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The Electric Competition Debate in...Texas

Fortnightly Magazine - May 15 1998

recapture stranded costs without legislation.

Stranded costs, according to early PUC studies, will top $8 billion statewide in 2001, according to Jones. TU's share of that figure is $2.6 billion in the same year; HL&P's tops $2.8 billion. Stranded costs in 2002 are more than $7 billion; in 2003, more than $6 billion.

The commission also is working on a rulemaking that will address transactions with affiliates (Project No. 17549), yet another task most states have undertaken during or after deregulation.

Co-ops Voice Concern

The final straw, at least for cooperatives that complain the commission is acting as though competition is imminent, is the PUC's unbundling proceeding. (Project No. 16536, Rulemaking on the Unbundling of Electric Distribution Facilities and Functions. See sidebar.) A hearing on a proposed rule in that case was set for May 8.

Co-ops claim that the costs of meeting such requirements would be prohibitive. They made that point very vocally to the Interim Committee at a March 25 committee hearing. But their candid views may only have angered the commission.

"We're [mad] at them because we asked specifically in the rule for companies to provide their costs," Wood counters. He says the commission was considering offering waivers, which would allow small rural utilities not to unbundle their costs and therefore avoid a steep bill for that process. The PUC has estimated the new accounting procedures could cost from $20,000 to $2.5 million, depending on the size of the utility.

"[For us] to bend over backwards to say we're going to accommodate your concerns and then for [co-ops] to go around to the Legislature and act like we're running roughshod over them?" the PUC chairman asks. "It makes me inclined to run roughshod over them. I was planning to give the waiver but now I won't¼ [but] I think customers have the right to know what they're paying for."

He says co-ops don't want customers to know their costs because of high wires charges. Deep East Texas Electric Co-op Inc., for instance, has distribution costs of more than 3 cents a kilowatt-hour, he says. A neighboring co-op has costs of less than a cent.

"The same exact terrain, the same everything," Wood says. "It's just how frugal they are. That's kind of what regulation is supposed to do."

The PUC is also developing five studies to guide the Legislature along the deregulation trail. The five reports will augment an 849-page study provided to state officials in 1997. The first of the five, expected in May, will address stranded costs. The second study, conducted with ERCOT, will address transmission adequacy during retail access. A third work will examine cost recovery mechanisms for "must-run" plants in the state. The fourth will identify low-income, environmental and renewable programs. The last item, a "scope of competition study," required of the PUC by the Legislature every two years, will examine the status of new competition.

At least one restructuring issue (em securitization (em will likely require legislative action. The state's public counsel recognizes that a bargain will need to be struck if more rate