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Chapter 15 - Managing Qualified Nuclear Decommissioning Trust Funds Under Uncertainty

Howard Hiller

Year: 1991
Volume: Volume 12
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-15
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Abstract:
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.



Chapter 16 - Historical Lessons for Nuclear Decommissioning Trust Fund Investment

M. Didi Weinblatt, Salvatore D'Elia and Theresa A. Havell

Year: 1991
Volume: Volume 12
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-16
View Abstract

Abstract:
One way we can attempt to judge the best investment strategy for nucleardecommissioning trust funds (NDTs) is to examine past after-tax returns of variousinvestment options. The authors of this chapter make such an evaluation. Theynote that no passively managed asset class allowed in qualified NDTs hasproduced real after-tax returns. They conclude that an active, rather than apassive, investment strategy is necessary, and they stress the advisability ofshortand intermediate -term fixed-income securities such as municipal bonds.However, when the authors applied the hypothetical 15 percent tax rate proposedin a new Congressional bill (HR 4653), several asset classes did provide realaftertax returns.





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