Investment management for nuclear decommissioning trusts

Journal Article · Thu Nov 22 04:00:00 EST 1990 · Public Utilities Fortnightly; (United States)

OSTI ID:5244510

Stimes, P C; Flaherty, R T ^[1]

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1. Flaherty and Crumrine Inc., Pasadena, CA (USA)

According to Nuclear Regulatory Commission estimates, and assuming a 4 percent annual inflation rate, minimum decommissioning requirements for a single reactor could total almost $350 million after 30 years. Consequently, reducing customer contributions to decommissioning funds is a potentially rewarding activity. In fact, improving the after-tax return earned on an NDT fund by as little as one percentage point can reduce customer contributions to the fund by 15% over its life. Unfortunately, many electric utilities are headed in the wrong direction and are unlikely to achieve satisfactory results. The main problem is the prevalence of the conventional wisdom, most of which has been appropriated from the area of pension fund management. This is an area which is familiar to most utility managements, but which has only superficial similarity to the issue of NDT investing. The differences are pronounced: NDTs, unlike pensions, are fully taxable at corporate income tax rates. In addition, NDT managers should be concerned with protecting the inflation-adjusted or real value of fund investments at a single, future decommissioning date. Pension managers, on the other hand, may be concerned with satisfying nominal contractual obligations spread over an extended future time horizon. In view of the large stakes involved in the management of NDTs, the authors summarize five key tenets of the conventional wisdom in this area and demonstrate where they feel they are in error.

• OSTI ID: 5244510
• Journal Information: Public Utilities Fortnightly; (United States), Journal Name: Public Utilities Fortnightly; (United States) Vol. 126:11; ISSN 0033-3808; ISSN PUFNA
• Country of Publication: United States
• Language: English

Related Subjects

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COST
DECOMMISSIONING
INVESTMENT
MANAGEMENT
NATIONAL ORGANIZATIONS
PLANNING
REACTOR DECOMMISSIONING
US NRC
US ORGANIZATIONS