These rates will be effective in January 2002. The PUC will hold a hearing two years after competition begins to make a final determination of total stranded costs. Utilities are allowed to securitize , or refinance, their stranded costs, as long as it benefits ratepayers. Through this process, utilities sell the debt to a third party. The utility receives the payment, equaling the amount of the debt sold, from investors.
Investors then issue securities.
Securitizing debt provides funding at a lower cost than traditional utility funding due to the risk reduction securitization gives bondholders, much like refinancing your home mortgage with a lower interest rate. Three utilities have filed applications to securitize stranded costs. The PUC will hold hearings for electric utilities that have stranded costs to set the amount they can recover through the sale of bonds. To limit market power in the generation market, no power generation company may own or control more than 20 percent of the energy production market in a geographic power region. At least 60 days before competition begins, each generation company affiliated with a former monopoly utility must sell entitlements to at least 15 percent of its installed generation capacity.