Calendar of Events

Sep 29, 2014 to Oct 03, 2014 | Michigan State University, Lansing MI
Oct 01, 2014 to Oct 03, 2014 | Washington, DC
Oct 06, 2014 to Oct 08, 2014 | Los Angeles, CA

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Public Utilities Reports

PUR Guide 2012 Fully Updated Version

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Brattle Group

It Ain't in There: The Cost of Capital Does Not Compensate for Stranded-cost Risk

A. Lawrence Kolbe and William B. Tye

Electric utilities now face the risk that existing assets, costs, or contract commitments may be "stranded" by increased competition, leaving shareholders rather than customers to bear the costs. Have shareholders already been compensated for this risk?

Some argue that shareholders have automatically been compensated for this risk by an allowed rate of return equal to the cost of equity capital determined in efficient capital markets.1 If so, forcing shareholders to bear stranded costs may seem fair.

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