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AGENCY COSTS OF THIRD‐PARTY FINANCING AND THE EFFECTS OF REGULATORY CHANGE ON UTILITY COSTS AND FACTOR CHOICES
Author(s) -
CRONIN Francis J.,
MOTLUK Stephen A.
Publication year - 2007
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/j.1467-8292.2007.00346.x
Subject(s) - restructuring , agency cost , agency (philosophy) , finance , productivity , business , capital (architecture) , economics , regulatory agency , distribution (mathematics) , public economics , industrial organization , corporate governance , shareholder , macroeconomics , history , mathematical analysis , philosophy , mathematics , archaeology , epistemology , welfare economics
** : Beginning in 1999, the Canadian Province of Ontario undertook restructuring and tried to implement performance based regulation for local electricity distribution utilities. Regulatory parameters were based on productivity research covering 1988–1997 that found little productivity difference by size, but wide variations in costs, factor mix, financing, and returns to capital among utilities. While some utilities questioned their ability to improve efficiency, other observers maintained many utilities were over‐capitalized, especially from third‐party financing paid by customers for connection/development charges; these observers noted that rates, profits, and valuations would be inflated. Despite its pervasive use, we can find no literature dealing with the implications of third‐party funding. We assess the effects and adjustment dynamics of regulatory and financing changes on costs, factor mix, and performance.