U.S. Utility Regulators Shift Costs of Nuclear Project Failures to Shareholders

U.S. regulators addressed utility bankruptcies from nuclear cost overruns by requiring shareholders to absorb some losses. Customers paid higher rates while creditors recovered fully. The approach differed from Britain's lighter regulatory model.

Three utilities went bankrupt when nuclear project costs exceeded available resources. Only one of those utilities was investor-owned. Regulatory agencies forced shareholders to bear portions of losses or imprudently incurred costs. Customers absorbed some costs through higher rates.

Creditors emerged whole in most cases. Policymakers developed this framework over time to handle nuclear overruns and abandoned projects.

Britain's light-touch utility regulation enabled companies like Thames Water to load up on debt, extract cash, and fail operationally while regulators failed to intervene effectively. Forcing customers to absorb the costs of rescuing the company creates a major moral hazard.

U.S. model, where regulators closely oversee financing and risk, differed from the UK approach that allowed excessive leverage and poor governance that left Thames Water financially crippled.