Inflation and Public Utility Regulation

by Fred Morrissey



This study shows that returns to utility stockholders have generally kept pace with inflation. But it raises the disturbing question that reported earnings may be illusory because of the inadequacy of depreciation allowances. The public utility sector of the economy is worthy of close attention by the business community because of the magnitude of resources devoted to this area. Excluding transportation, utility assets constitute 20 per cent of the total assets of all non-financial corporations in the U.S. and they employ directly about 1,320,000 persons, or 2.1 per cent of the entire labor force. Total revenue of public utility companies in 1958 approximated $21.6 billion or about 6.9 per cent of the disposable personal income, a sum perhaps more significant if expressed as $440.00 per family. However, it is even more remarkable to note that public utilities have been consuming 40 to 50 per cent of all new corporate security issues in recent years. The enormous expansion of physical assets combined with the relatively small role of retained earnings creates this dependence on external capital.

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