Foundation Decries Lavish Recovery

Fortnightly Magazine - May 1 1997
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The Heritage Foundation has released its second report in a series on electric deregulation, aimed at capturing the attention of lawmakers on Capitol Hill now holding hearings on proposed legislation to restructure the electric industry.

DC PSC RFP Technical Consultant for Formal Case (FC) No. 1156

The new report, Electricity Deregulation: Separating Fact From Fiction in the Debate Over Stranded Cost Recovery, by Adam D. Thierer, concludes that lavish stranded cost recovery is not justified, and that the "sky will not fall" if stranded cost recovery is limited or denied.

Thierer said, "If policy makers demand that customers and competitors pay for the losses of inefficient utilities, it could mean the end of a competitive electric future."

Thierer cited a variety of studies, which estimate total stranded costs anywhere from $10 billion to $500 billion. He called attention to a Moody's Investors Service study that set stranded costs for 114 investor-owned utilities at $135 billion in 1995, and another by Data Resources Inc., which estimated such costs at $88 billion in 1995.

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