Abstract
A popular view among specialists in electric utility economics is that the regulatory process exacerbated the negative effects of the OPEC's oil price increases during the 1970s. In contrast, Peltzman's theory of regulation suggests that regulators should “buffer” a firm from cost increases. This paper examines these contending propositions by examining the stock returns for a sample of electric utilities during the OPEC oil shock of October 1973. The data are more consistent with a buffering effect than a regulatory lag.
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