Fortnightly Magazine - March 15 1997

As the U.S. Congress works to pass federal legislation introducing competition into the electric utility industry, one of the most divisive issues regulators and policymakers must grapple with is that of stranded cost. In a recent study completed by Resource Data International, we have found that an important issue will be how "negative" stranded costs are handled.

At the heart of our study is a detailed, plant-by-plant, analysis of stranded costs for every utility in the country. We estimate that the total above-market stranded cost nationally is $202 billion.

XENERGY Inc. and the Electric Power-Research Institute will team up in a second phase of a retail-wheeling pilot program study. The expanded study will include California, Massachusetts, Illinois and New York. Competitors, market share and sales strategies will be assessed. XENERGY first started the survey in July 1996. More than 40 utilities sponsored the research. The first phase focused mostly on New Hampshire, but also targeted electricity deregulation in the 50 states. Phase two, focusing on commercial-industrial customers, ends June 1997.

After months of trying, which included the derailment by Western Resources of the proposed merger of UtiliCorp United and Kansas City Power & Light Co., the boards of directors of Western Resources and Kansas City P&L have approved a merger of the two companies in a stock-for-stock transaction valued at $2 billion. If approved by the necessary regulatory authorities, the new company would have $9.5 billion in assets, $3 billion in annual revenues and more than 8,000 MW of electric generation.

North Carolina and South Carolina, both relatively low-cost power states, recently have made moves toward competition. In North Carolina, bills calling for the formation of a study commission to examine the introduction of electric supplier choice in that state were introduced in the House (H.B. 12) and Senate (S.B. 38). The intent to introduce choice has prompted the North Carolina Coalition for Customer Choice in Electricity to call on legislators to develop a report by April 1998, in time for a bill to be considered by the General Assembly that same year.