Ahem, pardon me, but what was the latest justification I saw for the taxpayers having to finance $700 million of the $1 billion "FutureGen" thing? Ah, I remember. "Utilities are risk-averse organizations who will never fund such development from their own cashflows, even of a sure thing, so we better subsidize them."

"Assuming the implementation of a regulatory scheme that gets the price signals right," Why not assume a fair and open free market? Ah, I forgot, utilitiy companies.

"We would all depend on the wisdom of the program administrator to fairly allocate caps among the different sectors of the energy industry. " ????? Isn't that simply a written invitation to lobbyists to peddle influence for pay? Oh, of course, I forgot. The legislation is also written by the lobbyists.

"Given the complexity of the industry and the potential interactions across its different sectors, the fairest and most transparent regulatory scheme would simply tax all fuels equally at the point where they enter the economy." Yes !!!! Right On !!!! May that idea win the day!

I have two issues with this statement. First, any such tax would increase consumers' costs while increasing federal revenues, with no assurance that the tax revenues would be used effectively to reduce carbon emissions. Second, I hope the intent to "tax all fuels equally" is based on their carbon emissions potential, not their energy content.

Two of the suggestions in the emerging paradigm are:

1) A carbon tax should be negotiated on a global setting, i.e. the World Trade Organization. Each country that does not apply the negotiated tax, will then free ride the global system.

2) Most of the discussions are indirectly supporting generation as a monopoly. Generation competition is not only possible, but absolutely necessary to go forward.

In response to Edward A. Reid, Jr., first issue with the statement on how to use the tax revenues, I suggest to use them to fund – through low interest loans - the development of the resources of the demand side (demand response, energy efficiency, energy storage, etc.) by means of competitive Second Generation Retailer - 2GR. As the power industry increases market share with CO2-free products, tax revenues decrease. So the tax will result a temporary device.

Once the USA adopts such a tax structure, global negociations to extend its range is a piece of cake, because the world in general is expecting something like that.

Wholesale competition is just a long run exersice. Retail competition with the development of 2GRs is what allows true short run competition. Both interact as a fully functional electricity market that will result one of the greatest opportunity to face the global warming or climate change challenge. That is the industry structure the power sector needs.

I repeat the first part of a post written on 8.7.07 under the article Just How Smart IS Your Smart Meter? Why Achieving the Intelligrid Should be Your Ultimate Goal.

All readers,

As Len has decided to drop out from the generative dialogue, any remaining reader is advised to question EWPC as being the emergent winning market design and architecture paradigm for pragmatics in the first phase of competition.

I would enjoy it if you could itemize your proposal in very simple distinct items (no links) to clarify it.

Back on topic, I'm not so convinced that the government should be managing all the proposed plans in the article. I'm not even sure why they're involved in any way beyond anti-trust SEC duties. As Ed said above, I just don't trust their interests. Hmmm, nearly a pun since I was going to follow that with, "I'd rather use private interest bearing investments which are already at an all time high." To eliminate CFCs, we just banned them and let the market fix it. Once we're sure that all CO2 can be eliminated, which I am, let the money stay where it does the most good. I'd love to see a good contest between renewables on all scales and nuclear.

Independent Market for Every Utility Customer - Part 2 - Market Operation

Laid out here is IMEUC, a forward-looking system which exploits modern technology to implement a fair free market for all electricity customers, with a modified LMP pricing strategy which also specifically encourages advance build of capital-intensive large increments of new and replacement generation, while setting the smallest DG / CHP installs on an equal footing with all others, and providing a safe, fast and low-cost meand of DG connection and marketing.

No other system, including Jose Antonio's, can claim anything close.

Thanks for caring.

On 7.5.07 I wrote: EWPC is not a particular solution; it is an emerging market design and architecture aiming to set up mechanisms…I have followed Geoffrey Moore's advice to perform market vs. market cooperation - through an ongoing generative dialogue - as the first stage of competition to come up with the winning market architecture and design. If there is an element [of EWPC] that does not satisfy such aim, I like to learn about it to upgrade EWPC. The second stage of competition, company vs. company competition, initiates when the mechanisms are implemented and particular solutions can then arrive. The whole point is to enable a generative dialogue to reach the End-State of the power industry.

A generative dialogue (GD) is not about debating positions. After going over some of the following prerequisites, on later posts I will come back to explain that we will be learning from an emergent future, because of three kinds of complexities we are experiencing.

However, as I understand, with the post after yours, Len has made your request obsolete. In addition to your statement “I finally found your standpoint, but was too weary to respond by then,” Len says: “no other system [than IMEUC], including Jose Antonio's, [EWPC] can claim anything close.” So What I like to do is to concentrate on collaboration with you and any one else – including Len’s IMEUC – and any other “system” candidates to complete the first phase. His statement is right on the first phase of competition, even if IMEUC has many unnecessary details of the 2nd phase of competition.

So, ask Len to do exactly what you are asking me on his IMEUC first – concentrate on the essentials for the first phase of competition, so that I will have a benchmark to express not my claims on EWPC, but what insights are emerging if any from IMEUC that might make it the winner. By your own standards, the paragraph he added to his 2 links is not clear enough. He needs also to resolve all contradictions of IMEUC, including that related to LMPs. I promise you to respond in kind as soon his system is clearly understood.

For the back on topic, I will wait for the author to reply first.

Independent Market for Every Utility Customer - Part 2 - Market Operation

and not at all in any of your links.

This year I wrote in EnergyPulse and said at Carnegie Mellon University that EWPC was the winning market (architecture and design) of the first phase of competition. I came to that conclusion after a very lengthy generative dialogue under the 2 Playing With Fire EnergyPulse articles.

At some point in the dialogue (it was dialogue, no debate), under playing with Fire Part I (I could include the link, but you don't like it), Len wrote on 12.26.06: "Jose Antonio: Your cogent discussion raises some issues with IMEUC which I hope to clarify in a third article in the series here on EnergyPulse in perhaps a couple of weeks, provided I can submit it up to the high standards of the editorial staff. Thank you."

How do each of your proposed methods offer fair value to all generation entities' various aspects (like reliability, dispatchability, max capacity, ramp up speed, ecological 'greenness', etc.) to put them on an equal playing field.

How do you eliminate monopolization/gaming by regulators/politicians/"experts in the field" to force the most fair competition?

That should be a good start.

You are bypassing a process which is now under serious questioning about IMEUC feasibility as a market candidate. Readers should be reminded on my earlier post Todd Defends Len Once Again.

Len, in your first posting you're being sarcastic, so I can't tell what's serious and what's not, but it seems as if you've misconstrued the meaning of several of my sentences. When I write about the folks who founded the electric power industry, I am indeed talking about the industry's founders, and not any present day executives. When I write about relying on the wisdom of program administrators, I think it's clear that I am skeptical that any of us is smart enough to "to fairly allocate caps among the different sectors of the energy industry." Fortunately, it seems we have found common ground by the end of your first posting, and I'm happy to leave matters there.

Ed, thanks for raising those issues, and I'm pleased to clarify them here. My preferred carbon tax would be revenue neutral, so that any monies that flow to the government from the new tax would be offset by tax relief elsewhere. For example, income tax rates could be reduced thereby offsetting the regressivity of such a tax. As far as whether the tax would be based on carbon emissions potential or Btu content, I would insist on carbon emissions potential. After all, the point of the tax is to reduce carbon dioxide emissions. If people find a way to get Btus without carbon, more power to them (so to speak).

Jose Antonio, thanks for your kind words.

As to the debate that seems to have broken out in this comment section between Len and Jose Antonio, I wouldn't claim to understand these issues well enough to comment on them. I'm happy to have sparked such passionate dialogue. Todd, thanks for volunteering to referee.

You are welcome.

IMEUC's modified LMP market is designed to enable the Market Manager (eg. a government entity) within each market region to determine as required the values allocated to each of the services you query, either by a) simply letting the market reward generators who can respond sufficiently quickly to unexpected peaks or unexpected failures of dispatched capacity (reliability, dispatchability,ramp up speed), b) or by setting up new categories of product available in the market and letting customers decide how much to reward them, eg. wind, solar, micro-hydraulic, biomass etc. generation might be allowed one or several explicit categor(y/ies) of supply in which only those types of generation could compete, the generating companies can post offers at whatever price they choose, and customers can decide whether to pay the offer price or purchase from the general market supplied by eg. fossil or nuclear. Depending on local situations, it may even make sense to separate all generation into types, eg. nuclear, coal-with-zero-emissions, standard coal, natural gas, fossil-from-CHP, etc. and allow customers to allocate and prioritize their purchases among them according to their individual estimations of value vs. price (ecological 'greenness'). They only need to record their preference / priorities / price sensitivities once, then their "agent meter" will automatically act for them in the regional central market to maximize their benefits.

2) "How do you eliminate monopolization/gaming by regulators/politicians/"experts in the field" to force the most fair competition?"

On "monopolization/gaming", IMEUC provides for (requires) the market manager, a government entity, to (arrange to have someone, eg. their ISO) forcast / anticipate shortages in their market far enough in advance that they can if necessary, post RFQ's for new capacity build, and if required provide long-term contracts, if necessary take-or-pay, to purchase the generated energy. They are then responsible for marketing the contracted energy themselves, either within their own market or to other market regions as necessary. If they mess up and wind up over-buying, they are required to levy a fair surcharge on market transaction to cover contracted capacity they couldn't sell, and the customers are then free to punish the market manager's political bosses. This system will ensure that the worst abuses observed in eg. the California debacle wouldn't re-occur. Other existing market-oriented mechanisms (FERC, Justice dept, etc) should be capable of managing possibilities such as price-fixing, bid-rigging, capacity withholding etc. Legislators may choose (or not) to provide for recurring statistical audits of bids by eg. experienced independent auditors (or better, some neural networks constantly studying the database of bid histories) to catch events of artificial withholding or bid rigging.

3) IMEUC deals with "regulators/politicians/experts" by explicitly requiring the legislators who originally set up the market or their agents to no longer be involved in explicit price setting, though the politicians can not be stopped from providing specifiic subsidies if they choose since government budgets are their constitutional authority. Market prices are set only by willing buyers purchasing from willing sellers in an open, transparent and timely market where all suppliers compete on an equal footing and all customers are treated equally regardless of size etc.

My questions to EWPC would be i) How can customers of retailers be assured there is no deliberate manipulation affecting their prices when there is no available public consolidated record of bids / asks for generation in an open market? ii) Why would generation bother to sell their product to retailers at wholesale if for no additional cost they can sell directly to the customers and split the gain with the customers? (eg. in IMEUC the customer happily pays a fixed flat market operation fee, the generator entity pays no "Market Manager" costs, though they are free to do marketing in the unlikely event they think that might benefit them.)

Len and Todd, I will no respond to details, unless, quoting Todd "... you [Len] could itemize your [IMEUC] proposal in very simple distinct items (no links) to clarify it."

Jim: Thanks for your insight about the right questions.

My reservations with Len are that for more than a year he keeps shifting from dialogue to debate. I learned from a highly respected advisor that putting the right market concepts into practice is indeed very complicated. So before the concepts are developed, “asking the right questions” is a great target to hidden agendas.

Most the essential market architecture and design elements of EWPC have been discussed at length earlier. Reading the comments under the articles Playing with Fire I and II, should be sufficient to be convinced that EWPC is the winning market of the first phase of competition. However, I don’t dismiss a better market from appearance. So that is why I asked to learn of the new IMEUC proposition without contradictory elements, without success.

My approach has been to avoid debate, which is based on learning from the past, introducing a generative dialogue, which is about learning from the emerging future. I will recall one of the essential elements of the dialogue in search for the emergent structure from generation to customer.

IMEUC articles have a business model with a retailer between generation and customers, which I identified with as a switchboard. The problem is the switchboard had to be monopoly retailer switchboard. On the contrary, EWPC is open to any kind of competing retailers, which should develop business design innovations and compete. In a sense, this structure is less restrictive than the switchboard business model.

This is what Playing With Fire and Collapse Part 19 says in more details:

Thanks Len for considering the generative dialogue. In a generative dialogue what is important is "listening" in sychronicity with other interest parties to the larger whole that is emerging. For example, a common understanding of what EWPC means as a third way not considered in the decade old debate.

I presume that large customers could be allowed to go directly to generators for their deals in the wholesale market. Then, what you are suggesting is a monopoly retailer innovation under a Market Manager. I suggest to have retail competition, so that other potential innovations are also allowed to emerge. Go to any marketing book and you will find why intermediaries are needed.

What you are proposing is to impose on everyone the Swithboard Profit Model “innovation,” which Adrian Slywosky describes on page 59 of his book “The Profit Zone:” Some markets are characterized by multiple sellers communicating with multiple buyers, with high costs incurred by both. In many case, there is an opportunity to create a high-value intermediary that concentrates these multiple communicating pathways through one point, one channel, by creating a switchboard. The switchboard reduces the cost to both buyers and sellers. A powerful component of the switchboard model is that it builds on itself; the more buyers and sellers that join, the more valuable it becomes.

Such middleman model is perfectly allowed under the EWPC market architecture and design. That is why I said earlier "good luck!" Please say so if there are other things that still bother you.

Be aware of the following exchange:

Len Gould on 8.24.07

Jose Antonio: Since I have no means or intention of gaining from my efforts at promoting IMEUC, eg. no lecture tours, consulting fees or additions to CV, I really am having a difficult time finding the time to fulfill my commiitment to the Part 3 article I promised. I also am not so rigid in system design, often incorporating excellent suggestion from others into the strategy, eg. (I think it was) Ed's suggestion of means to slice a single market vertically in order to enable grouping of customers by attributes other than physical address, which could prove useful in some circumstances. After all, that simply amounts to another attribute definition on the customer table in the database, and perhaps an additional index, items which would cost nothing in a typical 10 million row customer database table. But I do often get distracted earning a living. Perhaps you might refresh me on what was supposed to be the topic of the Part 3 article?

Jose Antonio Vanderhorst-Silverio on 8.24.07

Len,

First: What do you mean by "EWPC lacks imagination. This is the 21st century," and

Second: "No other system, including Jose Antonio's, can claim anything close."

Once I have your answers, I promisse to return the respect.

"There are, however, problems with the the Swithboard, which resulted evident in the need for the development of the resources of the demand side to integrate demand into long and short term power planning, operation and control."

I had to read that single sentence nearly a dozen times to understand it's full meaning. I'm sure there are still many ramifications to it that I've missed. The second reason is that when I read the original articles from Len on IMEUC, I identified with them very well as they basically suggested what was already in my concept of how it should work. I didn't mean to single you out and put 'rules' on your side of the debate that didn't apply to Len. I just wanted to understand EWPC better than I did.

Regarding the Debate vs. Dialogue Debate, from my perspective, a debate is exactly what's needed. It brings out past experiences, scientific facts and future insights in a peer reviewed manner which, if done fairly and to completion, should fully qualify or disqualify everything brought out. For me, it is the epidomy of rational discussion. I do not mean any negativity towards 'generative dialogue', but it rings too close to 'lecture' and has nuances of 'touchy feely' for me. However, I will close this topic from here on.

My thanks to Jim Beyer for reminding me that this is benefitting more people than just myself, so I will continue to try to clarify how these two theories differ and what changes, if any, are needed in either to reach the perfect system.

One main difference that I have noticed is the dependency on people to decide something that I think should be a fully automatic, electronic and instantaneous decision. That being the balance of electricity in play at any given moment. Each supplier and consumer evaluates the same price to decide up or down and no supplier to consumer interaction is required. IMEUC seems to allow rapid price fluctuations to affect both the supply and demand, but in my opinion, it needs to be instant rather than on 15 minute intervals. I don't buy the argument that consumers won't respond to rapid price volatility because there are many products that stand to increase sales if that technology was included.

In times to come where a region is made up of both central plants and thousands of DG sources and the consumers are armed with price controlled appliances, the price is king. Any problems (like a generator going down or someone adding a large load or even a transmission line breaking) will affect price in two ways. It will rise to a level indicative of the amount of correction needed plus it will rise at a rate indicative of the speed of response needed. Both of these signals can be used to determine response in supply and demand as they are always representative of the TRUE cost of electricity at that instant. If not enough action is taken, the price will not come down and more action will be taken.

In control systems, this is a standard feedback loop and it can be made to control anything. To research it further, you may want to look up PID (proportional, integral, derivative) tuning. In any case, I see IMEUC as this process but it is missing only one aspect for our market scenerio. It lacks the ability to forcast long term needs. This is where Len's suggested Market Manager comes in. I'm hoping that this entity will only perform this function.

In EWPC, I see much more regulation and oversight with a large associated cost and potential for gaming that profit. I do think that long term planning may be handled a little better, but at what cost? If it costs the fairness of free market competition at true prices, then it's not worth it to me. If I'm misunderstanding either position, please clarify so we can move forward.

It occurs to me that somehow the carbon tax solution you refer to could be addressed by a similar feedback system. If a progressive way could be found to set it's tax rate based on society's desire to reduce CO2 and send it's revenue to a general non-CO2 production credit, wouldn't it be self adjusting? Once this rate is determined, it could simply become a price adder factor for those sources in the above system.

1) We agree that the "Market Manager", as an independent body reporting to ratepayers through their elected representatives, is the correct body to be planning for and possibly helping to finance large long-term generation additions. I also chose as convenient to assign it responsibility for setting up and operating the central database facility in which customer purchases are joined to supplier provisions in time, for billing, forcasting and statistical purposes. I have no problem if that activity can be assigned elswhere, provided the data in sufficient detail remains public for all purposes entrepreneurs large and small will need it.

2) I had settled on 15 minute consumption intervals for a variety or reasons. a) IMEUC amounts really to customers purchasing advance "non-tradeable options to purchase" the following days electricity, options purchased the day before at a variable rate of 50% of commodity market price at time of consumption. (At option expiry, the customer can choose to either purchase the electricity or relinquish the option). Without at least some sort of interval, the option strategy doesn't work. Without the option strategy, transmission operators and generation entities lack the detailed data required to assemble dispatch orders and wind up, as today, needing to dispatch a large and costly "spinning reserve", or call for curtailments of society's most valuable customers, large industrial and commercial enterprises, which is a costly and low-efficiency solution. If one could figure out how to get predictability for the generators and stability for the ISO, then perhaps genuine real-time spot bid/ask could work, but I think it might be more effective to explore the possibility of allowing customers (their robotic agents) to trade the pre-purchased options in realtime, which would essentially have the same outcome while still providing the advance data required.

Len Gould on 8.25.07 Jose Antonio: "So that is why I asked to learn of the new IMEUC proposition without contradictory elements, without success." Again I ask, what is it you think is missing from the two articles published on EnergyPulse?

I would tend to agree with Adrian Slywosky's analysis "The switchboard reduces the cost to both buyers and sellers. A powerful component of the switchboard model is that it builds on itself; the more buyers and sellers that join, the more valuable it becomes." I would add, however, that uniquely to the electricity market, required 100% participation in the switchboard is essential, else many of the benefits either cannot be realized or are brought about by the participants subsidizing the freeloaders who don't participate. Name for me one existing deregulated ISO operating an LMP wholesale market where participation in the LMP market is optional for generators. This is all ancient history stuff, as I said above.

You know, one of the worst aspects of your "generative dialogue" thing is that the sole proponent of one of the supposedly competing architectures (EWPC) is also the moderator of the "dialogue". I've long lost patience with that process.

Len Gould 8.25.07 I also would point out that your repeated references to the IMEUC market manager as a "Retailer" indicate at minimum a high level of confusion on your part, and request that you remove any such references from your Groppo Milenium site. In IMEUC, the market manager is not purchasing the commodity from generators and reselling it to customers, simply operating the required infrastructure necessary for customers to make the purchases themselves. Do you consider the NYSE to be a retailer of stocks? In what way exactly.

Len Gould 8.25.07 Jose Antonio: Or are you thinking that the "long-term last-resort contracting for output of new build which can't be financed any other way" makes the Market Manager a retailer? In some ways, I suppose it might be so construed, but in IMEUC that functionallity is solely a process of last resort, to be activated only if the free market refuses to provide for projected shortages efficiently. If it helps you, you might consider assigning that functionality elsewhere, away from the Market Manager, whose function is to ensure reliable operation (either by contracting it out, preferrred, or by owning the system themselves, whatever works best in local circumstances) of the central exchange database system to which the customer meters communicate and which provides the data required by the ISO to prepare dispatch orders.

On 12.4.06, to explain generative dialogues, I posted the following [s]uggested reading: generative dialogue paper by Adam Kahane, entitled "Changing the World by Changing How We Talk and Listen." Diagram "Four Ways of Talking and Listening," presented by Kahane in 2003 conference.

Generative dialogues are used when we are trying to change the world to what is emerging. Spot pricing of electricity started to emerge in the 80s, but was not allowed to emerge. Instead, an inferior path of development was set in to protect incumbents’ interest.

Downloading example: Jay gave us a great download in the article. His politeness on the comment was kept on the download level, so he won’t help us go forward at all yet. He prefers to remain close to the establishment.

Debates create nothing new… so we need to go to reflexive dialogue and generative dialogue if we are to transform the electricity industry to a new paradigm.

12.24.06 I wrote (see context on Playing With Fire and Collapse Part 17): …the complex situation is similar to the one facing the gas industry that Andy has brilliantly explained. This explains [to Len] why "recommendations don't quite go far enough." The complexity has three dimensions according to Adam Kahane (taken from Senge and other):

High dynamic complexity: forecasting tools should be replaced by system dynamics and scenario tools deployed by competent professionals. Fuel prices should be mitigated to produce electricity prices.

High generative complexity: an emergent market design and architecture model – a third way – is available and was not included in the decade long debate. Schweppes’s theory and practice was unable to emerge. EWPC is one candidate market design and architecture open to many competing solutions that extend Schweppes’s concepts.

High social complexity: there is a need for a customer orientation to be able to develop the resources of the demand side by market segments. As customers needs evolve, such development will empower customers only by interacting with them. Retailers’ accounts are assets that prudential regulation supervises and that customers and generators will trust if the system is designed properly.

To complement my post above on the three complexities, in his book “solving tough problems: An open way of Talking, Listening, and Creating New Realities (highly recommended)”, Adam Kahane states: “Problems are tough because they are complex in three ways. They are dynamically complex, which means that cause and effect are far apart in time and space, and so are hard to grasp from first hand experience. They are generative complex, which means that they are unfolding in unfamiliar and unpredictable ways. And they are socially complex, which means that the people involved see things differently, and so the problems become polarized and stuck.”

Since Len has decided not to supply a synthesis, or a third article, and instead has written changes to his IMEUC proposal and also written “I've long lost patience, Jose. My published descriptions of IMEUC (see links above) are far more detailed than anything I've found on EWPC,” being responsive to Len, Todd and Jim, I will lower my defenses and make three posts not to debate, but only to try to enable a generative dialogue.

PART I

The Process of Last Resort that Len is promoting with its IMEUC proposal, to finance base load power plants operates under a non competitive assumption. The assumption has its power under debate system that leads to getting stuck and to get it unstuck the result is to activate the process. The process is the same old “native load” business model of winning cases to the regulator, in which an intermediary negotiates under monopoly in the name of customers. That is exactly what we want to avoid under competition in the power industry.

So, to avoid getting stuck, all that is needed is a robust, complete and fully functional - market architecture and design – like EWPC - that provides for long and short run systemic risk management, with a combination of supply side and demand side resources.

The key question is as follows: Is the process of last resort for “native load” on base load generation being used as part of a hidden agenda? If so, I suggest a generative dialogue instead of a debate to make sure that the second phase of competition does not require activating anything at all.

To describe what is emerging as EWPC, with some references to IMEUC, I will transcribe the Generative dialogue synthesis as of 12.26.06 (see Playing With Fire and Collapse Part 20):

Competition is divided in two phases: One) market vs market and Two) company vs company.

In Phase One all interested parties cooperate in the generative dialogue to select the emergent winning market. Phase Two is not part of the generative dialogue.

EWPC – an integral reform paradigm - is an open and robust emergent market architecture and design [not a solution!] that divides the vertically integrated utility at modular interfaces. 1) Long run and short run system planning, operation and control natural monopoly functions are also kept integrated. 2) The T&D wires natural transport monopoly is kept integrated. 3) Supply - generation - natural competitive functions [will] compete with each other 4) Demand - retail - natural competitive functions [will]compete with each other. 5) Supply and demand – Megawatt/vars vs Negawatt/vars - [will] compete with each other in time and space. Module 1 commitments on planning, operation and control are to be executed by the other modules.

Based on mechanistic thinking, IMEUC is one close and fractured strategy, like any other experienced deregulation efforts, that suggests retaining one of the key elements of retail business model innovations – the metering function – as a monopoly. The intermediary Market Manager is designed to contract base load units based on long run forecasting under uncertainty, arising from improper market signals.

IMEUC as a switchboard intermediary is just one of the many potential business models. It is only through execution – high dynamic complexity – of the development of the resources on the demand side that the potential will be realized. Other potential business model innovations won’t be able to be developed if IMEUC is unfairly and prematurely selected, by giving it market power over other intermediaries. It is no correct to assume how customers will behave – and evolve - beforehand. Instead, there is a need for a customer orientation.

While incremental costs might become negligible, sunk costs might be comparatively prohibitive for all customers. As a “right” solution, IMEUC becomes a strong barrier to emergent – high generative complexity - creative destruction. The best way to find out what the real overhead costs will be is in Phase Two with the right strategy and flawless execution under competition.

Module 1 is to take decisions for the health of the whole system as they unfold. The forward looking statement suggested to Prof. Banks and Mr. Carson on the generative dialogue goes in that direction. The Market Manager does not have such integral perspective.

PART II Continued

I want to keep my opinions on Phase One. I am open to review the general open market design and architecture, if there are unfair elements associated with it. I have “listen” carefully to Len’s opinions and perceive that his interests, by going farther than necessary, go well beyond Phase One. Other parties representative of the larger whole – high social complexity - with different interests – regulators, generation of differing kinds, wholesale, retail, transmission, distribution, fuel supply, manufacturers of systems and equipments, etc. - are invited to participate in the generative dialogue.

PART III

A minimal agreement proposal (see original of 7.7.07 Synthesis Proposal Agreement of EWPC ) under the generative dialogue that avoids monopoly markets on wholesale and retail, open to be enhanced, is as follows:

Slides 7 to 13 of the CMU presentation (to be found on the left column of the GMH Blog) present 8 possible End-State, only one of which is the generic market model paradigm: retail competition with active demand and ultraquality transportation. That is the essence.

To take the best development path, including necessary transitions, to the End-State means eliminating "native load," and energy only markets at the outset, to avoid costly intermediate transitions. Those two eliminations are a prerequisite to an effective system, with wholesale and retail competition, demand integration, and transportation reintegration.

There are key elements that will require standards to complete the detailed cooperation on market vs. market competition, hopefully under global institutions. However, most technological and business solutions belong to the company vs. company competition.

In summary, a general agreement is that we should do without regulated price controls on the retail and wholesale markets (that is how the EWPC paradigm came to being on EnergyPulse with the intention to replace the faulty deregulation paradigm). I suggest that regulators worldwide should shift from price regulation to prudential regulation, under a global institution.

A power system is like crystal ball, and as such is operated with reserves to make sure that any generation or transmission outage does not produce interruptions. I call the process to do that short run systemic risk management, which in the industry is programmed as security constraint unit commitment. Some of the generators need to be committed to operation with some lead time. Under EWPC loads are also committed.

Len gave you part of his explanation of the 15 minutes on a day ahead schedule market. I recommend developing a week ahead market commitment as is suggested in slide 27 for outage coordination when required.

You appear to be "stuck" on my proposal to allow within the IMEUC strategy "some government body" to provide for backstop financing for advance build of large increment baseload prior to the requirement for it developing in the market. IMHO, and you are welcome to convince me otherwise, EVERY system, including EWPC or etc., should include such a mechanism in place, ideally never used, to ensure customers can employ their financing capacity as a group (via govt. bonds, loan guarantees etc.) to minimise the interest cost of capital-intensive generating plants. All that is required is a responsible entity to identify the requirement, call for competitive bids, and write contracts.

However, if this aspect of IMEUC is such a hangup for you, feel free to drop it from the proposal. Even without it, IMEUC works better than EWPC.

a) EWPC incorporates a huge "free rider" problem, wherein those subsets of customers who sign up with a progressive EWPC retailer who makes a real effort to exploit the "resources of the demand side" end up subsidizing all the customers who choose to ignore demand management. I don't care if you choose to call IMEUC a "switchboard" or anything else, it is still the only possibility I can see to fairly reward (and therefore adequately encourage) load shifting, leveling, conservation benefits of moving peaks from low-efficiency fossil-fueled peakers onto more intelligent large baseload units.

b) EWPC makes no requirement for (implementation of / exploitation of) adequate communication using modern digital processing and communications systems. Without exploiting "current" state-of-art technology with all customers, a lot of potential benefits are left on the table. Agreed, state-of-art in five years may be slightly improved, but we can no longer afford to sit and wait. Present metering concepts, (even new AMR systems) are all based on a 100 yr old paradigm. It's time to change the paradigm. In fact imperative.

I know from past experience, not just with myself, but with other people, that no matter what the answer to Len is, he will find a response to debate it if it is against his mental model. I agree he is very clever debating. However, he will be an asset if he decides to be positive about EWPC, in line with his old comment “José, you are close!”

As anyone has to admit, I don’t have all the answers. Sometimes I think I know the answer, but it may only be important for Phase 2, company vs. company competition.

It is time to concentrate precisely on the merits of the collaborative generative dialogue, from which Len excluded himself earlier as being a waste of time. He can change his opinion and include himself in, since Todd and Jim seem to think that EWPC it not a waste of time. Len and I got this far actually debating. So let’s go beyond debating to reflexive and generative dialogues.

Todd wrote: “I would enjoy it if you could itemize your proposal in very simple distinct items (no links) to clarify it,” I am tried to supply a proposal in the three PARTS message, which is open to be enhanced. I am expecting his fair unbiased response, as EWPC is what will support his distributed generation projects. More on that on another post!

I understand Jim said we were debating something important, but I will not set myself for debates and only debates. I have written that the debating system does not apply when there is so much complexity and there is a whole (paradigm shift) emerging on market architecture and design. I am also expecting his fair and unbiased comments.

The winning market was a result of a generative dialogue under the 2 “The Playing with Fire” articles, of which I only copied one post. Readers are advised to read all the comments under the 2 articles to get a full grasp of the process. As the debate system does not help create results, as it is vulnerable to people having hidden agendas and ending stuck under high complexity, the result is to apply force or maintain the status quo.

The whole point is: Can we collaborate to create a new reality out of EWPC?

This is what I mentioned above on the interests of Todd, which should make him support EWPC.

Under one of the articles mentioned on the post Wind Integration: An Emerging Paradigm, on 8.16.07, Todd wrote:

How would the wind storage concerns change if an army of customer owned generators could respond to real time price information to dispatch power to the grid instantaneously? Given today's knowledge, would you go back and put your money into mainframes or the little calculators?

Dick Maclay responded on 8.16.07 as follows:

Calculators and the first micro computers had a major market advantage over DG. They could stand alone. Even with DG, the cheapest back up system is some sort of network. Problem is that the network owners and their regulators look at DG as something that requires standby charges, is dependent on the transmission system, etc. They do not understand that it is to a large degree an alternative to expanding electric transmission. This is delaying DG by a decade or two.

But you describe a vibrant market at work, and deregulation is out of fashion. Unfairly out of fashion, since places like California slapped a "deregulation" sticker on a system designed to fail that did not at all resemble deregulation. But the perception that deregulation did not work is another factor slowing progress. If you are in a hurry my thoughts here are pessimistic.

But long-run they are more optimistic than the standard view. How does all of this affect wind? If I were smart enough to know that I would have been sufficiently clairvoyant to have sold all my holdings before the market started down.

Under EWPC DGs cannot stand alone, but the network owners are no longer opposed to DGs with ultra-quality transportation. The problem now is with "native loads," which oppose DGs. So there will no be a decade or two delay with EWPC.

EWPC is not deregulation, but what deregulation should have been. Deregulation did not work, because there is still a need for regulation: to change price control regulation with prudential regulation.

Under EWPC, DGs development will be associated with the Second Generation Retailer's business model innovations. Maybe there is a large market segment in the making already.

As deregulation is out of fashion, the emerging EWPC has all the potential to be in fashion, if we stop debating about it and concentrate on promoting a generative dialogue.

Len Gould wrote on 7.16.07

Hmmm..... Even I, who am the radical regarding smart metering here, haven't contemplated metering at the individual circuit level in a home. Ryan, though I grant that such detail is do-able, my initial reaction to the concept is "unlikely to pay back" for the average customer (eg. mass rollouts of new metering technology). Of course control must be even finer than the circuit level, but metering, likely not.

Also from the same article and posted as Second Generation Retailer - 2GR are a few paragraphs

Jose Antonio Vanderhorst-Silverio wrote on 7.17.07

I find Mr. Lund contribution a welcome one.

By merging what the author wrote I can come up with the following statement: "Advanced metering systems that enable new and variable prices issued by competitive retailers, which can be downloaded into meters over the network, create opportunities for regulators to enforce energy policy, retailers to differentiate their service, and for consumers to choose from an array of offerings to find one that best matches their needs and lifestyle."

Based on the statement, I see emerging Second Generation Retailers (2GR) under Electricity Without Price Controls (EWPC). This idea, which I suggest for the first time, is to stress the paradigm shift from the traditional retailer or First Generation Retailers (1GR), in this sense and the sense of the next paragraph: while demand response is a short run activity, energy efficiency is a long run one. Investments by retailers and customers on energy services, such as demand response, energy efficiency, and other service innovations, will restructure and integrate demand into system operation....

To allow 2GRs to differentiate their services, regulators should shift from price control energy policy to prudential regulation energy policy, so efficient variable price offering plans are selected by customers (not just consumers anymore) to choose the plan that best matches their needs and lifestyle. This means that 2GRs will develop business model innovations to compete in the retail and wholesale markets....

In short, as part of the ongoing generative dialogue, I see EWPC a lot closer.

Thanks for all those detailed questions. Some of them should be answered in a generative dialogue with the participation of all stakeholders. However, just think about the meaning of business model innovations in the Second Phase of competition, under (maybe global) prudential regulations. Innovation is the best tool to eliminate free ridership.

The essence to answering the questions is related to when you said in December 2005, before your two articles, "José you are close!" in response to a post, which has been updated in the three PARTS above:

Dear Professor Banks,

Below you may find a letter that I just sent to Dr. Alfred Kahn. If you have a comment regarding the letter, please don't hesitate to make it.

Best regards,

José Antonio Vanderhorst-Silverio, PhD

Dear Dr. Kahn

I am a Cornell graduate, who believes to have understood what is needed to design a true deregulation model for the electric sector [no deregulation, but an emergent Electricity Without Price Controls (EWPC). I am told you have said sometime ago: "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works reasonably well."

The uniqueness is associated with the non-lineal nature of the risk of system failure. Physical risk of system failure, linked to high prices in deregulated systems, used to be managed as a supply security risk under vertical integration. The apparently large costs of generation and transmission reserves required, under vertical integrated utilities from resulting risk management planning, became the target of inefficiency identified by economist and policy makers at the outset of deregulation.

By reducing reserves and creating congestion, here and there, long run risk of failure was thus increased by deregulation of wholesale markets and incomplete deregulation of retail markets. Associated with the physical risks was increased value destruction, and unstable markets. I believe that to be the structural reasons of the uniqueness of the electrical industry.

In the mean time, as technology has progressed, end-customers perceived sensitivity to shortages has spread sufficiently as to make invalid the assumption that customers can be classified in neat classes to pay average rates. In a sense, that sensitivity is the basis for differentiating customers, and the essence for a retail market to be developed. In addition, progress has also brought us the new technology of Demand Response together with an Automated Metering Infrastructure (AMI).

DR technology can complement the mitigation of physical risk of system failure and spot price sharp increases, as a non-linear feedback mechanism to repositioned systems reserves, in time and space, much better than lumpy investments in generation, transmission, and distribution. By developing a market on customers differentiated supply security (sensitivity to shortage) requirements, an efficient rationing system can be developed. Investment on an AMI is apparently feasible just on the operational benefits to the distributor.

The architecture of a "true" deregulated model is centered on independent retail-marketers, and a new value chain, whose mission is to segment customers according to electricity value added services, which customers can select. The value chain is wholesale, retail, end customer, leaving the distributor as a pure transporter charging a toll. Retail-marketers then take control of the strategic Enterprise Solutions, developing innovative business models. As each customer selects what he perceives is the maximum value addition, the economy as a whole maximizes welfare.

This is just a glimpse of my insights, design, research and, humbled observations. I will be very glad if I receive a comment from yourself on this matter.

Best Regards,

José Antonio Vanderhorst-Silverio, PhD

Interdependent Consultant on Electricity

BS ´68, MS ´71 & PhD ´72, all from Cornell University

Valued IEEE Member for 35 Years

javs@ieee.org

Research and practice areas, and interests: systems architecture, systems thinking, retail marketing, customer orientation, information systems requirements and design, market rules, contract assistance.

Following my first comment about Ontario not being close to EWPC by a large margin, on 6.12.07, Nat wrote among other things:

… I see huge distinctions among energy retailers, transporters (T&D) and producers. I am concerned that someone sees no value added by a retailer. If your retailer does not add value, then select a different retailer! I am not concerned with “new layers of overhead” because these layers are thin. Retailers who specialize in obtaining value from advanced meters, for example, will distinguish themselves from those who provide green power or those who provide traditional packages. The new retailers will aggregate customers who are willing to provide demand-responsiveness, and these customers will be rewarded for the value they provide.

Only a skeptic or someone with a hidden agenda would see no value added by a retailer and even more by a 2GR. The statement “Jose: You're close, just not going quite far enough. You need to eliminate your 'Retail marketers' by implementing intelligent software within the customer's meters which takes over the simple task of selecting either a lowest-cost supplier from among all available in a central electronic "marketplace", or alternatively choose to not purchase, and shut down some of the customer's less critical loads if the price exceeds customer-set limits,” can now be found to be an instrument to block progress.

It has been shown that such “simple task of selecting either a lowest-cost supplier from among all available in a central electronic ‘marketplace’” is not feasible and it is going too far, as the marketplace is centralized with Locational Marginal Prices that are the result of a supply vs demand transaction. A small balancing market is all that might be available for real time transactions if the power system is to operate with enough security.

It is clear that Ontario Markets are incomplete and unstable, because as it was done with other deregulation efforts they forgot that a power system is a very complex machine that cannot be designed by politicians and economists, just as they don't do it for nuclear plants and space vehicles. A bares bone transportation utility must not be compromised. EWPC requires integrated regulated transportation, not just transmission. Under those restrictions, a value chain can be worked out for competitive generation and retail to serve customers active needs.

Retailers compete with other retailers and with generators with active demand, creating a complete and fully functional retail and wholesale markets. Retailers own the costumer facing infrastructure including metering and participate in all key activities from long run system planning to economic transactions, with the exception of real time operation.

a) "simple task of selecting either a lowest-cost supplier from among all available in a central electronic ‘marketplace’” is not feasible and it is going too far" -- Who says it is not feasible? It is certainly less complex by a great distance than proposing that a system could be set up to locate any telephone anywhere in the world, and connect it to any other telephone. Only long-time utility "experts" would say such a silly thing.

b) "I am concerned that someone sees no value added by a retailer. If your retailer does not add value, then select a different retailer! I am not concerned with “new layers of overhead” because these layers are thin. .... etc..." A lot of wind with no-one at the helm. i) Provide some evidence that "retail layer is thin", it certainly isn't in my experience. ii) It can be as thin as it wants, it still cannot justify any of its expense. ii) Why the heck would any customer or generator choose to deal with a middle-person retailer if they could deal directly with each other for less transaction costs? (< $5 to $7.50 / month paid by customers provides access to wholesale prices, a top-notch energy management system, a top-notch peak shaving / load leveling system with NO FREE RIDERS.)

c) it is inevitable that if some retailers provide top-quality peak shaving / load leveling services and others provide less or none to their customers, then the second group is free riding on the benefits provided by the first, and no retailer in a competitive system can logically collect the full benefit to provided it to their customers if they are all purchasing in the same competitive wholesale market. I see no way for you to refute that.

Transportation is one the most important issue that separates Ontario from EWPC. As shown in PART III of Solving the Tough Electric Power Market Problem, the essence of EWPC is “the generic market model paradigm: retail competition with active demand and ultraquality transportation.”

Transportation is transmission integrated with distribution. By dividing transportation into two different companies that follow their internal rules, a transmission company and a distribution company, a mistake of large proportion was made. The aim of a transportation bares bone utility company is ultraquality, as is used in the design and operation of nuclear power plants and space vehicles.

The retailers’ discussion is over now. Nat Treadway statement is not a personal statement, likes your and mine, but an institutional statement he wrote very carefully and I am very sure he consulted it with his partners.

As a follow up of the discussions, please don't forget to read Ohio Needs to Consider EWPC.

Next month there will be a conference in Stockholm (sponsored by SNS) on the lovely subject of electric deregulation. A small group of know-nothings will retail a large collection of lies and half truths to a passive group of chumps, most of whom are familiar with the early chapters of their economics textbooks, but did not get a chance to read the later chapters which explain why electric deregulation cannot work, as Professor Kahn suggested. And there we have the bottom line of electric deregulation: in theory it can't work, and in reality it doesn't work.

About carbon reduction: emissions trading is a scam, pure and simple. Carbon taxes are probably the way to go, but the details are unfortunately not clear. Fortunately all we need to clarify the details is to get the right people working on this problem, after which their findings are widely circulated - which is something that, strangely, has not happened. Nuclear and a portforlio of renewables, and definitely NO emissions trading is the way to go. And incidentally, some of the "right people" have expressed themselves in this forum.

I think to have humbly shown what is on the tip of the iceberg on the very tough global power industry problem. To actually take the ideas to practice, there is a strong need for informed stakeholders to execute a generative dialogue including the “right people” to define how to reach the end state of the power industry for quite some time.

I say the problem is global, but not only through my suggestion of a negotiated carbon tax. I think that the shift from a highly developed supply side with a highly undeveloped inelastic demand side to a robust, complete and fully functional, highly developed supply and demand sides, requires a worldwide effort on the development of demand side whose funds could come up in a large measure from the carbon tax. So, you need to add the development of the resources of the demand side as the way to go.

Another potential global issue on the dialogue is that transportation utilities should not participate in commercial activities, because of purchases, mergers and acquisitions. Even another topic is whether generation companies could become retailers.

It has been shown that deregulation cannot work, as there is a need to shift from price control regulation to prudential regulations, which protect consumers for example, from retailers and generators potential market power abuses.

In 1996, I was retained to write a proposal to solve the electricity crisis of the Dominican Republic. The fund came from USAID. I wrote a white paper in Spanish entitled “The Need for an Integral Policy of Electricity for the Dominican Republic.” One of the specific policies suggested was: first stability, second economy, third sufficiency. We had and still have insufficiency. Stability actually meant reliability. Later on, as I got into system architecture, the concept has become first ultra-quality transportation.

Maybe you should try to get the above message to the parties of the conference in Stockholm. I think right now the best opportunity is in Ohio, as the above red link shows. Governor Strickland is expected to begin the debate any day now. In a debate, the most powerful will win, as it will get into a deadlock to be unlocked by congressional force. “Robert Schuler (R. Cincinnati), chairman of the Senate Energy and Public Utility Committee, are skeptical of tackling an all-encompassing package that would also deal with green power, advanced technology, and such unproven ideas as “smart metering” to help consumers and utilities conserve power (see Debate about to begin on electric deregulation).” An all-encompassing package is what is definitely needed to be developed under a generative dialogue.

T & D should not be designed and operated by two different masters to produce ultraquality. As simple as that!

Under vertical integration combined T&D functioned very well, as they were in a given territory and were assigned to control areas. The practical size of a T&D entity requires study. For example, in my country there are now three distributors (and monopoly retailers) and one transmission company. My 1996 suggestion was three transportation companies and one system planner and operator.

You fail to see the benefit of a large area, but wind power plant development wants those control areas to be as large as possible as the concept of control area is shifting to that of a balancing area. Those are the kind of thing that need to be work out in a generative dialogue to define the transition to the end state of the power industry.

At this time, we still have a) private corporations competing in a wholesale LMP to generate energy b) the transmission entity, a regulated monopoly ISO, c) local regulated monopoly distribution entities charging a fixed fee per connection. d) retailers, who purchase energy from the generators and compete to sign up customers to long-term contracts to re-sell it to.

However, in 10 years of dealing with retailers, I haven't seen one of them offer a single shred of innovation, and in fact they appeared to unanimously oppose the government's mandated imposition of TOU metering (obviously a conservation measure would reduce their gross sales, right?)

As long as demand is considered passive, it worked fine. That was a wonderful experience. Your 1GR retailers, are not my 2GR retailers, because the ginnie gets out the bottle as demand becomes active.

Europe had its 1st experience - a blackout of a large area (i think Nov. 06) from Germany to Spain, as wind resources located in distribution tripped, when the should have not. EWPC is a new paradigm on retail competition with active demand and ultraquality transportation. Now you and Todd want to make it even more active and the old utility structure will not support it.

What's the problem? Why is it that intelligent and educated people suddenly turn stupid? The answer in this case is Brussels - the EU. Above all the plans and policies of those birdbrains have to be treated with reverence, and electric deregulation is at or close to the top of their dance card.

About plans for a 'debate' on deregulation in Ohio (USA). Given the experiences with deregulation in the United States, I can't see that happening. That must be another Ohio - perhaps in Greenland or Guadacanal or someplace where the TV audience is completely oblivious of what has happened on the international deregulation scene.

On the article, the author says: "The chief risks are that the legislative process will produce regulations that deny the electric utility industry an opportunity to compete on a level playing field and that the enabling technologies will fail to materialize. Though these are not trivial risks, what made it possible for the U.S. electric utility industry to emerge as one of the chief enablers of the world’s largest economy was its willingness to master challenging technologies and engage in the political process."What are the flaws on the USA and UE political processes other than the debating system and superpowerfull global companies?

... in a speech before lobbyists representing heavy industry, utilities, environmentalists, and consumer and business groups, Mr. Strickland held out the possibility that a competitive electricity marketplace could yet develop.

But until it does, the generation of power would be subjected to renewed regulation by the Public Utilities Commission of Ohio.

"This is not a plan for the utilities,'' he said. "It's not a plan for manufacturers. It's a plan for Ohio. It's a plan to protect existing jobs and to attract new jobs.''

[So far... it is not about electricity, but jobs...]

Mr. Strickland wants to slow Ohio's march toward an open electricity market that has not generated true competition for most customers and has resulted in rate shock in some states. Maryland customers' rates spiked as high as 72 percent.

"We now face a choice,'' he said. "We can embrace unchecked monopolies presented under the guise of a deregulated marketplace, a false marketplace that would stifle our economy, and leave to chance the development of innovation.

"Or we can embrace a carefully crafted hybrid approach that recognizes [that] how we generate, distribute, and price electricity affects every one of us every day,'' he said.

[Now he is tallking about a false marketplace that has not generated true competion.... Yes Fred, all deregulation done in the US is about a false marketplace. But, do you believe on a carefully crafted hybrid approach is the way to go...]

Flash continues...

By including nuclear power in his "advanced energy'' mix, Mr. Strickland agreed a utility like FirstEnergy, already a heavier producer of nuclear power than its Ohio counterparts, will have a built-in advantage in meeting the new standard.

[WOW Fred... a key question: Is FirstEnergy the reason that competition has not developed in Ohio? A carefully crafted approach is available and can be done with EWPC, the winning market architecture and design as can be understood from all of the above comments.

There are only two stable states: vertical integration and EWPC. But vertical integration is very, very costly. A hybrid approach will result - as the August 26 "Debate about to begin on electric deregulation," by Mr. Provance - in " a caotic, intolerable set of circunstances that will lead to a lack of predicatbility."

Yes Fred "somewhere out there is a scheme [EWPC] that if introduced and implemented will save the day." First Energy, for example, as one of the impediment to competition, will need to decide in which space it will play: retailing or transportation or generation. The scheme, however, requires a lot of leadership to get implemented.

THIS is how a generative dialogue works? Fred, it's a waste of time, I know from experience.

Reality: everyone should be curious of Len's hangup with EWPC.

I am really asking for help. Is Len and/or Fred, working for some vested interest or are they just simple skeptics or just good guys trying to find the truth? Does anyone have info to that respect? I could supply a post about Fred being a skeptic, that somehow he run away from two times earlier.

EWPC market architecture and design is better than vertical integration (Model 1) which has outlived its useful life. EWPC is better than incomplete and/or no-functional markets, based on transmission open access (Model 2) and its extension which costs more than Model 1 when for example capacity markets are added.

For the benefit of Fred, I will recall a post under Playing with Fire (see A Generative Dialogue Without Illusions Part 12 and its context):

Thanks Fred for your timely response. I guess you are right that "no tinkering with the demand side can compensate for gaming and lack of investment on the supply side" is highly likely under Model 2 and its piecemeal extensions.

To face gaming and lack of investment under EWPC there is an ultraquality requirement to be performed by a system engineering institution. The commercial activities of generation, and wholesale and retail of electricity to end-customers need to operate under a no-nonsense prudential regulation.

If the expert to the authorities in China is pushing Model 2 and its extensions, I also agree that your "anti-electric deregulation performance" statement is very likely to occur. If vertical integration – Model 1 – becomes the default solution, the little guy is bound to pay more for the investments than he should. The development of the resources of the demand side equity criterion - Market 3 - should lead to the effective development of the Chinese market at the bottom of the pyramid, which is the largest in the world.

Unless Northamerican, Chinesse and European leaders listen very closely to the first and second part of these comments, discussions, debates, and dialogues, they will certainly be playing with fire. My humble recommendation is that they retain a system architect expert on EWPC to help them coordinate a generative dialogue to come up with a new vision and develop a transition to EWPC. An expert on gas without price controls (GWPC) should no be difficult to develop in a parallel generative dialogue.

Fred, as Len does not have one, what's your market design and architecture?

If anyone has a real market architecture and design, please by all means, proceed to make a synthesis like the one I have done in Solving the Tough Electric Power Market Problem for everyone to see. Meanwhile, EWPC is the winning market design and architecture.

1) How can it manage to implement effective demand response and avoid the huge "free rider" problem? 2) How can it GUARANTEE no shortages? 3) How can a fragmented bunch of small-cap "Retailers" finance items such as new-build nuclear? 4) What specific benefits do the "Retailers" provide to customers? 5) Why would generation choose to sell to middle-men if they can sell directly to the customers at no additional transaction costs?

6) What mechanism under EWPC would be used to deter gaming by artificially with-holding generation? 7) Are wholesale market thansations private or public information? Retail contracts? 8) How could any mechanism to defeat gaming be set up if market transactions are private?

9) How does EWPC deal with "spinning reserve" and "standby" costs? 10) What specific provisions are made to enable / encourage small Distributed Generation / residential CHP, when that ideal future trend goes directly counter to the interests of the "Retailers" and large incumbent generation? 11) Why would "retailers" bother to encourage conservation when that simply reduces their gross sales?

For a start.

I was expecting a lot of noise to reduce the signal of the post A Vertical Integration Conspiracy Theory for the US Judiciary. However, the article is now inactive. So, as we have been discussing EWPC under this article, I am coming back to complete it.

If you didn't know, the business model of vertical integrated IOUs is to win cases to the regulators, which are their customer and partner. As regulators are easily taken, customers, especially residential and small and medium size businesses have been taken for ride for many, many years. Just a great scam.

This is how it worked at PG&E in the 80s. "PG&E was right in the middle of pitched analytical battles over nuclear power, environmental protection, and utility deregulation." So far small customers have lost 20 years in the low signal to noise ratio debate!

"The primary focus of PG&E's management attention was therefore not on customers, but on formal public hearings before the CPUC. Fittingly, eight of the nine members of the company's executive Management Committee were lawyers." Everybody knows the similitude between lawyers ant cats. No, los gatos no están encerrados. We need the justice departments to lock them up.

The quotes were made by Adam Kahane, which was the Corporate Planning Coordinator, and tells in his book “solving tough problems,” of a PG&E retreat in his second year that "was a profound letdown. I watched the business sections in stupefied disbelief. The executives ignored the analytical material, played power games, ganged up on each other, pretended to misunderstand (as Don is doing), settled old scores. I was deeply disillusioned and felt my commitment to the company slipping away. This was not the brilliant, informed, rational decision making that I had been trained to expect..."

Vertical integration is just about price controls, which has been known as inefficient (read corruption) in many industries. That is why, Electricty Without Price Controls (EWPC) for the end customer is what is urgently needed.

I suggest everyone to read Lee Iacocca’s “Where Have all the Leaders Gone?” His book covers 4 parts, with the title as the first. Where have all our friends gone? Is capitalism letting us down? Can America be great again? Those questions are not just for America, they are for the global world.

Speaking of signal-to-noise ratio, your schtick is at least in need of some good Wiener or Kalman filtering.

Let's see if this poor pilgrim can understand this tremendously complex system that only system planners can deal with. It has a time response, possibly the price of a kilowatt-hour, that should not be limited. However, your system planner will shape the forcing function for the system, possibly demand for a kilowatt-hour, so that "ultraquality transportation" results. And since "Lowest cost electricity generation does not make sense to a system engineer, nor to the end customers that pay for it.", your system planner will give you a kilowatt-hour you can afford when he thinks you need it.

A phrase I picked up 30 years ago while trying to help Bechtel Espana get the Sayago plant launched was, "Aqui hay gato encerrado!" Yours truly, Fred, Joseph and possibly others probably agree that EWPC deserves such an accolade.

I add that you are a very intelligent man. Fred called us brilliant. But my message is that your opinion, not you, was incoherent, when you became a poor pilgrim.

From all the posts, here and under Fred's article, I know you could (because you are not your opinion) do a lot better by making a very serious reflection about what I wrote, since you engaged my post saying "Seems like a pretty close-minded lecture, Jose.... "

Over the weekned, responding to Ed Reid, I realized that EWPC is a doctrine. So no wonder that many intelligent people may not understand it.

Regards,

José Antonio