Stranded Costs, Nuclear Bailout

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NEW GAS PLANTS ARE "PLANNED" STRANDED COSTS: Natural Gas Prices Jump as California's Clueless Politicians Call for Construction of New Gas Power Plants to Avert New Energy Crisis, Portending Stranded Gas Costs When Expected Gas Spike Arrives (January, 2004)

In California, Cities Seek Alternative Power Providers, Fear Monopolies' Plans to Erect New Exit Fees With Long-Term Power Contracts (January, 2003)

WRITING ON THE WALL: Natural Gas Power Plants: The Next Bailout Scandal? (Oct 2002)

View A Petition Calling for Fair Exit Fees for Communities That Buy Power and Build Solar by clicking here. Print Sign and (April, 2002)

Opinion: "Stranded Costs," by Paul Fenn

There is a campaign underway in the United States that may be efficiently compared to the recent federal bailout of the Savings and Loan industry. It is the effort of many electric utilities and holding companies to force billion dollar "stranded cost" concessions from the Federal Energy Regulatory Commission (FERC) and a number of state regulatory agencies. Rhode Island, California, and Pennsylvania, and other states have saddled their residents and businesses with billions in utility bill surcharges to pay off utility shareholders, with little public awareness, and many observers say that a nationwide bailout in the hundreds of billions is a political "done deal."

New methods of hiding these bailouts and creating the appearance of rate reductions have been innovated, such as the use of state infrastructure bonds in California and "securitization" in Pennsylvania, in effect taking money from our pockets as taxpayers in order to create the appearance of a "rate reduction" as ratepayers, all to amortize and hide the impact of a billion dollar ratepayer bailout of the power companies that will refinance nuclear power plants that would otherwise be shut down.

What this will mean for average people is that we will be forced to pay our utilities an extra monthly surcharge for any of their power plants or other facilities that are too inefficient to compete in a deregulated industry. Threatened with decades of lawsuits by utility owners, the FERC and many state regulatory commissions appear willing to bail out these companies at our expense.

If successful, the winners of this campaign will be electric holding companies, power plant developers, and MCI-style "customer aggregators" that corral consumers left stranded by deregulation, skimming the transaction margins for profit. The losers will be local governments, businesses of every size, and every American that uses electricity at home.

Under its current course, electric restructuring will further gut local governments by stripping them of historic franchising powers in the name of "customer choice." While "deregulated" electric utilities are allowed to retain their monopolies over our local electric distribution systems, local communities and their governments will be statutorily deprived of their century-old jurisdiction over the use of those systems, de-funded, and tagged with a non-bypassable, billion dollar"stranded cost" surcharge attached to every American's electricity bill into the 21st century. At its current trajectory, "electric restructuring" is no less than a corporate takeover of local democratic authorities under the auspices of "customer choice."

"Stranded Costs Recovery" has been the bottom line for electric utilities since the beginning of the restructuring debate. In the face of utility threats to file lawsuits and delay restructuring, the Federal Energy Regulatory Commission (FERC) and many state regulators have already conceded utility demands that the American public pay for all their uncompetitive power plants and infrastructure.

While the public is only marginally aware of the bailouts in progress, the U.S. Utility Industry estimates that it will reach $300 billion as a result of deregulating the industry, compared with the $500 billion billed to American citizens in the bailout of the Savings and Loan Industry. Some observers say the stranded cost bailout could be even higher in the final analysis.

There is a movement afoot to fight the stranded cost bailout of this industry. Citizens Against the Utility Tax (CUT) has recently formed in California to repeal AB1890's $28 billion bailout. In Washington, D.C., a politically diverse coalition called "Stop the Bailout" has formed, including a broad array of organizations, including the Heritage Foundation and the U.S. Public Interest Group. For more information, call 510 451 1727.

Articles and Images Copyright (c) 1996, 1997, 1998 by the American Local Power Project.