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In the October issue of the Wiley journal Natural Gas & Electricity, Managing Director Dr. Jeff D. Makholm builds on themes discussed in his May 2019 Wiley article, which cited recent calls to publitize utilities and considered the economic history of the US model of energy regulation. In this latest article, Dr. Makholm reviews a period in American history in which public ownership of utilities gained ground in the electricity industry. Public participation in the US power supply and distribution industry grew quickly in the 1920s and 1930s as the regulation of US utilities seemed to stumble badly because of the abuse of utility holding companies and the ability of those companies, and others, to effectively evade state regulatory control. That wave, supported by the administration of President Franklin Roosevelt, was a distinct and important era in the history of US electricity supply.

As a remedy to such apparent regulatory difficulties, Congress passed the Public Utility Act in 1935, giving the SEC jurisdiction over public utility securities and the power to simplify holding company structures in the industry. In 1944, the Supreme Court dealt with the “Fair Value” doctrine with its decision in the Hope Natural Gas case. With that case, the profitability of utilities was thereafter to be determined on the basis of a fair return on objective measures of the actual, historical capital contributions that investors had made to the utilities that provided public services. Thenceforth, utility rate regulation was to become a highly reliable and predictable affair.

When Congress and the Supreme Court finally resolved the legal and administrative means to regulate US electric utilities effectively by the mid‐1940s, the era of rapid growth in US public power supply and municipally owned electricity distribution systems came to an end.

Makholm, Jeff D. (2019, October). “Why Publitize? Part II: When Public Ownership Gained Ground in the US Electricity Industry,” Natural Gas & Electricity, 36/03, ©2019 Wiley Periodicals, Inc., a Wiley company.

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