Pennsylvania § 2802(15) The Commission is empowered under this chapter to determine the level of transition or stranded costs for each electric utility and to provide a mechanism, the competitive recovery charge for recovery of an appropriate amount of such costs in accordance with the standards established in this chapter.

§ 2803 "Transition or stranded costs." An electric utility’s known and measurable net electric generation-related costs, determined on a net present value basis over the life of an asset or liability as part of its restructuring plan, which traditionally would be recoverable under a regulated environment but which may not be recoverable in a competitive electric generation market and which the Commission determines will remain following mitigation by the electric utility.

§ 2804(13) ... the Commission has the power and duty to approve a competitive transition charge for the recovery of transition or stranded costs it determines to be just and reasonable to recover from ratepayers.

§ 2808(c)(4) The Commission shall consider the extent to which the electric utility has undertaken efforts to mitigate generation-related transition or stranded costs by appropriate means in a manner that is reasonable under al of the circumstances, including consideration of whether mitigation has been commensurate with the magnitude of the electric utility’s generation related transition or stranded costs. During the transition period, electric utilities shall have the duty to mitigate generation related transition or stranded costs to the extend practicable.

Shareholders should "share" stranded costs.

Any stranded costs that are recovered must be paid for equitably by all customer classes, allocated by usage of stranded assets.

Prohibit securitization of stranded costs because it locks in recovery of costs with out an opportunity to "true-up" for over recovery.

Prohibit the shifting of costs from generation assets to the transmission and distribution system as a method of stranded cost recovery. This method shifts costs on to residential and small commercial customers and away from large industrial customers and shareholders.

Texas model bill; CU

Excess costs over market.
The legislature finds that the most reasonable transition to retail competition is to bring regulated rates closer to competitive rates. The Commission shall estimate excess costs over market to develop strategies to reduce regulated rates to the level that would occur under a competitive market.

The Commission shall require each electric utility to take measures to reduce the potential amount of the utility’s excess costs over market. The measures may include:

renegotiation and restructuring of purchased power contracts and fuel supply contracts existing on the effective date of this section that include prices that are above market price;

implementation of cost controls and cost reduction procedures directly related to generation facilities included in the utility’s excess cost over market computation;

application of consolidated tax savings;

selling uneconomic assets;

selling excess capacity;

offsetting potential excess costs over market through the recognition of increases in revenues due to participation in new markets;

retiring generation facilities if operating costs and taxes exceed the cost of replacement power; and

improving the operating performance of assets that are potentially over market cost.

The Commission may require performance standards governing the recovery of avoidable costs associated with assets that are potentially over market costs.

The Commission shall develop a procedure for estimating a utility’s excess costs over market. The computation may not include administrative costs that are not directly attributable to the utility’s generation system and must produce a net value that is based on the investment costs of all generating plants of the utility. A utility’s excess costs over market shall be allocated based on the annual use of system generation by the customer or customer class and must be collected on a cents per kilowatt hour basis. Not later than the third anniversary of the date retail competition is initiated, the Commission shall conduct reconciliation of each utility’s excess cost over market recovered from customers and the excess costs over market actually incurred.

If the net book value of a utility’s generating system is less that the estimated market value of the generating system, the Commission shall, before deregulation of that utility, determine whether it is fair and equitable to order the utility to compensate its ratepayers for the foregone expected cost saving.

The customers and shareholders of an electric utility subject to this subtitle shall share equitably the utility’s uneconomic investments, as determined by the Commission.

For purpose of this subtitle, "excess costs over market" means the difference between:

the value of all of the utility’s generation-related assets that have a net book value equal to or above their market value; and

the value of all of the utility’s generation-related assets that have a net book value below their market value, after mitigation efforts described in Subsection (b) of this section, and excluding costs that are avoidable in the future.