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Chapter 15 - Managing Qualified Nuclear Decommissioning Trust Funds Under Uncertainty

Funds for the eventual decommissioning and removal of nuclear power plants are accumulating. The amount will total many tens, perhaps hundreds of billions, of dollars. One of the ingredients in setting aside these funds is managing them so as to assure that just enough cash is on hand at the time of decommissioning to meet all required expenses at the lowest possible net present value cost to utility ratepayers. As with any investment, there can be a variety of opinions. For this reason, it is important to consult several sources for advice on the investment of such nuclear decommissioning trust funds (NDTs). The next three chapters provide such advice from the perspective of three different firms. The first, by Howard Hiller, stresses the importance of an adaptive approach, pointing out that the most difficult question is the choice of investment maturities. Hiller employs a simulation methodology to quantify the riskcost characteristics of strategies along the maturity spectrum--from short to long-term. He identifies some of the unique uncertainties inherent in decommissioning and brings these uncertainties into his analysis. He concludes that the steepness of the municipal yield curve can be exploited even in the presence of inflationary uncertainty.

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Energy Specializations: Nuclear Power – Markets and Prices; Nuclear Power – Policy and Regulation

JEL Codes: G11: Portfolio Choice; Investment Decisions, D81: Criteria for Decision-Making under Risk and Uncertainty, G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity, G14: Information and Market Efficiency; Event Studies; Insider Trading, C53: Forecasting Models; Simulation Methods, R15: General Regional Economics: Econometric and Input-Output Models; Other Models

Keywords: Nuclear decommissioning, Trust funds, Utility ratepayers, Uncertainty, Risk

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-15

Published in Volume 12, Special Issue of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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