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Recovering Stranded Costs: Not "If," But "How"

Fortnightly Magazine - January 15 1997

Commerce Commission, having been reappointed for a third five-year term as commissioner in June 1993. She is also chairman of the Committee on Gas of the National Association of Regulatory Utility Commissioners, and chair of the advisory council to the Gas Research Institute. Robert Garcia is an executive assistant to Commissioner Kretschmer, and has also worked as an electric utility analyst in the commission's Office of Policy and Planning.

Retail Wheeling

Illinois Initiatives

Illinois Power (em Tariff SC 37:

• Offers maximum of 50 megawatts of transmission capacity

• Customers must have firm demand of at least 2 megawatts

Central Illinois Light (em Rate 33

• Covers 8 largest industrial customers with demands of 10 megawatts or greater

• Offers maximum of 50 megawatts of transmission capacity for up to two years

Central Illinois Light (em Rate 34

• Covers residential and commercial customers in 3 designated areas

• Allows maximum purchase of 5 megawatts off-system, for up to five years.

Due Deference?

The FERC's Functional Test

To safeguard state PUC prerogatives to impose a stranded-cost surcharge on distribution, the FERC announced in Order 888 that it would give "deference" to state PUCs on what is transmission and what is distribution.

That policy began to take shape on October 30, 1996, when, the FERC heard petitions filed by the three major, California investor-owned electric utilities (at the direction of the California PUC) asking the FERC for a declaratory order to, among other things, interpret which "transmission" facilities must be placed under the operational control of the California Independent System Operator, and which facilities would be available to the California PUC to support a competitive transition charge (CTC).

The primary difference among the utilities in their characterization of assets involved facilities between 60 and 138 kilovolts (kV). But with two minor exceptions (one involving radial generation ties, the other concerning step-up transformers and substations for the San Onofre nuclear plant), the California PUC had accepted the classifications (transmission, distribution, or generation) submitted by the utilities. The PUC also supported the utilities argument that the ISO could effectively control the transmission system and maintain reliability regardless of whether the facilities were designated as "transmission" or as "local distribution."

Citing Order 888, the FERC said it would defer to the PUC: "Such deference ... is only for the purpose of determining what facilities are jurisdictional ... for the purposes of the state's retail-access initiative." See, Pacific Gas & Elec. Co., et al., Dkt. No. EL96-48-000, Oct. 30, 1996 77 FERC ¶ 61,077.

Speaking at the commission's open hearing, the FERC's James Hoecker contrasted the ruling with a different conclusion reached the same day in a case involving the New England Electric System. In that case, he said, the Massachusetts DPU had not presented a sufficient analysis of its jurisdictional split under the guidelines of Order 888. See, New Eng. Pwr. Co., et al., Dkt. No. EL96-48-000, Nov. 5, 1996 77 FERC ¶ 61,135.

(em B.W.R.

34

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