You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
New thinking defines "stranded costs" in terms of
asset value and return on capital, not lost revenues.
On July 3, the Pennsylvania Public Utility Commission (PUC) submitted its report to the Governor and General Assembly on retail electric competition (PUC Docket No.
I-940032). That report recommended a five-year transition to "end the regulation of electric generation as a retail monopoly."
Before introducing full retail competition, the report promises to "identify, analyze, and mitigate or recover existing uneconomic assets of utilities." But it warns that cost recovery should not impose increased prices on any customer (except for "must-take" commitments under the Public Utility Regulatory Policies Act of 1978), and that "each utility will make vigorous efforts to mitigate the costs of stranded commitments."
On the same day, Commissioner John Hanger released a separate statement "in full support of" the PUC report, plus some analysis on stranded costs in Pennsylvania (a "work-in-progress" (em not a final PUC determination). These new numbers offer several scenarios, including (A) full recovery, (C) no return on equity, (D) "California style" treatment, and (F) a new definition of stranded costs that emphasizes profit, rather than lost revenues.
On a net basis, Scenario F indicates no net stranded utility generation investment in Pennsylvania when the rate of return is omitted from the regulated price of generation. This scenario may be thought of as allowing a return of investment in potentially stranded assets, but no return on investment. t
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