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Public Utilities Reports

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Recovery

Perspective

Christopher Garbacz

The spectre of retail competition in electricity presents some difficult but solvable technical problems in creating new markets. It could lead to a new world of regulation. At the least, it will expose some currently protected utilities to potential losses that could prove substantial.

This prospect of losses has inspired some high-cost utilities to mount a formidable defense of the status quo, coupled with an aggressive offense to shape the transition.

Mailbag

Un-American Activities

I would like to comment on Joseph Paquette's letter ("Stranded-cost Recovery: It's Constitutional," Mailbag, Oct. 1, 1996) responding to Charles Studness (Stranded-cost Recovery: It's Un-American," Financial News, July 15, 1996, p. 43).

Mr. Paquette suggests that denying recovery of stranded costs amounts to an unconstitutional taking of private property.

Senate Panel Gets Tutorial From New England on Electric CompetitionJoseph F. Schuler Jr.

Joseph F. Schuler, Jr.

Utility witnesses want it both ways:

Stranded-cost recovery plus incentives for renewable energy.A New England utility executive told a U.S.

Stranded Cost Recovery: All FERC'ed Up

Michael T. Maloney, Robert E. McCormick, and Chad A. McGowan

Stranded-

Cost

Recovery: All FERC'ed Up

By Michael T. Maloney, Robert E.

McCormick, and Chad A. McGowan

The "lost-revenues" approach in Order 888 ignores the fact that cash flow drives

asset valuation . . .

. . . the key to measuring uneconomic investment.

Generation, Deregulation, and Market Power: Will Antitrust Laws Fill the Void?

Stephen L. Teichler

Monopoly rents? Not in the short run. The real enemy is a price war, fueled by indifference to stranded costs. And when that happens, antitrust laws won't offer much help.Competition has formally begun in the electric service industry. The Federal Energy Regulatory Commission (FERC) has issued Order 888, giving generators access to wholesale loads throughout the nation.

Maine Won't Close Docket on Stranded Costs

Phillip S. Cross

The Maine Public Utilities Commission (PUC) has rejected a request by Central Maine Power Co. to suspend a proceeding to develop an interim competition transition charge.

Mailbag

Charles Studness is not the type of person I would like to loan money to. I say this because if interest rates dropped in the future he would believe he was now entitled to borrow at the lower rates and not pay me what was owed.

In his latest diatribe against stranded-cost recovery ("Stranded-cost Recovery: It's Un-American," Financial News, July 15, 1996, p. 43), Studness tells us that recovery of stranded costs will keep Americans from purchasing electricity at the competitive price.

It certainly will; however, first all debts must be paid.

Mailbag

I am shocked that a respected and learned analyst of the utility industry like Charles Studness would espouse a position that stranded-cost recovery is somehow "un-American" ("Stranded-cost Recovery: It's Un-American," Financial News, July 15, 1996, p. 43).

Contrary to the claims of Mr. Studness, recovery of stranded cost is a fundamental right protected by the U.S. Constitution.

Financial News

Charles M. Studness

Despite two years of debate, little progress has been made toward a solution to the issue of stranded costs. And since the two sides have almost no common ground, any accommodation seems unlikely. Utilities that seek stranded-cost recovery appear to have the upper hand at present, but the stiffest resistance still lies ahead. The Federal Energy Regulatory Commission's Order 888 clearly favors utilities, but customer reaction signals a shift to another venue.

Phantom Taxes: The Big Paycheck

David M. Wise

The restructuring debate in the electric industry has focused on nuclear assets at risk for "stranding" under deregulation, while another issue has largely eluded public scrutiny: accumulated deferred federal income taxes (ADFITs). ADFITs represent money that utilities have received from ratepayers to cover federal tax expenses not yet actually recognized and paid.

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