University of California Energy Institute

PWP-048

The Origins of State Electricity Regulation: Revisiting an Unsettled Topic

In PWP-050, Knittel analyzes the impetus for the growth of state regulation beginning in 1907. Although the growth in electricity use during the turn of the century was a major factor in the growth of the US economy historians and economists have left a number of issues regarding the regulation of the industry unsettled. Knittel attempts to reconcile some of these issues. Specifically, the paper tests the validity of the three most commonly forwarded reasons for the origin of state regulation in the electricity industry. Using Census data gathered on the electricity industry, the paper concludes that state commissions acted in the interest of the public,while seeking to exploit the economies of scale that existed in the industry. The paper also draws on the work of Anderson (1981) in looking at documents from the National Electric Light Association to gather the industry’s mindset during this period and concludes that industry leaders supported state regulation in order to rid themselves of corrupt local politicians, but did not unilaterally support regulation altogether as is commonly believed.