Electric utilities now face the risk that existing assets, costs or contract commitments may be ＇stranded＇ by increased competition, leaving shareholders rather than customers to bear the costs. An important policy question is whether shareholders have already been compensated for this risk under traditional cost of service regulatory principles. The economic principles of asymmetric risk imply that even if investors are fully cognizant of the risks of stranded costs, capital market prices fully reflected such risks and regulators always set the allowed rate of return equal to the true cost of capital, it is mathematically impossible for investors to have been previously compensated for these risks.