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Stranded costs levy unfair
1 January 1998
California state regulators have ruled that payment for the "stranded costs" associated with past utility investments must be borne by all ratepayers, regardless of who they choose as their electricity supplier. The California Public Utilities Commission (CPUC) ruled on November 19 that over the next four years consumers will pay off the uneconomic investments made by the state's three largest utilities. "The estimate is that it will take four years before we become a competitive market place, so utilities only have four years to recover," says CPUC's Dianne Deinstein. The CPUC estimates the costs for the utilities' uneconomic non-nuclear projects are $2.8 billion for Pacific Gas & Electric, $1.1 billion for Southern California Edison and $130 million for San Diego Gas & Electric. The utilities say that consumers, who are guaranteed by law a 10% rate reduction starting on January 1, will not be affected by their debt pay-off. But consumer advocates and electricity suppliers new to the deregulated California market say it amounts to a bail-out for the investor owned utilities and their shareholders and will give them an unfair competitive advantage. Other electricity providers will have to add a stranded costs levy to their electricity prices, yet pass the earnings from the levy on to the big three utilities. The stranded costs debts are just part of what the three call their total of $28 billion in "stranded assets" -- investments that no longer produce power at competitive rates such as the Diablo Canyon and San Onofre nuclear plants
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