Will stranded cost recovery distort Pennsylvania`s electricity market?

Journal Article · Wed Oct 01 04:00:00 EDT 1997 · Electricity Journal

DOI:https://doi.org/10.1016/S1040-6190(97)80193-5· OSTI ID:569352

Caplan, R L ^[1]

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1. Caplan & Luber, Philadelphia, PA (United States)

It is ironic indeed that the forecasting errors of Keystone State utilities that have led to today`s claims of stranded costs are now to be remediated in new legislation which, unaccountably, utterly fails to take account of the same problem: utility forecasting errors. On December 3, 1996, the Governor of Pennsylvania signed into law the Electricity Generation Customer Choice and Competition Act (66 Pa. C.S. 2801 et seq.). The Act set in motion an ambitious timetable for restructuring Pennsylvania`s electric utility industry to substantially deregulate its generation component. Customer choice of electricity supplier is to be phased in over a two year period beginning January 1, 1999. As indicated by the appearance of the word {open_quotes}competition{close_quotes} in the official title of the Act, the resulting institutional transformation is expected to foster free market competition in the generation and retail sale of electricity. However, there is already dispute among the Act`s commentators and critics, who are legion, as to whether its strategy for achieving this commendable objective will produce significant cost savings to consumers any time soon. One need look no further than the Act`s transition cost recovery provisions to find cause for skepticism. Section 2808 of the Act empowers the Pennsylvania Public Utility Commission to impose, for a period of up to nine years from January 1, 1997 (or longer at the Commission`s discretion), a {open_quotes}competitive transition charge{close_quotes} (CTC) upon {open_quotes}every customer accessing the transmission or distribution network.{close_quotes} The CTC is intended to afford Pennsylvania`s regulated electric utilities the opportunity to recover those of their {open_quotes}transition or stranded costs{close_quotes} (collectively {open_quotes}stranded costs{close_quotes}) approved by the Commission.

• OSTI ID: 569352
• Journal Information: Electricity Journal, Journal Name: Electricity Journal Journal Issue: 8 Vol. 10; ISSN ELEJE4; ISSN 1040-6190
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
CAPITALIZED COST
COMPETITION
DATA COMPILATION
DEREGULATION
ELECTRIC POWER INDUSTRY
ELECTRIC UTILITIES
FINANCING
LEGISLATION
PENNSYLVANIA