Consumer Representation and Local Telephone Rates

Consumer Representation and Local Telephone Rates With the increasing complexity of issues concerning telephone, electricity, and other utility services, participation by consumer groups in state utility commission proceedings has become more difficult and more expensive. For a brief period, consumer-funded citizens' utility boards (CUBs) promised more effective representation of consumer interests, but recent legal developments have slowed the growth of CUBs (The Consumer Affairs Letter 1988). The direct election of state utility commissioners is another alleged means of increasing sensitivity to the concerns of average ratepayers, but research does not support its effectiveness (Costello 1984). As a result, a large portion of the burden of representing the interests of residential customers and small businesses has fallen on "proxy advocates" (Gormley 1983), that is, government officials who play the role of consumer advocate in public utility proceedings. Proxy advocates come in three forms: (1) an independent consumer counsel or utility advocate, (2) a division within the state attorney general's office, or (3) a special staff within the state utility commission, The primary objective of the research reported here is to assess the extent to which the political environment affects flat-rate residential telephone rates, with particular attention to the relative effects of the three forms of proxy advocacy. The analysis controls for additional factors that could influence telephone rates, including aspects of the political environment other than proxy advocacy. PREVIOUS RESEARCH Escalating electricity rates during the 1970s stimulated research on the influence of political factors on utility rates. The general model underlying the diverse studies of electricity rates is that rates are a function of three types of conditions: (1) supply, (2) demand, and (3) political/regulatory. The supply and demand conditions are included as control variables in the study of the political/regulatory influences on electricity rates. A number of different factors have been included in past studies to measure supply-related influences on the price of electricity: the cost of acquiring fuel, the proportion of total generation obtained from low-cost hydroelectric sources, population density, degree of competition from publicly-owned electricity companies, the ratio of residential to business sales volume (also possibly interpretable as a demand factor), and tax payments per kilowatt-hour of sales. In most studies, demand for electricity has been measured in terms of a state's per capita income. Among the many possible political influences on state electricity regulation, the direct election of utility commissioners received the most research attention, but results have been equivocal. A few studies showed that elected commissioners dampen electricity rates (Crain and McCormick 1978; Mann and Primeaux 1986). The majority of studies, however, conclude that there is no relationship between rates (or related dependent variables) and method of commissioner selection (Costello 1984; Gormley 1983; Hagerman and Ratchford 1978; Harris and Navarro 1983; Pelsoci 1979). A number of other political variables have been tested for their relationships to electricity rates (or related measures). As in the case of method of commissioner selection, the results are often contradictory. Pelsoci (1979) found that the higher the number of commissioners, the higher the electricity rates. However, Hagerman and Ratchford (1978) reported that the number of commissioners had no bearing on rates. Larger utility commission staffs were related to lower rates in one study (Pelsoci 1979), but a more inconclusive measure of commission resources (i.e., commissioner salaries, budget size, and data processing capacity in addition to staff size) was positively related to the percentage of rate requests granted (Gormley 1983). …