Unbundling: An Excuse for Cost Shifting?

Fortnightly Magazine - January 1 1998
This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.
Recharge the Economy with Renewable Energy Tax Credits

The article "Risk and Rates for the Regulated Distribution," by Maloney, McCormick, and Tyler (Sept. 1, 1997, p. 26) was interesting. For people with the vested interests of the authors, unbundling offers the golden opportunity of reducing regulated rates without actually having a formal rate decrease. That comes about by shifting on paper as much revenue as possible from the regulated disco to the competitive genco, while of course leaving all the costs with which that revenue is associated within the disco.

To paraphrase the authors, if a cost is truly a cost of generation, then in the competitive market the price will allow for its recovery. That is true, as far as it goes. However, the problem is that the costs the authors want shifted to the genco are costs that were never there in the first place. These costs, such as administrative and general expenses, uncollectible accounts mandated by state policy, general plant and customer accounting and service expenses, now reside heavily in the distribution function. They will remain with the disco of the future. They won't be recoverable by the genco in the competitive market because no new unregulated entity will be burdened with such costs.

This full article is only accessible by current license holders. Please login to view the full content.
Don't have a license yet? Click here to sign up for Public Utilities Fortnightly, and gain access to the entire Fortnightly article database online.