WHY DO REGULATORS REGULATE - THE CASE OF THE SOUTHERN CALIFORNIA GAS MARKET

Cross-subsidies often accompany entry regulation. Because cross-subsidies may be efficient or inefficient, they make it harder to find out whether regulation is motivated by ''public interest'' or ''public choice'' considerations. This paper uses case study methods to illuminate the motives and intentions of California state regulators in a battle over bypass of state-regulated gas utilities during the 1980s. Detailed study reveals that wealth redistribution, rather than economic efficiency, dominated regulators' motives.