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assets and issue stock in a new company, stock issuance prices may be depressed because of investors' perceptions of a glutted market. Depressed prices suggest the existence of stranded costs, which will be assigned to ratepayers in the form of non-bypassable charges beginning in 2004. Electric Prices In The Competitive Market Sever Ail Links Between Costs and Prices. In addition to the problems described above, the pricing of electricity in the competitive market place is based on the commodity trading format developed for the natural gas market, not the price of power generated in Texas. As a result of the Public Utility Commission's decision to tie electric prices to natural gas prices, the accumulated knowledge of decades of wholesale electric power transactions has no relevance to the electric restructuring model in Texas. Because there is no market index for electricity, traders must use a proxy like the natural gas market. Price quotes based upon natural gas prices are only available for 24 to 48 hours, severely restricting or eliminating the ability to shop an "apples to apples" price comparison. In short, Texas' model of deregulation thus far has severed all links between actual production costs and prices paid by retail customers (at the expense of the customer). Nowhere is the dichotomy more apparent than in the EPCOT marketplace. Generators associated with Reliant and AEP have removed power plants from service because, they claimed, excess generation capacity in ERCOT caused wholesale power prices to be so low that it was infeasible to continue operating these plants. Simultaneous with the generators' announcement, the affiliated REPs received approval from the Public Utility Commission to increase Price to Beat rates on the basis that rising gas prices threatened their ability to compete against the Price to Beat. The retail market has been forced into a gas spot market pricing scenario, while the REPs' affiliated generation companies take advantage of significant non-gas generating assets, portfolio gas purchasing strategies, stranded costs recovery and limited competitive generation. Whether it is a power shortage in California or a power surplus in Texas, electric industry restructuring does not address a key fact - that deregulation does not necessarily result in competition and lower prices for end use customers. If true retail competition does not develop, rates will not fall. Meanwhile, during a tune when all market indicators point to low wholesale prices, customers face rising retail prices. 1813\00~ac~uno030113grog 11