Retail wheeling in Kansas: Stranded costs could bewitch customer choice.
With the advent of retail wheeling, some customers will see their electricity prices fall while others will see them rise. And stranded costs may have a lot to do with it (em at least according to a report by the Docking Institute of Public Affairs at Fort Hays State University in Kansas.
"Like all expansion of trade opportunities, some customers will benefit, while others will be adversely affected," says the report, funded by four of the state's rural electric cooperatives (em Kansas Electric Cooperatives, Kansas Electric Power Cooperative, and Sunflower Electric Power Corp.
"Our models show that rates for rural residential customers under retail wheeling will rise, at least in the first few years of retail wheeling," according to the report.
How stranded costs are handled will likely prove critical in determining who wins and who loses under retail wheeling. For instance, according to the report, an average residential electric bill could drop 2 to 6 percent over the next 10 years or so (em but only if no stranded costs are passed on to the customers (see chart). However, once stranded costs are factored in, the same bill could climb anywhere from 24 to 31 percent over the same period.
Besides stranded costs, the report anticipates higher overall electric rates for most residents and small businesses due to increasing prices of delivered electricity. It's unlikely these additional costs will be levied on large customers, the report states. It assumes that smaller customers will bear most of the cost burden.