Press Release July 30, 1999	Contact: Janee Briesemeister or Rafael Ayuso, ayusra@consumer.org (512) 477-4431 Consumers Union Southwest Office

AUSTIN, TX - A compromise agreement on the issue of stranded costs which was key to the passage of the electric deregulation bill in May could unravel next week. Industrial customers have asked the Public Utility Commission to renege on the stranded cost allocation compromise formula in SB 7 and pass on a greater share of the costs to residential ratepayers.

"Basically, the commissioners will be asked to make a decision on stranded costs that either will uphold the fair compromise that was reached by the Legislature or will force residential ratepayers to pay more than their fair share," said Janee Briesemeister, a senior policy analyst with the Southwest Regional Office of Consumers Union.

PUC commissioners will interpret five policy issues at their meeting on Thursday, August 5 dealing with the implementation of SB 7, including two key ones related to the allocation of stranded costs. The meeting will start at 9:30 a.m. and will be held in the commissioners' hearing room, located on the 7th floor of the Travis Building at 17th and Congress.

"The industrials either have contracted short-term amnesia or are trying to manipulate the PUC into giving them something they never had," Briesemeister said. "They are attempting to stand the agreement on its head, shifting more stranded costs back on to residential customers-exactly the opposite result the Legislature intended."

Allocation of stranded costs among the customer classes was one of the last issues resolved in finalizing SB 7. Throughout the legislative debate on SB 7, Consumers Union and other consumer advocates complained the bill unfairly burdened residential and small commercial customers with the majority of stranded cost payments. A committee amendment sponsored by Rep. Kevin Bailey of Houston required large industrial customers to pay a greater share of stranded costs than would have been required by the Senate version of the bill. Industrial customers pulled their support of SB 7 after this amendment was added to the bill. Later, through negotiation by several representative parties and key legislators (including Rep. Bailey), a compromise agreement on the allocation of stranded costs was reached.

PUC Chairman Pat Wood and agency staff performed the calculations on which the agreement was based and assisted in drafting the language for the House floor amendment sponsored by Rep. Bailey. "Many legislators believe that without this agreement, SB 7 would not have had the support it needed for enactment," Briesemeister said.

In the simplest terms, the compromise allocated a portion of the stranded costs to customers using the methodology preferred by the residential consumer advocates, with the remainder allocated based on a utility's last rate case -- which was the method advocated by large industrial customers. In addition, the parties negotiated a methodology for allocating stranded costs to those industrial rate classes who did not exist during the utility's last rate case. For example, a utility may have developed a new discount rate to attract a particular industry to its service area.

The implementation of SB 7 requires numerous, complex rules and proceedings to be finished in a relatively short period of time. For example, utilities will begin collecting "securitized" stranded costs after September 1 of this year, and will file for permission to collect additional stranded costs in April of next year. The PUC has set up task forces of interested parties to assist the Commission staff in drafting the numerous rules which are required to fully implement the legislation. Consensus has developed around many of the details necessary to implement SB 7. However, when there are disputes among parties regarding the interpretation of the legislation the Commissioners will be asked to make a ruling in order for the implementation process to proceed. Five policy issues will be presented to the PUC on August 5, and two of the five relate to the allocation of stranded costs.

First, the industrial customers claim the stranded cost agreement did not mandate that the PUC use the same "numeric allocators" from the utility's last rate case in the implementation of SB 7 as it used when performing the calculations the legislators relied on when adopting the agreement. If the industrials' position is adopted, the amount of stranded costs paid by residential and small industrial customers will be greater than the figures relied on by the legislators who crafted the compromise.

Second, the industrials want special treatment for those industrial rate classes which did not exist during the utility's last rate case. The issue is whether customers receiving certain discounted rates should pay the same stranded costs as customers of the same service who do not receive the discount. "We believe that failing to do otherwise results in some customers receiving a discounted allocation of stranded costs, thus leaving other customers to pay more than their share," Briesemeister said.

"It is very disappointing that the customer group who stands to benefit the most from deregulation is asking the PUC to re-write the SB 7 so they can get even more. In our opinion the bill is a mixed bag for consumers, but the stranded cost allocation compromise stood out as one of its most redeeming features."

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