The Competitive Transition Charge (CTC) Is Effectively a Legislated Asset

question 57

Multiple Choice

The competitive transition charge (CTC) is effectively a legislated asset and is the result of the movement to make the electric utility industry more competitive by deregulating the industry. In regards to CTC, which of the below statements is FALSE?

• A) The CTC is collected by the utility over an unknown period of time.
• B) Because the state legislature designates the CTC to be a statutory property right, it can be sold by a utility to an SPV and then securitized.
• C) It is the legislative designation of the CTC as an asset that makes rate reduction bonds different from the typical asset securitized.
• D) The CTC is initially calculated based on projections of utility usage and the ability to collect revenues.

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Definitions:

Pareto Optimal

A condition of resource allocation in which it is impossible to make any one individual better off without making someone else worse off, signifying an efficient distribution of resources.

Competitive Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded, effectively clearing the market.

Utility Function

A mathematical representation of how different quantities of goods or services are ranked according to their desirability for a consumer.

Initial Endowment

The initial distribution of income, wealth, or resources that individuals or organizations possess before entering into any market transactions.