Order 888 Petitions Strong on Stranded Costs

Fortnightly Magazine - August 1996
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About 90 parties have filed petitions seeking changes to Order 888. Claiming "errors," the National Association of Regulatory Utility Commissioners (NARUC) asked the Federal Energy Regulatory Commission (FERC) to reverse its assertion of:

s Jurisdiction over unbundled retail transmission services

s "Primary" authority over retail stranded-cost recovery when retail consumers convert to wholesale

s "Backstop" authority to provide stranded-cost recovery when an end user changes power suppliers under a state-established retail wheeling system.

NARUC asked the FERC to implement a "bright-line test," arguing that rates and terms of service for delivery of power by a utility to an end user are subject to state commission jurisdiction regardless of the identity of the party generating or reselling the power or the facilities used to transport the power. If FERC jurisdiction over retail stranded costs remains the same, NARUC asks that the FERC reconsider applying the "revenues lost" method of stranded-cost calculation.

The National Rural Electric Cooperative Association (NRECA) filing also expresses concern over the "revenues lost" method. NRECA believes the method is flawed because 1) it uses an overstated, backward-looking estimate of the revenue stream; 2) fails to synchronize elements of the formula properly, and 3) fails to consider that a customer's contractual commitment for replacement capacity/energy may be of a shorter term than the transmission provider's reasonable expectation period.

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