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2009 Regulator's Forum: Walking A Tightrope

The economy forces tough decisions.

Fortnightly Magazine - November 2009

storm costs and stranded asset recovery—to finance regulatory-driven investments such as scrubber retrofits. Do you foresee PUCs asking utilities to use securitization bonds as a way of reducing financing costs for mandated RPS and carbon-reduction investments?

Everett, Georgia: The decision to use securitization to finance energy efficiency initiatives would depend on the individual utility’s financial condition or the individual state government’s economic condition.

DelGobbo, Connecticut: The department will remain very cautious in this regard. One of the challenges with securitization is that once implemented it’s almost impossible to refinance if interest rates decline or to pay down debt if circumstances change.

Brown, New York: New York is a restructured state. Investment and finance decisions you are describing will be made solely by the competitive, independent power producers selling in New York. Those costs will be shouldered by the generators, not ratepayers. That said, potential benefits that securitization might offer RPS and related clean-energy programs need to be reviewed.

Beyer, Oregon: Most of our electric and gas utilities collect a public-purpose charge from customers and forward the funds to a third party (the Energy Trust of Oregon) to run energy efficiency programs, so there is no utility investment to be securitized.

The Oregon PUC doesn’t have similar authority for renewable resources, and no one has pursued it. That may be because there’s a strong belief here that commissioners today shouldn’t be able to bind a future commission, meaning that guarantees are problematic.

Cawley, Pennsylvania: Securitization financing may be appropriate for smart-meter deployment, smart-grid development, and other types of large-scale infrastructure improvements by our regulated utilities. Our restructuring act permitted, but didn’t require, utilities to securitize stranded costs. We would prefer to consider securitization financing proposals when made through an appropriate proceeding.