Commissioner Selection and Deregulation of Gas Utilities

Abstract

This study evaluates the role of reelection motives of state public service commissioners in the recent trend of deregulation in the gas distribution market. Competing-risk hazard models are used to explain when and which regulatory regime – retail restructuring, price cap or sliding-scale regulation – state commissions adopt to deregulate particular utilities. The system of selection of state commissioners, frequency and timing of elections, and composition of commissions and state legislatures are evaluated as determinants of commissioners’ personal motives. Frequency of elections is associated positively with the risk of all forms of deregulation, albeit with different time delay. In election years, the risk of price cap adoption rises immediately, while that of restructuring rises in subsequent years. Public elections favor price caps, while appointments by state legislature favor restructuring. Democratic-leaning commissions and legislatures appear to avoid restructuring in favor of price caps, perhaps due to their doubt over the prospect of effective competition.