Table 17

Table 17. Treatment of Stranded Costs by States as of April 30, 1998: A Summary

State Order Legislation Proposed Start Date for Phased-in Retail Competition Proposed Date for Full Retail Competition Composition
of
Stranded Costs Recovery Level
Permitted Recovery Mechanism Procedure for Estimating Stranded Costs Mitigation Requirement/
Strategies Projected
Recovery
Period

Arizona
12/96 ^a
Legislation is required to implement this proposal. January 1, 1999 January 1, 2003 Generation assets, purchased power agreements, fuel contracts, regulatory assets, employment transition costs, and environmental mandates. Utilities have the opportunity to recover prudently incurred stranded costs. No decision. Possible choices: variable charges, fixed fees, exit fees, access fees. Administrative approach is recommended. Required. Recommended period is no longer than 10 years, beginning January 1999.

California
12/95 ^b

9/96 ^c
March 31, 1998 ^d March 31, 1998 Generation assets, nuclear power plant settlements, power purchase agreements, qualifying facilities contracts, capital costs of early retirement and retraining programs. Utilities have the opportunity to recover prudently incurred stranded costs.

Nuclear stranded costs may be recovered.
Competitive transition charge (CTC).

Utilities authorized to securitize $7.3 billion through issuance of rate reduction bonds.
Market-based approach. Required. Four years (through 12/31/01) for generation-related assets.

Rate Reduction bond financing would mature 10 years from issue.

Connecticut 4/98 e January 1, 2000 July 1, 2000 Generation assets, generation-related regulatory assets, long-term power purchase contract costs, and others. Stranded cost recovery is based on the divestiture of all non-nuclear generating assets and aggressive implementation of mitigation strategies. Recovery of stranded costs will be recouped through a competitive transition assessment (CTA) charge imposed on all customers of an electric distribution company. Utilities may also be authorized to issue rate reduction bonds (RRBs) for specific stranded costs. The legislation provides a methodology to estimate stranded costs. Stranded costs must be minimized through mitigation. All generation assets must be divested by 2004. All RRBs are to be retired no later than December 31, 2011. CTA charges, beginning January 1, 2000, will be imposed until the RRBs are retired on or before December 31, 2011.

Illinois 12/97 ^f October 1, 1999 May 1, 2002 Categories unspecified. Opportunity for full recovery. Transition charge and limited securitization. Lost revenue approach. Required. Level of mitigation is reflected in transition charge. December 31, 2006.

Maine
5/97 ^g
March 1, 2000 March 1, 2000 Above market costs associated with utility generation, generation-related contracts, and regulatory assets. Opportunity for full recovery. To be determined before the recovery period begins in March 2000. Market value approach in the context of divestiture. Generation-related assets must be divested by 2000. Recovery period begins March 2000. Every 3 years actual stranded costs are trued up, and the recovery period ends when all stranded costs are paid.

Maryland 12/97 ^h Legislative authority not required. However, the Commission will work with the legislature to craft legislation. July 1, 2000 July 1, 2002 Unrecoverable capital costs of generating assets, regulatory assets, costs of restructuring, social and demand-side management programs.

Excludes nuclear stranded costs.
Opportunity for full recovery. Potential options include a competitive transition charge (wires charge) and exit fee.

Securitization is encouraged if ratepayers benefit.
Market value approach recommended.

Each utility to file plans with the Public Service Commission.
Divestiture of assets recommended. Time frame for recovery to be included in filings by utilities.

Massachusetts 12/96 ⁱ
11/97 ^j
March 1, 1998 March 1, 1998 Utility-owned generation assets, purchased power contracts, regulatory assets, and nuclear decommissioning costs. Opportunity for full recovery. Direct access charge to be recovered by utilities subject to regulatory appproval.

Securitization is permitted when utilities meet required conditions.
Administrative and/or market valuation with reconciliation methods. Aggressive mitigation required. Full divestiture is not required, but encouraged. Five to ten years with true-ups in years two, five, and ten.

Michigan
6/97 ^k
Legislation necessary to carry out plan proposed. Phased-in retail competition begins March 31, 1998 (2.5 percent of load), with graduated annual increases of 2.5 percent through 2001, for a total of 12.5 percent available by January 1, 2002. January 1, 2002 "Costs incurred during the regulated era that will be above market prices," encompassing five categories: (1) regulatory assets, (2) capital costs of nuclear plants, (3) contract capacity costs from power purchase agreements, (4) employee retraining costs, (5) costs of implementing restructuring. Opportunity for recovery of prudently incurred costs. Transition charge with potential securitization option. Top-down administrative estimates subject to periodic true-ups. Not mandated. March 31, 1998-December 31, 2007.

Montana
5/97 ^l
July 1, 1998 July 1, 2002 Above market costs of qualifying facility contracts, energy supply related regulatory assets and deferred charges, investor-owned utility generation, and power purchase contracts. Opportunity to recover prudently incurred costs. Nonbypassable transition charge.

Securitization to recover certain transition costs is authorized.
Based on review of utility filings due one year before direct access. Required. July 1, 1998 - July 1, 2002.

Nevada
6/97 ^s
December 31, 1999 December 31, 1999 Composition of stranded costs to be determined. Staff report ^t includes past generation investment and contractual obligations, regulatory assets, and public policy costs. Opportunity to recover prudently incurred costs. Commission to determine mechanism.

Staff report suggests use of a nonbypassable access charge.
AB 366 directs the Commission to determine stranded costs. Required. AB 366 gives the Commission authority to determine the appropriate recovery period.

New Hampshire
2/97 ^m

5/96 ⁿ
January 1, 1998 ^o January 1, 1998^p Above market, sunk costs of utility-owned generating facilities, regulatory assets, above-market power purchase costs, and nuclear generating facility decommissioning costs. Opportunity for recovery linked to the regional average electricity prices. Nonbypassable transition charge.

Securitization to be considered very carefully since it may reduce incentives for mitigation.
Divestiture of generation assets. Aggressive mitigation required. Utilities to submit divestiture plans by 12/31/97. To be negotiated with utilities.

New Jersey
4/97 ^q
Legislation needed to implement plan will be reviewed during the 1998 session of the New Jersey legislature. October 1, 1998 July 1, 2000 Costs directly related to utility power supply, including utility generating plants, long- and short-term power purchase contracts with other utilities and with nonutility generators. Opportunity for full recovery. Market transition charge (MTC).

Securitization is proposed.
Sale prices for divested assets will be the basis of stranded costs estimates. Utilities must take all reasonable steps to mitigate nonutility generator contracts and other stranded costs. Period lasts up to 8 years, through 2008.

New York
5/96 ^r
Legislation is needed to carry out plan. 1998 Contingent on settlement agreement with jurisdictional utilities in the State. Above market generation assets, including nuclear power generating assets, nonutility generator contracts, regulatory assets, and others. Full recovery not guaranteed.

Recovery level varies with each individual utility agreement and depends on utility's mitigation efforts.
Nonbypassable access or wires charge.

Securitization is proposed.
Estimates submitted by utilities subject to regulatory review and approval. Required. Negotiated on a utility-by-utility basis.

Oklahoma
4/97 ^u
July 1, 2002 July 1, 2002 Long-term investments and contractual obligations. Opportunity to recover prudently incurred stranded costs. Nonbypassable transition charge. Commission to determine. Not spefically required in SB 500. Mitigation to be discussed in financial issues recommendation due to legislature December 1999. Three to seven years.

Pennsylvania
12/96 ^v
January 1, 1999 January 1, 2001 Regulatory assets, buyout costs for uneconomic qualifying facilities contracts, above market costs of existing generating facilities including their retirement costs, unfunded portion of projected nuclear generating plant decommissioning costs, and other transition costs. Opportunity to recover prudently incurred stranded costs. Nonbypassable customer bill surcharge.

Securitization allowed.
Utility filings to be reviewed on a case-by-case basis. Required. Recovery began January 1, 1997, and will last approximately 9 years.

The recovery period can be shortened or lengthened in agreements with individual utilities.

Rhode Island
8/96 ^w
July 1, 1997 July 1, 1998 Costs associated with power purchase contracts, regulatory assets, and net unrecovered costs of generating plants. Opportunity for recovery of prudently incurred costs. Nonbypassable transition charge, initially set at $2.8 cents per kilowatthour.

RI Assembly passed securitization bill.
By 2001, 15% of generation assets must be sold, allowing valuation. A true-up process will be used to track the proceeds of transition charge. Required.

Partial divestiture required.
Twelve years

(by December 31, 2009).

Vermont
12/96 ^x
Legislative action is needed to implement this plan.

Legislation was introduced in 1997, but measure did not pass.
January 1, 1998 December 31, 1998 Generation assets, power purchase agreements, and regulatory assets (which include nuclear decommissioning costs and demand-side management program costs). Recovery level linked to strength of mitigation strategies. Nonbypassable competitive transition charge.

Securitization is under consideration.
"Bottom up" administrative approach. Utilities submit estimates, and each claim will be balanced with potential mitigation techniques. Required. Three years (by December 31, 2001).

Virginia 4/98 ^y January 1, 2002 January 1, 2004 Not specified, to be decided by State Corporation Commission and future legislation. Just and reasonable net stranded costs will be recoverable, and appropriate consumer safeguards related to stranded costs will be implemented. Not specified, to be decided by State Corporation Commission and future legislation. Not specified, to be decided by State Corporation Commission and future legislation. Not specified, to be decided by State Corporation Commission and future legislation. Not specified, to be decided by State Corporation Commission and future legislation.

^a Arizona Corporation Commission, Docket No. U-0000-94-165, Decision No. 59943, In the Matter of the Competition in the Provision of Electric Services Throughout the State of Arizona (December 26, 1996).

^b California Public Utilities Commission, Case No. R-94-04-31, Decision 95-12-063, Order Instituting Rulemaking on the Commission's Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation (December 20, 1995).

^c California Civil Code Chapter 845, Assembly Bill 1890, An Act Related to Public Utilities (September 23, 1996).

^d January 1, 1998, was initially proposed for implementation of competition at the retail level. Due to operational problems, the date has been moved to March 31, 1998. California Public Utilities Commission, Case No. R-04-31, Decision No. 97-12-131, Order Instituting Rulemaking on the Commission's Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation (December 30, 1997).

^e Connecticut House Bill 5005, Public Act No. 98-28, An Act Concerning Electric Restructuring (April 29, 1998).

^f Illinois law, Article 16, HB 362, Electric Service Customer Choice and Rate Relief Law of 1997 (December 16, 1997).

^g State of Maine, H.P. 1274-L.D. 1804, An Act to Restructure the State's Electric Industry (May 29, 1997).

^h Maryland Public Service Commission, Order No. 73834, Case No. 8738, In the Matter of the Commission's Inquiry Into the Provision and Regulation of Electric Service (December 3, 1997). The following order delays the initial start date of April 1999 to July 2000: Maryland Public Service Commission, Case No. 8738, Order No. 73901, In the Matter of the Commission's Inquiry Into the Provision and Regulation of Electric Service (December 31, 1997).

ⁱ Massachusetts Department of Telecommunications and Energy (formerly Department of Public Utilities), Decision 96-100, Electric Industry Restructuring Plan: Model Rules and Legislative Proposal (December 30, 1996).

^j State of Massachusetts, HB 5117, Bill Relative to Restructuring the Electric Industry in the Commonwealth, Regulating the Provision of Electricity and Other Services, and Promoting Enhanced Consumer Protection Therein (November 25, 1997).

^k Michigan Public Service Commission, Case No. U-11290, Opinion and Order, In the Matter, on the Commission's Own Motion to Consider the Restructuring of the Electric Utility Industry (June 5, 1997). This order was later amended by a January 14, 1998, order under the same docket number. The revised order delayed the starting date for retail competition.

^l Montana Senate Bill 390, The Montana Electric Utility Industry Restructuring and Consumer Choice Act (May 27, 1997).

^m New Hampshire Public Utilities Commission, Docket No. 96-150, Restructuring New Hampshire's Electric Utility Industry: Final Plan, (February 28, 1997).

ⁿ New Hampshire House Bill 1392 (RSA Chapter 374-F), An Act Restructuring the Electric Utility Industry in New Hampshire and Establishing a Legislative Oversight Committee, was enacted on May 16, 1996, to be effective from May 21, 1996.

^o The New Hampshire PUC shifted the target date for beginning retail choice from the initial target of January 1, 1998, to July 1, 1998, due to delays resulting from litigation with Public Service Company of New Hampshire. The July start date may be further postponed, since the litigation with PSNH will be heard November 1998.

^p Ibid.

^q New Jersey Board of Public Utilities, Docket No. EX94120585Y, Restructuring the Electric Power Industry in New Jersey: Findings and Recommendations (April 30, 1997), p. 2.

^r New York Public Service Commission, Case 94-E-0952, In the Matter of Competitive Opportunities Regarding Electric Service, Opinion and Order (May 20, 1996).

^s Nevada Assembly Bill 366, An Act Relating to Governmental Administration (July 14, 1997).

^t State of Nevada Public Service Commission, The Structure of Nevada's Electric Industry: Promoting the Public Interest (June 1996).

^u Oklahoma Assembly Bill 500, Electric Restructuring Act of 1997 (April 25, 1997).

^v Pennsylvania House Bill 1509, Sections 3-4, Title 66 Pennsylvania Consolidated Statutes, Sections 2801-2812, The Electricity Generation Customer Choice and Competition Act (December 31, 1997).

^w Rhode Island Assembly Bill 96-H 8124B, An Act Relating to the Utility Restructuring Act of 1996 (August 7, 1996).

^x Vermont Public Service Board, Docket No. 5854, Investigation into the Restructuring of the Electric Utility Industry in Vermont. The Power to Choose: A Plan to Provide Customer Choice of Electricity Suppliers, Report and Order (December 31, 1996).

^y Virginia Acts of Assembly, HB 1172, An Act to Establish a Schedule for Virginia's Transition to Retail Competition in the Electric Industry, Effective July 1, 1998.

Source: Energy Information Administration.

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State	Order	Legislation	Proposed Start Date for Phased-in Retail Competition	Proposed Date for Full Retail Competition	Composition of Stranded Costs	Recovery Level Permitted	Recovery Mechanism	Procedure for Estimating Stranded Costs	Mitigation Requirement/ Strategies	Projected Recovery Period
Arizona	12/96 ^a	Legislation is required to implement this proposal.	January 1, 1999	January 1, 2003	Generation assets, purchased power agreements, fuel contracts, regulatory assets, employment transition costs, and environmental mandates.	Utilities have the opportunity to recover prudently incurred stranded costs.	No decision. Possible choices: variable charges, fixed fees, exit fees, access fees.	Administrative approach is recommended.	Required.	Recommended period is no longer than 10 years, beginning January 1999.
California	12/95 ^b	9/96 ^c	March 31, 1998 ^d	March 31, 1998	Generation assets, nuclear power plant settlements, power purchase agreements, qualifying facilities contracts, capital costs of early retirement and retraining programs.	Utilities have the opportunity to recover prudently incurred stranded costs. Nuclear stranded costs may be recovered.	Competitive transition charge (CTC). Utilities authorized to securitize $7.3 billion through issuance of rate reduction bonds.	Market-based approach.	Required.	Four years (through 12/31/01) for generation-related assets. Rate Reduction bond financing would mature 10 years from issue.
Connecticut		4/98 e	January 1, 2000	July 1, 2000	Generation assets, generation-related regulatory assets, long-term power purchase contract costs, and others.	Stranded cost recovery is based on the divestiture of all non-nuclear generating assets and aggressive implementation of mitigation strategies.	Recovery of stranded costs will be recouped through a competitive transition assessment (CTA) charge imposed on all customers of an electric distribution company. Utilities may also be authorized to issue rate reduction bonds (RRBs) for specific stranded costs.	The legislation provides a methodology to estimate stranded costs.	Stranded costs must be minimized through mitigation. All generation assets must be divested by 2004.	All RRBs are to be retired no later than December 31, 2011. CTA charges, beginning January 1, 2000, will be imposed until the RRBs are retired on or before December 31, 2011.
Illinois		12/97 ^f	October 1, 1999	May 1, 2002	Categories unspecified.	Opportunity for full recovery.	Transition charge and limited securitization.	Lost revenue approach.	Required. Level of mitigation is reflected in transition charge.	December 31, 2006.
Maine		5/97 ^g	March 1, 2000	March 1, 2000	Above market costs associated with utility generation, generation-related contracts, and regulatory assets.	Opportunity for full recovery.	To be determined before the recovery period begins in March 2000.	Market value approach in the context of divestiture.	Generation-related assets must be divested by 2000.	Recovery period begins March 2000. Every 3 years actual stranded costs are trued up, and the recovery period ends when all stranded costs are paid.
Maryland	12/97 ^h	Legislative authority not required. However, the Commission will work with the legislature to craft legislation.	July 1, 2000	July 1, 2002	Unrecoverable capital costs of generating assets, regulatory assets, costs of restructuring, social and demand-side management programs. Excludes nuclear stranded costs.	Opportunity for full recovery.	Potential options include a competitive transition charge (wires charge) and exit fee. Securitization is encouraged if ratepayers benefit.	Market value approach recommended. Each utility to file plans with the Public Service Commission.	Divestiture of assets recommended.	Time frame for recovery to be included in filings by utilities.
Massachusetts	12/96 ⁱ	11/97 ^j	March 1, 1998	March 1, 1998	Utility-owned generation assets, purchased power contracts, regulatory assets, and nuclear decommissioning costs.	Opportunity for full recovery.	Direct access charge to be recovered by utilities subject to regulatory appproval. Securitization is permitted when utilities meet required conditions.	Administrative and/or market valuation with reconciliation methods.	Aggressive mitigation required. Full divestiture is not required, but encouraged.	Five to ten years with true-ups in years two, five, and ten.
Michigan	6/97 ^k	Legislation necessary to carry out plan proposed.	Phased-in retail competition begins March 31, 1998 (2.5 percent of load), with graduated annual increases of 2.5 percent through 2001, for a total of 12.5 percent available by January 1, 2002.	January 1, 2002	"Costs incurred during the regulated era that will be above market prices," encompassing five categories: (1) regulatory assets, (2) capital costs of nuclear plants, (3) contract capacity costs from power purchase agreements, (4) employee retraining costs, (5) costs of implementing restructuring.	Opportunity for recovery of prudently incurred costs.	Transition charge with potential securitization option.	Top-down administrative estimates subject to periodic true-ups.	Not mandated.	March 31, 1998-December 31, 2007.
Montana		5/97 ^l	July 1, 1998	July 1, 2002	Above market costs of qualifying facility contracts, energy supply related regulatory assets and deferred charges, investor-owned utility generation, and power purchase contracts.	Opportunity to recover prudently incurred costs.	Nonbypassable transition charge. Securitization to recover certain transition costs is authorized.	Based on review of utility filings due one year before direct access.	Required.	July 1, 1998 - July 1, 2002.
Nevada		6/97 ^s	December 31, 1999	December 31, 1999	Composition of stranded costs to be determined. Staff report ^t includes past generation investment and contractual obligations, regulatory assets, and public policy costs.	Opportunity to recover prudently incurred costs.	Commission to determine mechanism. Staff report suggests use of a nonbypassable access charge.	AB 366 directs the Commission to determine stranded costs.	Required.	AB 366 gives the Commission authority to determine the appropriate recovery period.
New Hampshire	2/97 ^m	5/96 ⁿ	January 1, 1998 ^o	January 1, 1998^p	Above market, sunk costs of utility-owned generating facilities, regulatory assets, above-market power purchase costs, and nuclear generating facility decommissioning costs.	Opportunity for recovery linked to the regional average electricity prices.	Nonbypassable transition charge. Securitization to be considered very carefully since it may reduce incentives for mitigation.	Divestiture of generation assets.	Aggressive mitigation required. Utilities to submit divestiture plans by 12/31/97.	To be negotiated with utilities.
New Jersey	4/97 ^q	Legislation needed to implement plan will be reviewed during the 1998 session of the New Jersey legislature.	October 1, 1998	July 1, 2000	Costs directly related to utility power supply, including utility generating plants, long- and short-term power purchase contracts with other utilities and with nonutility generators.	Opportunity for full recovery.	Market transition charge (MTC). Securitization is proposed.	Sale prices for divested assets will be the basis of stranded costs estimates.	Utilities must take all reasonable steps to mitigate nonutility generator contracts and other stranded costs.	Period lasts up to 8 years, through 2008.
New York	5/96 ^r	Legislation is needed to carry out plan.	1998	Contingent on settlement agreement with jurisdictional utilities in the State.	Above market generation assets, including nuclear power generating assets, nonutility generator contracts, regulatory assets, and others.	Full recovery not guaranteed. Recovery level varies with each individual utility agreement and depends on utility's mitigation efforts.	Nonbypassable access or wires charge. Securitization is proposed.	Estimates submitted by utilities subject to regulatory review and approval.	Required.	Negotiated on a utility-by-utility basis.
Oklahoma		4/97 ^u	July 1, 2002	July 1, 2002	Long-term investments and contractual obligations.	Opportunity to recover prudently incurred stranded costs.	Nonbypassable transition charge.	Commission to determine.	Not spefically required in SB 500. Mitigation to be discussed in financial issues recommendation due to legislature December 1999.	Three to seven years.
Pennsylvania		12/96 ^v	January 1, 1999	January 1, 2001	Regulatory assets, buyout costs for uneconomic qualifying facilities contracts, above market costs of existing generating facilities including their retirement costs, unfunded portion of projected nuclear generating plant decommissioning costs, and other transition costs.	Opportunity to recover prudently incurred stranded costs.	Nonbypassable customer bill surcharge. Securitization allowed.	Utility filings to be reviewed on a case-by-case basis.	Required.	Recovery began January 1, 1997, and will last approximately 9 years. The recovery period can be shortened or lengthened in agreements with individual utilities.
Rhode Island		8/96 ^w	July 1, 1997	July 1, 1998	Costs associated with power purchase contracts, regulatory assets, and net unrecovered costs of generating plants.	Opportunity for recovery of prudently incurred costs.	Nonbypassable transition charge, initially set at $2.8 cents per kilowatthour. RI Assembly passed securitization bill.	By 2001, 15% of generation assets must be sold, allowing valuation. A true-up process will be used to track the proceeds of transition charge.	Required. Partial divestiture required.	Twelve years (by December 31, 2009).
Vermont	12/96 ^x	Legislative action is needed to implement this plan. Legislation was introduced in 1997, but measure did not pass.	January 1, 1998	December 31, 1998	Generation assets, power purchase agreements, and regulatory assets (which include nuclear decommissioning costs and demand-side management program costs).	Recovery level linked to strength of mitigation strategies.	Nonbypassable competitive transition charge. Securitization is under consideration.	"Bottom up" administrative approach. Utilities submit estimates, and each claim will be balanced with potential mitigation techniques.	Required.	Three years (by December 31, 2001).
Virginia		4/98 ^y	January 1, 2002	January 1, 2004	Not specified, to be decided by State Corporation Commission and future legislation.	Just and reasonable net stranded costs will be recoverable, and appropriate consumer safeguards related to stranded costs will be implemented.	Not specified, to be decided by State Corporation Commission and future legislation.	Not specified, to be decided by State Corporation Commission and future legislation.	Not specified, to be decided by State Corporation Commission and future legislation.	Not specified, to be decided by State Corporation Commission and future legislation.