luhtunud kulud

Terminological databases

ID 716008 Last modified 30.12.2004

Domain Environment - Environmental ProtectionEconomics

luhtunud kulud

stranded costs

costs which firms must bear because of commitments they made and are no longer able to honour as a result of the liberalisation of the sector in question
uneconomic physical assets (generating plants which are uneconomic to run now and will be even more uneconomic in the competitive era), past investments, long-term contracts and expenses, previously reviewed and approved (and in some cases, mandated) by regulators, that have not yet been fully recovered by the utility companies and will be unrecoverable in a fully competitive market because competitors will bear no such burdens

Good to know

FR: co?ts échoués [T50529]; co?ts irrécupérables [EUR] - préférer „co?ts irrécupérables“ qui est plus compréhensible [EUR] DE: verlorenen Kosten [T50529]; gestrandete Kosten [EUR] FI: hukkakustannukset [T50529]

luhtunud kulud

stranded costs

Usage examples

In a competitive market, however, when utility companies need to cut selling prices to attract and retain customers, they may not be able to pass all their costs on to consumers - especially those based on poor managerial judgment, over-staffing, operational inefficiencies, misallocation of financial resources and/or profits and other considerations. The investment costs that a utility may not be able to recover in a competitive market are commonly called "stranded costs" or "stranded investments." These asset-based costs are tied to investments that may lose value in a competitive market.

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