A Critical Comparison of Utility-Type Ratemaking Methodologies in Oil Pipeline Regulation

Abstract

This article tests the efficacy of four formulas for specifying regulated utility rates. All exhibit "intertemporal bias" in that rates are disproportionately and seriously shifted forward upon current consumers ("front-end loading"), although the ICC and Consent Decree formulas yield rates less skewed than the utility and escalated utility rate formulas. "Formula bias" arises in all cases, because the ex post