Embedded Costs Exceeding Market Prices (ECEMP)

Embedded costs of utility investments exceeding market prices are: i) costs incurred pursuant to a regulatory or contractual obligation; 2) costs that are reflected in cost-based rates; and 3) cost-based rates that exceed the price of alternatives in the marketplace. ECEMPS may become "stranded costs" where they exceed the amount that can be recovered through the asset's sale. Regulatory questions involve whether such costs should be recovered by utility shareholders and if so, how they should be recovered. "Transition costs" are stranded costs which are charged to utility customers through some type of fee or surcharge after the assets are sold or separated from the vertically-integrated utility. "Stranded assets" are assets which cannot be sold for some reason. The British nuclear plants are an example of stranded assets which no one would buy. (Also referred to as Transition Costs.)

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