Transition costs are the potential monetary losses that electric- utility shareholders, ratepayers, or other parties might experience because of structural changes in the electricity industry. Regulators, policy analysts, utilities, and consumer groups have proposed a number of strategies to address transition costs, such as immediately opening retail electricity markets or delaying retail competition. This report has 3 objectives: identify a wide range of strategies available to regulators and utilities; systematically examine effects of strategies; and identify potentially promising strategies that may provide benefits to more than one set of stakeholders. The many individual strategies are grouped into 6 major categories: market actions, depreciation options, rate-making actions, utility cost reductions, tax measures, and other options. Of the 34 individual strategies, retail ratepayers have primary or secondary responsibility for paying transition costs in 19 of the strategies, shareholders in 12, wheeling customers in 11, taxpayers in 8, and nonutility suppliers in 4. Most of the strategies shift costs among different segments of the economy, although utility cost reductions can be used to offset transition costs. Most of the strategies require cooperation of other parties, including regulators, to be implemented successfully; financial stakeholders must be engages in negotiations that hold the promise of shared benefits. Only by rejecting ``winner-take-all`` strategies will the transition-cost issue be expeditiously resolved.
