Abstract
While the regulation of public utilities is a widely accepted form of government intervention in the market economy, there are few empirical studies of the effectiveness of one of their key components: the setting of an allowed rate of return. Using the Ontario natural gas sector as a case study, this article examines the effectiveness of utility regulation in setting a market rate of return and concludes that despite market rate objectives, natural gas utilities in Ontario have consistently earned above-market returns. Several mitigative factors are examined, including a proposal to increase competition through deregulation.
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