Reagan economics and electric utilities: will rate actions limit benefits

A revitalized electric-utility industry providing reliable and cost-effective service to consumers and industry clearly is in the national interest. But given its current financial problems, its ability to provide such service in the future is questionable, especially so if the economy enters the rapid and sustained expansion forecast by the administration's Economic Recovery Program. The analysis reported here shows that the benefits of this program - the sum total of new tax, fiscal, monetary, and regulatory policies - will not greatly affect electric utilities if they are passed on to ratepayers by utility regulatory commissions. These benefits can only be retained if regulatory commissions permit allowed returns on equity at current levels by granting real rate increases. Whether this will occur depends, as always, on how competing - and sometimes conflicting - stakeholder interests in utility rate setting are resolved. The financial health of electric utilities during the coming decade depends largely on that outcome, regardless of how the national economy performs as a whole. 10 figures.