§ 56-_______. The Commission may allow the recovery in rates, through a non- bypassable surcharge or other fair and equitable mechanism, such costs as it finds, after hearing, (1) have been incurred by or contractually committed to by electric companies subject to its jurisdiction with the reasonable expectation that such costs would be recoverable under traditional utility regulation; (2) have been prudently incurred and are verifiable and non-mitigable; and (3) could not reasonably be expected to be recoverable in the competitive markets required by this Act. All such costs are hereinafter referred to as "stranded costs."

Stranded costs may include, but are not limited to: (1) unfunded nuclear decommissioning expense; (2) above market amounts paid under contracts entered into under the Public Utility Regulatory Practices Act of 1978 (PURPA) (P.L. 95-617) and approved by the Commission; (3) above market fixed and variable generation costs; and (4) regulatory assets.

In determining how and over what periods to permit recovery of stranded costs, the Commission shall be guided by the following principles:

(1) Any rate surcharges and recovery periods shall be determined and applied in ways that minimize costs to consumers while, at the same time, ensure the creation of robust competitive markets at the earliest practicable time for all classes of consumers;

(2) All stranded cost recovery mechanisms prescribed shall be fair to all classes of consumers and shall bear reasonable relation to the costs actually stranded as to each class of consumer;

(3) Through annual rate adjustments or other reasonable procedures, the Commission shall ensure that the only costs recovered in regulated rates are those costs that are stranded by reason of this Act and not offset by new sources of revenue made possible by this Act. To the extent the public interest in creating competitive markets may require, the Commission may approve settlements or other agreements of the affected parties that waive the requirements of this subsection.

(4) No stranded cost surcharge or other recovery mechanism should be approved by the Commission that will delay the development of robust, competitive markets for electricity beyond the year 200_.