In its Policy and Roadmap Decisions the Commission asked that rate unbundling be addressed by a working group. The charges were to both establish the separate costs associated with the primary functional categories (generation, transmission and distribution) as well as to unbundle the costs associated with various distribution services. In order to discuss the task before the group, it is important to clearly define what is meant by the term "unbundling".

CIU suggests that unbundling involves several aspects. These include 1) identification of potential functional or service categories to be unbundled; 2) Allocating costs among the categories identified in the first step; 3) identifying the unbundled components of costs on customer bills; and 4) allowing competitive providers to offer various services.

It is CIU's position that there is no reason that the first two items above cannot be completed without the need for phasing or staging in time for implementation of direct access on January 1, 1998. This group has already identified most if not all of the relevant categories necessary for the initial stages of direct access. Of course, after implementation the evolution of markets may suggest additional categories of costs that need to be unbundled.

Once the appropriate categories have been identified, the utility revenue requirements must be separated into these categories. Although this process involves some important threshold questions, the additional time and investment required to unbundle an additional service is not likely to be significant. While this decision may involve considerable analysis and debate, the extent of that analysis and debate will be no greater if the costs of 12, rather than three services are to be unbundled. Moreover, most of the items currently in the undetermined category are components of the distribution function. Once the costing methods have been determined for classifying distribution costs as customer related or demand related (a determination that must be made in any event), applying these principles to additional services should not pose significant problems.

The question of identifying unbundled cost components as separate items on a customers bill, while requiring the information developed in the first two steps, is really a separate issue. On this question the utilities have identified important limitations that will likely limit their ability to reflect all the unbundled cost information on customer bills by 1/1/98. Moreover, it is not clear that all of this information would be of value to customers in any event. Thus, it would be reasonable for this group to address questions such as what information to show on customer bills. Nevertheless, the decisions made concerning billing should not, and need not, limit what can and should be undertaken with respect to the unbundling of costs.

Similarly, the extent to which distribution service offerings are unbundled is a question separate and apart from the unbundling of costs. In fact, this is a question that may be decided by a different working group. The important task before this group is to make sure that costs are unbundled such that whatever decisions are made concerning the unbundling of services, the ability to do so is supported by the workgroup's efforts at unbundling costs.

CIU believes that it is premature to identify costing methods (allocation factors?) on a component by components basis. As mentioned above, important threshold questions concerning the basic philosophical underpinning of costing must first be considered. Once such threshold questions have been decided, the working group or subgroups will be ready to discuss the proper allocator for the costs in each unbundled category.