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"energy crisis" of the 1970s have had the net effect of placing high-cost obligations on

many traditional monopoly electric utilities relative to the current market prices of

electricity generated by natural-gas turbines.65 In unregulated markets, falling energy

prices would have resulted in the bankruptcy of the high-cost generation technologies used

by the traditional utilities. Or the projects would not have been undertaken in the first

place. In the regulated electricity market, however, those increasingly uneconomic plants

and independent power contracts are termed "stranded costs" (costs that utilities will not

be able to recover if they are forced to compete for business). The frequently staggering

nature of those uneconomic assets and contracts has produced demands for compensation

on the part of traditional utilities in return for their acceptance of mandatory retail

wheeling of power produced by low-cost alternative generators to traditional utility

customers.

The idea that utilities should recover stranded costs that were not demonstrably

forced on them is flawed on its face. No seller is entitled to customers; no seller may

punish customers who simply no longer wish to buy that seller's products. But utilities are

demanding stranded-cost recovery, not simply because they are losing customers to

competitive generation, but because they are losing control over their most valuable asset-

-their transmission lines.66 Instead, if utilities are deregulated (lose their monopoly

franchise protection) and are allowed to charge what the market will bear (with the

proviso that other producers are free to make inroads through the many mechanisms

described in this paper), utilities' rationale for stranded-cost recovery will be eliminated

because mandatory access will not be required.

The open-access approach constitutes a taking because utilities lose exclusive

control over their transmission assets and must transport power between other sellers and

buyers at less than market rates. According to testimony filed by Granite State Electric

Company, "While the generation will be priced at market, the wires or distribution rates

will be capped at the embedded cost of the wires themselves--a price lower than their true

value in a competitive marketplace."67

Open access also entails involuntary accommodation of inflows and outflows of

electricity on the grid, which will require extensive planning, scheduling, and switching ef-

forts. With present technology, the electricity injected into the grid flows where resistance

is lowest, not necessarily along the particular path one might prefer that it follow. Large

influxes of power will bleed over into neighboring utilities' lines, and some will return as

"loop flows." Advocates of open access would need to determine how to compensate

fairly incumbent utilities for dealing with burdens imposed by others, as well as how to

compensate the incumbent for upgrading the grid.

The elimination of monopoly franchise protection would not prevent utilities from

recovering stranded costs through appropriate pricing of transmission, but their recovery

attempts would be disciplined by the risk of high charges inducing entry. "If wires as well