Stranded costs

Stranded costs are sales deductions for investments or transactions that occur as a result of market liberalization or deregulation. The term is mainly in the area of ​​energy supply ( electricity ) is used.

In a regulated market, power companies usually have an exclusive right for the sale of electricity within a specific territory. The prices are set by regulators. In many countries, energy supply market was deregulated, that is, the territorial protection for power generation canceled. This enabled investments and transactions that were previously made ​​in the regulated market, so-called sunk costs in the competitive environment will no longer be covered by future revenues.