The Financing of Investment in Utility Assets |
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| Authors: | Nicos Zafiris |
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| Affiliation: | Associate Lecturer in Finance at Groupe INSEEC, London and former Head of Economics and Quantitative Methods at the University of Westminster, London. Email: . The author is indebted to three anonymous referees for comments, while remaining solely responsible for any errors. |
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| Abstract: | 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. |
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| Keywords: | asset maintenance intergenerational equity national accounts public debt utility investment |
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