Mailbag

Fortnightly Magazine - October 1 1996
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Recharge the Economy with Renewable Energy Tax Credits

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. This is common practice. The recovery of stranded costs did not thwart competition in telephones or gas pipelines, even though that recovery was substantial and continues through this day. What Studness wants is for people to escape their electric supplier's fixed costs. He wants this right because embedded costs are currently higher than marginal costs. In the past, when marginal costs exceeded embedded costs, neither Studness nor any of his ilk ever said "Let the utilities charge the higher marginal costs, because that is what the competitive market would charge." We didn't hear that argument when the shoe was on the other foot.

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