Senate Panel Gets Tutorial From New England on Electric CompetitionJoseph F. Schuler Jr.

Fortnightly Magazine - November 15 1996
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Utility witnesses want it both ways:

Stranded-cost recovery plus incentives for renewable energy.A New England utility executive told a U.S. Senate energy panel earlier this fall that the region was hammering out electric market solutions (em especially on stranded costs and environmental quality (em and that federal legislators should follow its lead.

Dan Delurey, a New England Electric System v.p., was one of 16 witnesses called to testify before the Committee on Energy and Natural Resources meeting in Burlington, VT, September 9. Sen. James M. Jeffords (R-VT), vice chairman of the Subcommittee on Energy Production and Regulation, chaired the hearing.

Before citing progress in the moves to a competitive market in Rhode Island, Massachusetts, and New Hampshire, Delurey, in his written testimony, noted that the key to the "magic kingdom" was stranded investment recovery:

"Recovery ... is a threshold issue which must be resolved before advancing on any other front. As they say out West, 'there is nothing like a hanging to focus your attention.'"

Delurey said utilities must recover "historic costs" during the transition to competition. Rhode Island, he noted, allows near full recovery of stranded investments on a fixed-cost basis. Sunk costs of generating plants and regulatory assets will be recovered over 12.5 years. Above-market power contracts (one-third of all stranded exposure) and nuclear decommissioning costs also will be recovered over the lifetime

of those obligations. A transition charge starts at 2.8 cents per kilowatt hour (¢/Kwh), and then after 12.5 years, drops to 0.5¢/Kwh.

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