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Texas PUC Develops ECOM Model

Fortnightly Magazine - July 15 1996

To prepare a report on stranded investment mandated by the Texas legislature, the Texas Public Utilities Commission (PUC) has asked electric utilities to file the required financial information using a new model.

The model consists of six scenarios that use a number of variables approved by the PUC to yield a broad estimate of excess cost over market (ECOM) (em a measure of potential stranded costs. Each utility will file 54 "snapshots" of its potential excess-cost factors based on various competitive market scenarios and market-price assumptions. The model, an electronic workbook in Microsoft Excel 5.0 that contains a number of spreadsheets, is available at the PUC Internet homepage under the "Rulemaking Activities" category ( http://www.puc.texas.gov).

The forecast period tracks the remaining life of the longest-lived generation asset currently in a utility's rate base. Costs for generating assets that are jointly owned will be allocated to the owners, who will allocate costs and sales just like wholly-owned generating assets. The model calculates ECOM estimates for retail industrial, commercial, and residential classes. Although it collects Texas jurisdictional wholesale data, the model does not estimate ECOM for generation costs allocated to wholesale loads. (em LB

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