Demystification - the economic realities of securitization
The challenge of public policy in the transition is to bring the benefits of competition to consumers as soon as possible, while allowing shareholders to recover those costs that were truly incurred as a direct consequence of prior regulatory policies. Securitization, a part of the transition package, does less than its advocates say, but more than nothing. These savings, if the authors read the stories correctly, will be produced by refinancing {open_quotes}stranded assets{close_quotes} using securitized debt which, as the result of its publicly backed repayment guarantees, carries an interest rate that is lower than the investor-owned utility`s cost of capital. If this is such a great idea, then why did one bother to create and regulate private utilities in the first place? If publicly backed financing makes sense, why didn`t one rely exclusively on municipal utilities and other publicly owned electric companies? Has the American Public Power Association been correct all along? Could the country have had far lower electric bills these last hundred years by resorting to public financing? (Answer: possibly not, but the securitization movement certainly gives an inadvertent boost to the argument for public power.) There is no question that interest rates on publicly guaranteed dept are lower than utility capital costs and that this difference yields an accounting savings -- if nothing goes wrong.
- OSTI ID:
- 569345
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 8 Vol. 10; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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