Section R14-2-1607. Recovery of Stranded Cost of Affected Utilities

A.      The Affected Utilities shall take every reasonable, cost-effec- tive measure to mitigate or offset Stranded Cost by reducing costs, expanding wholesale or retail markets, or offering a wider scope of permitted regulated utility services for profit, among others.

B.       The Commission shall allow a reasonable opportunity for recovery of unmitigated Stranded Cost by Affected Utilities.

C.      The Affected Utilities shall file estimates of unmitigated Stranded Cost on or before July 1, 1999, or pursuant to Com- mission Order, whichever occurs first. Such estimates shall be fully supported by analyses and by records of market transac- tions undertaken by willing buyers and willing sellers.

D.      An Affected Utility shall request Commission approval, on or before July 1, 1999, or pursuant to Commission Order, which- ever occurs first, of distribution charges or other means of recovering unmitigated Stranded Cost. The filing may include a discounted stranded cost exit methodology that a consumer may choose to use to determine an amount due the Affected Utility in lieu of making monthly distribution charge or other payments.

E.       The Commission shall, after hearing and consideration of analyses and recommendations presented by the Affected Util- ities, staff, and intervenors, determine for each Affected Utility the magnitude of Stranded Cost, and appropriate Stranded Cost recovery mechanisms and charges. In making its determi- nation of mechanisms and charges, the Commission shall con- sider at least the following factors:

1.        The impact of Stranded Cost recovery on the effective- ness of competition;

2.        The impact of Stranded Cost recovery on customers of the Affected Utility who do not participate in the compet- itive market;

3.        The impact, if any, on the Affected Utility’s ability to meet debt obligations;

4.        The impact of Stranded Cost recovery on prices paid by consumers who participate in the competitive market;

5.        The degree to which the Affected Utility has mitigated or offset Stranded Cost;

6.        The degree to which some assets have values in excess of their book values;

7.        Appropriate treatment of negative Stranded Cost;

8.        The time period over which such Stranded Cost charges may be recovered. The Commission shall limit the appli- cation of such charges to a specified time period;

9.        The applicability of Stranded Cost to interruptible cus- tomers.

F.       A Competition Transition Charge (CTC) may be assessed on all retail customers based on the amount of generation pur- chased from any supplier. Any reduction in electricity pur-

Corporation Commission – Fixed Utilities

chases from an Affected Utility resulting from self-generation, demand side management, or other demand reduction attribut- able to any cause other than the retail access provisions of this Article shall not be used to calculate or recover any Stranded Cost from a consumer.

G.      Stranded Cost shall be recovered from customer classes in a manner consistent with the specific company’s current rate treatment of the stranded asset, in order to effect a recovery of Stranded Cost that is in substantially the same proportion as the recovery  of similar costs from customers  or customer classes under current rates. In no event shall the Competition Transition Charge be utilized as a mechanism for double recovery of Stranded Cost from Standard Offer Service cus- tomers.

H.      The Commission may consider securitization as a financing method for recovery of Stranded Cost of the Affected Utility if the Commission finds that such method of financing will result in a lower cost alternative to customers.

I.        The Commission may, after notice and hearing, order regular revisions to estimates of the magnitude of Stranded Cost.

Historical Note

Adopted effective December 26, 1996, under an exemp- tion as determined by the Arizona Corporation Commis- sion (Supp. 96-4). Amended by an emergency action effective August 10, 1998, pursuant to A.R.S. § 41-1026, in effect for a maximum of 180 days (Supp. 98-3). Emer- gency amendment replaced by exempt permanent amend- ment effective December 31, 1998 (Supp. 98-4).

Amended by exempt rulemaking at 5 A.A.R. 3933, effec- tive September 24, 1999 (Supp. 99-3). Amended by exempt rulemaking at 6 A.A.R. 4180, effective October 13, 2000 (Supp. 00-4).

Note

Editor’s Note: The Arizona Corporation Commission has determined that the following Section is exempt from the Attorney General approval provisions of the Arizona Administrative Proce- dure Act (A.R.S. § 41-1041) by a court order (State ex. rel. Corbin

v. Arizona Corporation Commission, 174 Ariz. 216 848 P.2d 301 (App. 1992)).