| Author: | Spiro, P.S. |
| Title: | Should the Discount Rate Change if an Electric Utility is Privatized? |
| Journal: | Engineering Economist
1990 : FALL, VOL. 36:1, p. 1-10 |
| Index terms: | PRIVATIZATION DISCOUNT RATE ELECTRICITY INDUSTRY |
| Language: | eng |
| Abstract: | In recent years a movement has begun toward the privatization of electric utilities in a number of countries, including the UK. The Central Electricity Generation Board of the UK is now in the process of privatization, and it has been suggested that the discount rate for investment used by the privatized entity should be much higher than the one previously used by the CEGB. The reason is that the capital is the largest cost category for utilities. This raises interesting conceptual issues relevant to both shareholder and publicly owned utilities. The analysis presented suggests that in order to achieve the lowest economic generation cost, the privatized utility should continue to use the same discount rate. |
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