Gregory Sidak and Daniel Spulber develop a comprehensive argument both justifying compensation of utilities for the adverse effects of various deregulatory developments and explaining how to do so. They read the Takings Clause as expressing a fundamental principle of political economy requiring compensation in order to prevent—or at least reduce the risks of—government action destructive of wealth. Compensation thus should be required in most instances where the action cannot be justified as preventing harm or where the “settlement costs” of providing compensation are not excessive. The last qualification rules out compensation, for example, for losses resulting from changes in monetary policy.
My central concern about the authors’ argument is the question of why the old utility may not be in a good position to compete with new entrants.
