ABSTRACT
A central controversy in electric utility deregulation concerns the treatment of so-called “stranded costs,” which are costs of investments undertaken in reliance upon the preexisting regulatory regime, with its guaranteed rate of return. Utilities argue that if they are not allowed to recover investment costs-if those costs are left “stranded”—they (and their shareholders) will suffer losses estimated at between $10 and $500 billion.1 At worst, such losses could threaten the existence of some investor-owned utilities; at least, they would place post-regulatory utilities at a competitive disadvantage to new entrants to their markets.
