Regulation and the impact it has on power and pipeline construction

Rachael Sherman, Kristen Parrish

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Current electricity demands, increased regulatory requirements, and growing populations require innovation in power production and delivery. Cost overruns of power and pipeline construction projects have the potential to lead to the loss of the economic justification for the project. Project performance and the profitability of power and pipeline construction projects often look different in a regulated environment than a non-regulated environment. This is hypothesized to be due to the Averch-Johnson effect. The Averch-Johnson effect is produced when fair rate of return regulation encourages a firm to invest more than is consistent with the minimization of its costs. This research seeks to understand how capital investments vary for power and pipeline projects in both regulated and non-regulated environments by analyzing 1917 projects in the Independent Project Analysis, Inc. project database. The goal of this research is to present a statistical analysis of cost performance across different project types and project sectors to assess if the Averch-Johnson effect holds true. The results of this paper found that regulated power and pipeline projects were overestimated as compared to non-regulated projects of similar scope.

Original languageEnglish (US)
Title of host publicationConstruction Research Congress 2020
Subtitle of host publicationInfrastructure Systems and Sustainability - Selected Papers from the Construction Research Congress 2020
EditorsMounir El Asmar, Pingbo Tang, David Grau
PublisherAmerican Society of Civil Engineers (ASCE)
Pages418-426
Number of pages9
ISBN (Electronic)9780784482858
DOIs
StatePublished - 2020
EventConstruction Research Congress 2020: Infrastructure Systems and Sustainability - Tempe, United States
Duration: Mar 8 2020Mar 10 2020

Publication series

NameConstruction Research Congress 2020: Infrastructure Systems and Sustainability - Selected Papers from the Construction Research Congress 2020

Conference

ConferenceConstruction Research Congress 2020: Infrastructure Systems and Sustainability
CountryUnited States
CityTempe
Period3/8/203/10/20

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Building and Construction

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