Stranded Costs
Must be considered
The magnitude of "stranded costs" and how to collect them is another stumbling block
to electric competition in Ohio. Stranded costs result when consumers select another
power supplier and no longer contribute revenue to the incumbent utility for cost
obligations which were incurred for their benefit before customer choice under an
obligation to serve requirement. Agreeing to the level of stranded cost is only
the beginning. Other issues to be decided are how much of this total is appropriate
for recovery and who should pay for it. These details will be worked out by the
Public Utilities Commission of Ohio. The choice between who should pay for stranded
costs is fairly straightforward for electric cooperatives; these costs are paid
for by the departing power supply customer if they default to remaining power supply
customers. For investor-owned utilities, this proposition is less clear. Here, stranded
costs can be allocated between three parties: departing power supply customers,
remaining customers, and shareholders.
Ohio cooperatives and stranded costs
Ohio's electric cooperatives are not immune from stranded cost concerns. Buckeye
Power has long-term debt obligations remaining on its two power plants, long-term
coal supply contracts and investments in a load management system. As a group, Ohio's
electric cooperatives may have less exposure to stranded cost recovery concerns
than other segments of the electric supplier industry. Part of this is because of
the competitive cost of generation from Buckeye's Cardinal units and part is because
of the dominance of residential sales over industrial/commercial sales. Most investor-owned
utilities make over two-thirds of their sales to commercial/industrial customers
and these are the most likely customers to seek and find more competitive power
suppliers in a customer choice market.