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2004-05 Seminars

Aftershock: Deregulation and Stranded Cost Recovery

David Rode
Director, DAI Management Consultants
Doctoral Candidate, Dept. of Social and Decision Sciences

Abstract
Part of electric market deregulation is experienced as a delayed reaction: recovery of stranded costs. Nationally, estimates of total potential stranded costs run well into the tens of billions of dollars -- all of which, if utilities are successful, will be borne by ratepayers. For many formerly regulated utilities, recovery of these costs represents their last grasp at the stability of a regulated asset. Texas, as one of the earliest markets to consider deregulation, is now beginning to deal with the stranded cost consequences of that legislation.

Texas's electric market deregulation legislation -- PURA, the Public Utility Regulatory Act -- called for stranded costs proceedings to begin this year. In March, CenterPoint Energy filed a $4.4 billion stranded cost request with the Texas PUC. During this proceeding, I served as an expert witness for the Texas Office of Public Utility Counsel (the government agency that represents small ratepayers before the PUC). In this presentation, I will give an overview of the proceedings as a means of exploring how the traditional stranded cost recovery process has changed under deregulation. Additionally, the presentation will address issues particular to serving as an expert witness and appearing before utility regulators.

Slides