The Financing of Investment in Utility Assets

This article concerns appropriate ways to finance investment in quasi‐public assets, such as those of utilities. Pursuing the principle of charging the user, analogies are drawn with not‐for‐profit investment, dedicated to the service of users. Focusing on intergenerational equity, an arguably typic...

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Bibliographic Details
Published in:Economic affairs (Harlow) 2017-06, Vol.37 (2), p.197-212
Main Author: Zafiris, Nicos
Format: Article
Language:English
Subjects:
asset maintenance
Economic theory
Government sponsored enterprises
intergenerational equity
national accounts
Project finance
public debt
Studies
utility investment
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Summary:This article concerns appropriate ways to finance investment in quasi‐public assets, such as those of utilities. Pursuing the principle of charging the user, analogies are drawn with not‐for‐profit investment, dedicated to the service of users. Focusing on intergenerational equity, an arguably typical pattern of intergenerational investment transactions is identified and proposed as a financing norm. It is shown that, while an investing generation will always experience a real resource cost, the burden can be alleviated in welfare terms if all new investment is financed by borrowing. Charges or taxes levied for maintenance and replacement of assets offer scope for improving the intergenerational welfare balance.
ISSN:0265-0665
1468-0270
DOI:10.1111/ecaf.12225