Putting aside calls for a faster-paced switch to the new industry format, the Michigan Public Service Commission has adopted a phase-in schedule for customer direct access to alternative electricity suppliers that runs through 2002. The order, which some have said needs additional work, also outlines stranded cost recovery policies and related securitization strategies.
Under the plan, 2.5 percent of each electric utility's retail load will become eligible for customer choice each year from 1997 through 2001, with all customers eligible in 2002. The commission said that a faster schedule would increase the potential magnitude of stranded costs and that a cautious approach is appropriate because the customer-choice model for the electric market "is relatively untried in this country and has not always been successfully implemented in other countries."
Michigan Attorney General Frank J. Kelley expressed his disappointment with the order, and said he intended to introduce a plan that is fair. "[The order] giving full stranded costs to the utilities and the lack of any provisions to allow other utilities into the Michigan electric market will greatly diminish the potential benefits to ratepayers," Kelley said.
Stranded Cost Recovery. The commission said that prudently incurred costs are recoverable. The following would qualify for recovery: regulatory assets, capital costs of nuclear plants, capacity costs in power purchase agreements, employee retraining costs and direct-access implementation costs.
Nuclear capital costs and regulatory assets reflected in rates will be included in stranded cost charges for direct-access customers. Customers who leave to participate in direct access will pay an