What is Rate Regulation?

Rate regulation is a government activity in which the government or representatives of the government regulate rates charged to consumers. This practice is designed to protect consumers from excessive or unreasonable rates, to ensure that basic rates are fixed at low costs to make them accessible for people of low income, and to prevent collusion or price fixing among companies which charge rates for their services. Rate regulation may be accomplished by local, state, or federal agencies, in a variety of ways.

Some examples of industries which may be subject to rate regulation include: insurance, electric utilities, and cable companies. In these industries, schedules of rates are subject to review by government representatives who can determine whether or not the rates are fair, or if the rates meet the standards set by the government. Companies which violate rate regulation standards may be fined.

In addition to establishing base prices, rate regulation also includes regulation of services. For example, in rate regulation of the cable industry, the government may determine that people who are charged the base rate need to have access to at least two local cable stations, so that cable subscribers have access to emergency information and coverage of local events which may be important to know about. Likewise, regulators may determine what should be considered “basic coverage” for consumers paying the minimum rate for insurance so that people who buy basic insurance have an assured level of coverage.

This practice is not supposed to discourage competition, or to tell companies how much they can charge for their services. Within the rate regulation framework, there is a great deal of flexibility which allows companies to make decisions about the kinds of services they want to offer, how their services should be tiered, and how many their customers should be charged for their services. Rate regulation also tends to focus on basic service, which means that higher levels of service are not subject to regulation, and consumers are on their own.

If a consumer feels that an interaction with an industry which is subject to rate regulation may be violating government standards, he or she can report the company and request an investigation. The process for doing this varies from nation to nation; contacting a local elected official is often the best way to start, as the official can provide help and a referral to the proper government office. People can find out who their local elected officials are by checking the phone book, which often has a complete listing, or by contacting City Hall or a similar government agency.