The law of regulated industries, particularly the obligation to secure 'just and reasonable rates "for regulated services, is a highly specialized application of financial economics. Ratemaking, bluntly put, represents a regulatory exercise in capital asset pricing. As a matter of economics, this Essay describes ratemaking as a variation on the financial theme of uncertainty. As a matter of law, this Essay describes legal principles guiding the regulatory determination of the rate of return on utility property. It analyzes two valuation methods derived from the 1923 Bluefield Water Works decision ("attracting capital" and "comparable earnings"), as well as a third approach based on the capital asset pricing model. Discretionary elements in rate regulation make it impossible to wholly alleviate uncertainty in the pricing of infrastructure. Rate regulation therefore constitutes a speculative undertaking in its own right.

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