Abstract: In the fall of 1987, the New Hampshire Public Utilities Commission faced an electric rate decision with far-reaching consequences. Ostensibly, the commission had only to decide whether to grant an emergency 15 percent rate increase to the financially troubled Public Service Company of New Hampshire. Beneath the surface, the commission had to struggle with the issue of who -- the firm's stockholders or customers -- should bear the cost of the Seabrook nuclear power plant. Seabrook had long been controversial for alleged siting and safety problems. Long delays in construction and failure to obtain operating permits had escalated construction costs -- and precluded its owner, under New Hampshire law, from passing costs through to customers. As the Public Utilities Commission faced Seabrook again, commission members were told that, without the emergency rate increase, the Public Service Company faced bankruptcy. The case raises the implications of the paths open to the public utilities commissioners -- noting that, no matter what its fate, someone would bear the cost of building Seabrook. The key question: who?
Learning Objective: This case is designed for use in an intermediate microeconomics curriculum as an example of capital markets.