The Theory of Regulatory Risk
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High costs for new electric power plants have led to a series of regulatory and legislative decisions that may retroactively rewrite the rules that utility investors relied upon when they supplied capital for these projects. In Duquesne Light Co. v. Barasch, 109 S.Ct. 609 (1989), a case involving the recovery of capital invested in constructing nuclear power plants that were ultimately never completed, the Supreme Court upheld one such change.
KeywordsRate Base Risk Premium Moral Hazard Economic Principle Regulatory Risk
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