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Fashionably Retro

Why rate base is back in style.

Fortnightly Magazine - November 15 2002

to learn from their brethren in the deregulated airline industry.

Robert L. Crandall, former CEO and chairman of American Airlines, speaking at the EEI Finance conference, put his finger on the main problem with electric deregulation. The most important thing that happened in airline deregulation, he said, was that prices came down-something the California model was not able to accomplish. Crandall spoke of how there was fierce resistance to airline deregulation from many in Congress, who feared that voters living in remote areas would not be served.

But what kept the momentum going on airline deregulation, Crandall said, was that the airlines were able to win a large constituency in the country through their lower fares, and won an even bigger constituency as the prices continued to fall.

Of course, as the emphasis returns to the rate base, one might ask how regulated utilities will improve on the moves they made as monopolies some 20 years ago. They certainly made some very costly building decisions that raised rates considerably in some states. Let's not forget the billions paid off in stranded costs. Therein lies the question that started us on the road to restructuring.

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