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Restructuring: It's Not Unpatriotic Anymore

Fortnightly Magazine - May 1 1996

barbs about industrial users sticking residential users with stranded or uneconomic costs, Anderson said that once competition comes, the issues will vaporize: "We care whether it makes sense for customers.

"Customers are going to say 'we didn't ask for any of these uneconomic costs and we don't want to pay any of them.' Utilities will say 'I was forced to put in all of these uneconomic costs and I should get them all back.' And we've got to find a way of cutting the baby. And it's going to be tough.... I didn't say stick it to the stockholders 100 percent."

One conference attendee questioned whether stranded costs were part of the "social contract," especially in situations where plants planned at $500 million cost $5 billion. "In those situations, ratepayers were asked to come in and sort of save the utility from going bankrupt," he said. "That doesn't seem to me that should have been part of our social contract with you."

Although stranded-cost payments will delay competition and reward monopolies, Massey said, there has to be cost-sharing, even if it slows the move from monopoly to competitive markets. Stranded costs must be legitimate, verifiable and prudent (em not offloaded from a gravy train.

"Certainly the nuclear experience as well as the QF experience both strain the social compact," said John Jurewitz, regulatory policy manager, Southern California Edison. "I think that's exactly what's causing us to go towards retail access, frankly." Then again, he said, he wouldn't want to see restructuring reopen issues that were litigated long ago.

In the move to retail access, suggested William F. Hecht, chairman of Pennsylvania Power & Light, it might be appropriate for PUCs to license power suppliers to ensure that they can indeed supply customers and be reliable.

Hecht also suggested that customers be free to buy directly from a pool or from load aggregators at market-based rates: "All customers would have the benefits of the marketplace setting the price for energy at the bulk-power level." t

Joseph F. Schuler, Jr. is associate editor of PUBLIC UTILITIES FORTNIGHTLY. Email: schuler@pur.com.

Top 10 Industry Cliches

When They Say... It Really Means...

1 Let the market work. It's my turn to control the market.

2 Restructuring will lower your rates. Restructuring will lower my rates.

3 We need to get government off our bakcs. Thanks for the franchise Mr. Mayor: Now let me raise my

prices in peace.

4 Let's not have one size fits all. I'm taking the size 7's; you can have what's left.

5 We should do this by consensus. If you think I'm giving up 100-percent market share,

you're out of your mind.

6 We should have a phased approach. Me first.

7 We need an independent system operator. Why should I give up the one secure monopoly I still have?

8 Look how well it's working the Forget everything you know about electricity.

telecommunications and gas industries.

9 Unbundling is inconsistent with our Sixty years ago, I came up with a financial gimmick designed

indenture provisions. to lock out all competitors