Meaningful restructuring: Resolving the stranded cost dilemma
- Lafayette Capital Corp., Washington, DC (United States)
Current proposals to restructure the electric utility industry will impose significant costs on consumers, yield few near-term consumer benefits, and reward the least efficient utilities. The 18 principles suggested here would be a better starting point for cost recovery - one that would lead to a far more competitive and dynamic industry. In Order 888, the Federal Energy Regulatory Commission decided it would leave the major policy decisions regarding retail competition to the states. Retail transactions account for more than 90 percent of industry demand, thus the focal point for policy determination has shifted from FERC to the states. For utilities that lose revenue when wholesale customers purchase {open_quotes}off-system,{close_quotes} FERC would provide substantial revenue recovery through {open_quotes}stranded cost{close_quotes} charges assigned directly to those customers. FERC explicitly acknowledged that, as a result, the development and benefits of competition will be reduced and delayed for many wholesale customers. State commissions do not have to follow FERC`s lead, however, as they may wish to balance the interests of ratepayers and utility shareholders in a different manner in fashioning a more competitive industry structure. Instead, commissions that seek the benefits of competitive energy markets for their consumers may want to consider alternative approaches, especially in the area of stranded cost recovery.
- OSTI ID:
- 443481
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 1 Vol. 10; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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