Stranded cost disputes originated primarily during the electric industry restructuring movement, when states that opened generation to retail competition had to decide how utilities would recover investments — such as long-term power plants or above-market purchase contracts — that had been prudently made under the prior regulated, cost-of-service model but could no longer be recovered through market prices after restructuring.

States commonly authorized recovery through a dedicated competitive-transition charge or through securitization, issuing bonds backed by a dedicated rate charge to recover stranded costs at a lower financing cost than traditional utility equity, with the securitized charge often surviving as a distinct line item on customer bills for years afterward. Litigation frequently turns on whether a specific cost category qualifies as a legitimately stranded, prudently incurred investment or is instead an ordinary business risk the utility should bear without special recovery.

Because stranded cost determinations blend historical prudence review with forward-looking market projections about what the asset would have earned absent restructuring, the underlying valuation methodology is often as contested as the legal recovery theory itself. A Juricratic simulation can model prudence-finding likelihood and valuation-methodology assumptions as separate dials to rehearse the range of plausible recovery amounts.

Stranded cost recovery disputes typically arise during or after a state's transition to retail electric competition, with a utility seeking commission approval of a stranded cost charge or securitization mechanism and intervenors contesting the prudence or valuation of specific claimed investments.