Significant deregulation efforts in the telecommunications and electric power industries are following on the heels of reduced regulation of natural gas, airlines, railroads, trucking, banking, and securities brokerage. The transformation of the network industries in the United States promises significant benefits. The removal of government controls over prices, products, and the entry of new firms, and their replacement by markets, should yield substantial productive efficiencies, allocative efficiencies, and innovation in technology and service offerings. Moreover, market allocation of goods and services obviates the costly administrative processes that inevitably accompany public regulation. The question, however, is whether the deregulatory process in network industries will fulfill its great promise.

Traditionally, the utility sector in the United States has been characterized by the combination of private ownership and management of companies with public control over prices, service obligations, and entry. Deregulation generally is interpreted to mean the relaxation of public controls. That type of deregulation is most likely to achieve the benefits of competition. Other types of public policies carried out in the name of deregulation, however, have the effect of encroaching on private ownership of property and increasing public control. Such policies cannot be expected to yield the full benefits of market competition. In this book, we address deregulatory policies that threaten to reduce or destroy the value of private property without any accompanying payment of just compensation, policies that we term “deregulatory takings.” We further consider the problem of renegotiation of the regulatory contract, which changes the terms and conditions of operation of utility companies.