The Federal Energy Regulatory Commission has moved closer to deciding the stranded cost dispute between Consumers Energy and the city of Alma, Mich., which intends to construct its own municipal electric system.
On Sept. 10, the FERC set for hearing two stranded cost issues: (1) whether Consumers Energy has met the "reasonable expectation" standard justifying stranded cost recovery from Alma; and (2) if so, what amount the utility may recover. (See, Docket No. sc97-4-000.)
Consumers Energy wants $56.1 million in stranded cost payments from Alma. But Alma disputes that amount, saying it owes no fee under the "revenues lost" approach of Order Nos. 888 and 888-A, because it claims that Consumers Energy faces a shortage of capacity (with load growing at 2 percent per year) and thus will not lose any contribution to fixed costs even if Alma leaves to form its own municipal distribution system.
Nevertheless, the FERC will require a hearing. Under FERC policy, a utility experiencing load growth still can demonstrate stranded costs if it cannot recover lost revenue from another customer, i.e., the released capacity is either left unsold or resold at a price below full embedded cost.
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