Deregulation and Stranded Cost Recovery
Director, DAI Management Consultants
Doctoral Candidate, Dept. of Social and Decision Sciences
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.