Perspective

Fortnightly Magazine - June 15 1998
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COMPETITIVE transition charges. Wires charges. Securitization payments. Every stranded cost recovery mechanism considered to date requires customers to pay for electric utility stranded costs through direct assessments on monthly bills. These charges will continue for many years after competition is introduced.

There is a real irony here: As we seek to introduce competition into the electric industry, we as regulators are forced to invoke all of the most heavy-handed tools to extract payments from citizens. Further, it is those utilities who decry the "shackles" of regulation that are the first to ask us for relief. They want regulators to issue orders to extract "nonbypassable" payments directly from the pockets of their customers.

Whatever one thinks of the merits of stranded costs, the time has come to devise a more market-driven alternative mechanism to recover these costs. It is time for us, as regulators, to promote alternative recovery mechanisms rather than stand by to be drafted by the companies we regulate to serve as the new revenue collectors for the electric industry.

I wish to outline one such proposal. At the outset, I would like to make clear that this proposal is a recovery mechanism only. It is not intended to address the idea of an entitlement to stranded costs or a quantification of such a right. Rather, I propose this alternative to stimulate thinking of alternatives to traditional regulatory tools for recovering those stranded dollars. My intention is to promote both equity and efficiency in moving to a fully competitive retail generation market - to "jump-start" competition during the transition period and introduce market forces to the recovery of stranded costs.

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