COST OF SERVICE TARIFFS AND CHARGES.

(a) Each electric utility shall, on or before April 1, 2000, file proposed tariffs for its proposed transmission and distribution utility.

(b) The filing under this section shall include supporting cost data for determination of nonbypassable delivery charges, which shall be the sum of:

(1) transmission and distribution utility charges by customer class based on a forecasted 2002 test year;

(2) a system benefit fund fee; and

(3) an expected competition transition charge, if any.

(c) Each electric utility shall also identify the unbundled generation and retail energy service costs by customer class.

(d) In accordance with a schedule and procedures it establishes, the commission shall hold a hearing and approve or modify and make effective as of January 1, 2002, the transmission and distribution utility's proposed tariffs for transmission and distribution services, the system benefit fund fee, and the expected competition transition charge as determined under Subsections (g) and (h) and as implemented under Subsections (i)-(l), if any.

(e) The system benefit fund fee shall be that established by the commission under Section 39.903.

(f) The expected competition transition charge shall be that as determined under Subsections (g) and (h) and as implemented under Subsections (i)-(l).

(g) The expected competition transition charge approved by the commission shall be calculated from the amount of stranded costs as defined in Subchapter F that are reasonably projected to exist on the last day of the freeze period modified to reflect any adjustments determined appropriate by the commission under Section 39.261(c).

(h) The electric utility shall use the ECOM administrative model referenced in Section 39.262 to determine estimated stranded costs. The model must include updated company-specific inputs. Natural gas prices used in the model must be market-based natural gas forward prices, where available. Growth rates in generating plant operations and maintenance costs and allocated administrative and general costs shall be benchmarked by comparing those costs to the best available information on cost trends for comparable generating plants. Capital additions shall be benchmarked using the limitation in Section 39.259(b).

(i) An electric utility may:

(1) at any time after the start of the freeze period, securitize 100 percent of its regulatory assets as defined by Section 39.302 and up to 75 percent of its estimated stranded costs as defined by this section and recover those charges through a transition charge, in accordance with a financing order issued by the commission under Section 39.303;

(2) implement, under bond, a nonbypassable charge of up to 100 percent of its estimated stranded costs; or

(3) use a combination of the two methods under Subdivisions (1) and (2).

(j) Any competition transition charge shall be allocated among retail customer classes according to Section 39.253.

(k) In determining the length of time over which stranded costs under Subsection (h) may be recovered, the commission shall consider:

(1) the electric utility's rates as of the end of the freeze period;

(2) the sum of the transmission and distribution charges and the system benefit fund fees;

(3) the proportion of estimated stranded costs to the invested capital of the electric utility; and

(4) any other factor consistent with the public interest as expressed in this chapter.

(l) Two years after customer choice is introduced, the stranded cost estimate under this section shall be reviewed and, if necessary, adjusted to reflect a final, actual valuation in the true-up proceeding under Section 39.262. If, based on that proceeding, the competition transition charge is not sufficient, the commission may extend the collection period for the charge or, if necessary, increase the charge. Alternatively, if it is found in the true-up proceeding that the competition transition charge is larger than is needed to recover any remaining stranded costs, the commission may:

(1) reduce the competition transition charge, to the extent it has not been securitized;

(2) reverse, in whole or in part, the depreciation expense that has been redirected under Section 39.256;

(3) reduce the transmission and distribution utility's rates; or

(4) implement a combination of the elements in Subdivisions (1)-(3).