Very interesting analysis. Thank you for the effort. I hope that, in the future, you will attempt to compare the economic impacts of the two approaches as well. As I am sure you are already aware, they are not trivial.

I have several broad concerns in this area. 1) If AGW is a problem, it is a global problem and requires a global solution. Kyoto, or "Kyoto-lite", is not a global solution. Kyoto includes neither China nor India, both of which are developing rapidly and plan to dramatically increase their coal-fired electricity production. China became the #1 carbon emitter in June, 2007. 2) If AGW is an impending catastrophe of colossal proportions; and, if we are rapidly reaching a "tipping point"; and, if what is really required is a "90% reduction by 2050" ("Testimony" of A. A. Gore, Jr. to Congress, April 2007); then, a 7% reduction below 1990 levels by 2030 in the US is just a spot of "yellow snow". 3) If the Kyoto Accords were actually an attempt to get the developed countries "a little bit pregnant", in the hope that the pregnancy would be politically difficult to abort, then it would be helpful to know what "full term" reductions would be intended/required, so that any interim measures proposed could be assessed to determine whether they were on the path to the ultimate reductions required. (For example, if elimination of gasoline and diesel vehicles would be required to achieve the required reductions in carbon emissions, spending a great deal of RDD&D effort on improved gasoline and diesel vehicle fuel economy would appear to be an economic "dead loss".) 4) If the intent of the Kyoto Accords was/is to shift manufacturing from the developed countries to the developing countries, including China and India, it would seem only fair to let the populations of the developed countries know what lies ahead for them.

Ed Reid

That's a pretty broad brush. It seems to me ingenuous to blame such a shift on supporters of Kyoto etc. The profit motives of business to exploit cheap labour outside the developed countries are so much more significant in this shift of production that no other factor could even be significant.

Cheap labor notwithstanding, if: US businesses have their carbon emissions capped or taxed (or both); and, the same is true in the other developed countries; and, there are no such restrictions in developing countries; then, there will be even further incentive for businesses to move manufacturing to China, India, etc.

Also, please note that my post was a series of condition statements. However, your definitive statement that "no other factor could even be significant" is also a bit "broad brush". My point above was to be "broad brush"; that is, to point out the continued existence of the forest, while others appear to be focused on the condition of some of the bark on certain trees.

The open questions regarding AGW are very significant. 1) What is the ultimate percentage reduction required to "solve the problem"? 2) What is the time frame over which these reductions must be achieved? 3) What is the plan to achieve these reductions within this time frame? 4) What is the expected cost of achieving these reductions within this time frame? 5) How will this cost impact the economies of the affected nations?

Chris Neal has proposed a plan for a first step and compared it to the U.S. Senate's proposed first step, for which I applaud him. However, there is a risk that looking only at the short term will result in substantial economic inefficiency and ultimately economic loss. The economic cost of proceeding effectively would be high enough, without adding to the burden.

Ed

While the Senate Bill ... does not otherwise provide incentives for nuclear power, the author and EPRI are forecasting 5 and 4 units per year, respectively, from 2015 to 2030.

As I have said earlier, I am not against, nor favor, nuclear power. Public policy should not pick winners, as they don't do it in other industries. Now here is a report against it: New nuclear power said too costly and risky. I have seen many comments in energypulse.net that show the contrary. To me the solution is to implement a carbon tax and leave it to the market to make the decision, and allow private investors to receive the benefits and to take the risks. That would end that debate.

The same applies to renewables. Most renewables want the repeat of PURPA to avoid competition. Both nuclear and renewables should just compete with gas on the supply side and with energy efficiency, demand response, distributed storage, etc, on the demand side (see first link). By the way, the author didn't take into account the benefits of demand response on CO2 reduction. In addition, there is a need for an institution to integrate active demand.

The next opportunity to start implementing EWPC is the state of Ohio. To develop the transition from the actual situation, a generative dialogue to re-regulate the power industry is suggested. Please refer to Restructuring of Ohio’s Power Industry Business.

"...the world needs a market structure and rules (same as architecture and design) that allows competition in generation, competition in retail, and competition between generation and retail."

I suspect that a single market structure for electricity worldwide is, if not unworkable, at least highly unlikely, especially if it is imposed by some new world body, as you have suggested previously in comments here.

"To me the solution is to implement a carbon tax and leave it to the market to make the decision, and allow private investors to receive the benefits and to take the risks."

This suggests that a tax does not, among other things, change or influence the market. Also, carbon tax at what rate; and, if the initial rate is insufficient to "move" the market to the extent desired, do you then propose to increase the tax rate until the market makes the "correct" decision?

"By the way, the author didn't take into account the benefits of demand response on CO2 reduction."

Demand response may not lead to reduced carbon emissions, depending on the fuel type and efficiency of the plants which would not be operated on the shaved peak vs. the fuel type and efficiency of the plants which would supply the shifted demand during off-peak periods.

"In addition, there is a need for an institution to integrate active demand."

If the retailer and the customer have a contractual relationship which is monitored by an intelligent meter which receives price communications from the retailer and allows the customer to control response to price signals, why is there a need for "an institution to integrate active demand". It would seem that the contract and the communication do that.

The current regulated "market" in electricity, which you contend does not work well, is a creature of government. The "generative dialogue to re-regulate the power industry" you suggest would also be a creature of government. I do not share your confidence that the new regulatory regime would be more effective than the current regime; and, neither of us can prove the case one way or the other.

Ed Reid

It depends on the renewables. Hydro, geothermal and bio-fueled plants have very different availability characteristics than solar and wind. The distinction I have made here previously is between "reliable" and "source of opportunity" generation. Geothermal and bio-fueled plants are reliable; solar and wind are "source of opportunity"; and, hydro is a combination of both.

A 15% renewables percentage nationwide would be a far greater challenge than achieving it in several states.

Ed Reid

Here's a link to the story behind it.

What makes it interesting is the concept that you can run simulations to try and determine an optimum scenario, fuel mix etc. Naturally I don't want to brag about my high (actually low) score and ranking since it could certainly disappear soon. However, it would be valuable to "game" this kind of approach for the economic impact of your various proposals, such as pure retail, government retail, pure regulated etc.

For reasons unknown, when enough humans "vote" on an outcome, their predictive capacity ala betting sites is amazingly good. I think Chevron and the Economist might be on to something here, once they make improvements and allow for more "consumer" behavior in the model.

As EWPC is not an incremental change from today’s markets, but a paradigm shift, I will take the opportunity to supply a comprehensive response to Ed’s broad and interesting post. I will be posting on the weekend.

Thanks Jeff it seems very interesting. I will check it after I respond to Ed.

I realize that. But there is little extra hydro available, and biomass is limited as well. Assuming the RPS represents a substantial increase in use of some sort, where would it come from? This sounds odd, but I almost think new nuclear should go under this label as it both reduces carbon emissions (w.r.t. coal) and also improves energy security (w.r.t. oil) Maybe RPS would be easier to recognize if that was done.

Wash your mouth out with soap!

Ed

A complete version with Edward’s comments including his quotes of my post Nuclear and Renewables Competition under EWPC, can be found on the post EWPC is a True and Non-Trivial Doctrine.

I strongly recommend that taxpayers worldwide look closely to the responses and send letters to their government representatives. Three special cases have already gathered a sense of urgency: US Congress Energy Bill, Ohio’s re-regulation of the electric utilities and the Very Short Electricity Law of the Dominican Republic.

Paul Samuelson said that a doctrine is non-trivial when “it is attested by thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them. The EWPC doctrine is logically true, coherent and non-trivial. Reform should be based on knowledge and facts, not only on the political processes. This statement does not mean that I claim to know everything, as I operate under the generative dialogue principle that I am not my opinion.

EARJr: I suspect that a single market structure for electricity worldwide . . .

JAVS: Thank you very much Edward for the very challenging comments you posted on energy pulse about EWPC. It took me many hours to come up with this very short post, but I think the results will be very useful for future consulting engagements.

Respectfully, I have not suggested imposing a new world body. I am suggesting that the world needs a worldwide competitive power industry. I agree that the current markets are an act of government. In fact, I found out that the lack of stability and predictability of today’s’ electric markets has such an effect on global trade that it qualifies for mainstream WTO work.

In addition, electricity markets, with the very clear vision of the future that already emerged on the EWPC paradigm, have the necessary sense of urgency to be negotiated under the trade in services of the multilateral trading system (WTO) agreement, just as the basic telecommunication agreement was done. The object is “to sharpen competition, motivate innovation and breed success.”

I suggest that the power industry should be subjected to a multilateral basic discipline system. Some of the issues that require discipline are the process to get to the End-State of the global industry, prudential regulations on generation and retail, merger and acquisitions investment rules; all to discourage the accumulation of unfair play.

EWPC is not like the failed attempt on the unworkable SMD, as the approach is not to be standardized. The SMD was an attempt to make a compromise of the existing solutions of PJM, New York and New England. Many failed re-engineering projects resulted from misunderstandings of the true requirements.

EWPC is not exactly related to a reengineering project, but its similarity to discovering the true requirements suffices, as it is also about starting over. EWPC is an End-State (model convergence) market architecture and design, whose essential principles are to be adopted. A generative dialogue is needed to define the necessary transition from today’s reality to reach such End-State. This means that close attention of local conditions should be considered.

Although it is highly worthy, my confidence on EWPC doesn’t depend on the carbon tax. It depends on a non-trivial truth about electric power systems, which is a very complex machine whose design and operation is not a subject of debate, but on the work of a systems architect. It also depends on large changes experienced on fuel and transactions costs. Lowering of transactions costs allows the integration of demand to the power system with the development of the resources of the demand side, which leads to the development of robust, complete and fully functional retail and wholesale markets.

EARJr: This suggests that a tax does not, among other things . . .

JAVS: By implementing a carbon tax, the business case for EWPC is enhanced, as it certainly influences the markets. Details on how to implement the carbon tax is very speculative at the moment. Some earlier discussions suggested a gradual process to increase, for example, coal carbon tax by 2% yearly increments up, to 40%. EARJr: Demand response may not lead to reduced carbon emissions . .

JAVS: You have a very valid point for the short term. Demand response in some states like Ohio, which has about 90% coal generation, may lead to an increase in carbon emissions, since peaking generators, fueled with natural gas with be displaced. Later on, as coal generating units are replaced with combined cycle gas generation up to 2016, the benefits arrive. So, you suggestion is an asset for EWPC reform. As the demand response business case reduces investments in generation, transmission and distribution and end-use, delaying its implementation is not warranted. What might be done is accelerating the process of the carbon tax.

EARJr: If the retailer and the customer have a contractual relationship . . .

JAVS: Thank you very much for emphasizing customers with contractual relationship with a retailer. The institution is the Second Generation Retailer mentioned in earlier posts, which is a very different animal than the retailers that are operating today.

EARJr: The current regulated "market" in electricity . . .

JAVS: As the introductory remarks covered the whole last paragraph, I will add that it is not necessary to prove the case. All that is needed to move forward is to cross the chasm of the technology-enabled market development, as explained by Goeffrey Moore. Skeptics may never get raid off their vertical integration mental model. Conservatives will wait until the majority has developed the business model innovations of EWPC. So what’s remaining is for technology enthusiasts and visionaries to help EWPC cross the chasm. Demand response systems already in operation are the proof that EWPC has already entered the pragmatics’ bowling alley.

José Antonio Vanderhorst-Silverio, Ph.D.

Updated Background

• Over 28 years of consulting experience and leadership in electric power technology and education • BS ´68, MS ´71 & PhD ´72, all from Cornell University • Valued IEEE member for 36 years. • Autodidact in management systems – loves to implement applications learned by reading, listening, and integrating complementary perspectives from information sources for high tech - high touch environments • Research and practice areas, and interests include: electricity without price controls, systems architecture, systems thinking, electricity retail marketing under a customer orientation, electric market rules, information systems requirements and design, contract assistance

I've read your comments here and on other item post on this web-site. I think you put way to much reliance on the stakeholder or users of electric power to make decisions. I suspect that if you did a survey of electric power users or households that they would know no more then from whom their monthly electric bill comes. They would know little or nothing about the source of electricity nor would they care as long as the billing remains reasonable stable.

Ken Kok

I am writing to make the electricity industry more efficient and effective. Many vertical integration assumptions no longer hold. The dot.com bubble signaled the beggining of a new era that is transforming every industry. The goverment regulator as a customer is one of those assumptions. Another assumption is that forecasts are big bets. The transition to a new electricity industry, believe it or not, is under way. The industry needs to have the customers as partners.

Jim,

It seems to me that your post is about nuclear and renewables. RPS are a repeat of PURPA. To compete they need a good carbon tax, but not subsidies, nor long term fix price contracts with a government regulator.

I was checking out the game and it seems to me a supply side game. In addition, there is big limitation: "The player of Energyville is not able to make distintions between using fuels and electricity."

I never said the site was perfect, just an interesting viewpoint to how to solve your impasse. Both you and Len feel you have the best approach, but the fact is, no one will let either of you implement your scheme. in the REAL world. So it would be wise to simulate it and see how the simulations come out.

The bad news for almost all "change orders" to electricity per the GenCo, TransCo, DisCo and MarkCo model is that the entrenched provider isn't recompensed for their stranded generation capacity, transmission capacity, distribution capacity etc. Therefore your panacea of letting MarkCo solve the world's problems never gets to happen, because of those Billions that have been spent building up the 1st three.

Deregulation doesn't work because the monopoly rightfully asks the regulators for something in the kitty to pay them back for all that stranded plant. Right away, there is a thumb on the scale as the butcher weighs out that meat..

What all this has to do with the title of this article escapes me now.. :)

What is a good tax?

JAVS: "The institution is the Second Generation Retailer mentioned in earlier posts, which is a very different animal than the retailers that are operating today. " -LG- I presently have a contract with my electricity retailer, a company who is neither a distributer or a generating company, but a (fairly) pure energy retailer. So what is it exactly that would be different for me under EWPC?

Good luck pitching for speaking engagements......

In his elementary textbook on energy economics, Professor Ferdinand Banks calls all of us (ken is added by myself) as brilliant commentators. I recognize also that all of you are intelligent people, which are probably experts in more than one field of knowledge.

What has emerged as EWPC is the work of many years, which I would say started in 1980, when I learned how to plan an interconnected power systems, under experienced and generous (free of charge) power planning professionals from Puerto Rico. They had gone to Schenectady after a huge mistake of purchasing two oversized generators for their mostly thermal power system. The result of the mistake is that they have been operating those two generators at half load since then to satisfy the reliability criteria.

Officials and regulators of the Puerto Rico Power Electric Authority (PREPA) authorized the investment by thinking intuitively that by purchasing two large base load generators, electricity cost would come down. However, reliability results were that when one of those generators tripped, the whole system collapsed and everybody lost because of the large interruption costs. That occurred several times in the 70s. Leaning at GE ffor the was truly a paradigm shift. The essence of the message is the need for expert professionals to plan the electric system under the architecting imperative of ultraquality, just as nuclear power stations are architected and designed. That is part of a logically true and non-trivial doctrine key for EWPC.

Over the weekend, while researching to satisfy Edward A. Read Jr. request (see EWPC is a True and Non-Trivial Doctrine), I came to the conclusion that I may have been trying to explain a non-trial doctrine to intelligent people. For example, central to the non-trivial subject of power system planning is the intuitive concept of "Lowest cost electricity generation" - that Puertorican had bought - which I though to be a good statement to get many readers on the same page, but apparently didn’t make it. So, in the post Lowest Cost Electricity Generation is Just Intuitive, I have included a small lecture to explain the concept, the reaction by Don Giegler who said “Seems like a pretty close-minded lecture, Jose....” and my logical response to his reaction.

The conclusion applies to Len too. Although he is very intelligent, there is not guarantee that he will understand the paradigm shift of the EWPC doctrine, not matter how well it is explained to him (see what Paul Samuelson said on EWPC is a True and Non-Trivial Doctrine). So I have answered, not 7, but 11, of his 8.31.07 questions about EWPC as you will see below in the next two posts.

By the way, “a good tax,” is the one that elected government should decide, in line with a finite environmental capacity world. If we act with a business as usual (irresponsible) response, we may get to what Jim wrote about Jared Diamond’s “Collapse.” However, his suggestion at the end about finding it difficult not to keep burning coal it will only increase the probability of collapsing. One way to go about such difficult scenario is to implement a reduction of the consumption of energy per capita – while keeping as much as possible the energy service – by developing EWPC ASAP.

Industries in Ohio want to go back to vertical integration, which is a zero sum game. For industry to get lower rates, other customers will get higher rates. No so under EWPC, where price and service differentiation will let every customer find the best service plan, which better fits its requirements, as long as prudential regulations are well design and implemented.

Len Gould on 8.31.07. My problem with EWPC are myriad eg. it's precisely identical to every existing failed attempt at de-regulation in N. America. And it's promoter flatly refuses to answer any difficult questions about it. Questions which I have posed before, such as:

1) How can it manage to implement effective demand response and avoid the huge "free rider" problem?

This question is a key element of the EWPC paradigm shift, but belongs to the second phase of competition: company vs. company competition. It will be answered by 2GRs business model innovations. Any customer trying to be free rider will find how effective competition is. The huge free rider problem is under monopoly.

2) How can it GUARANTEE no shortages?

Although with a very small probability, in any power system there will be always shortages. EWPC is about rational rationing in those very costly moments when required. Vertically integrated systems were designed for a 24 hour loss of load probability in 10 years. The system planner and engineer is the responsible for short run and long run systemic physical risk management as explained in my article An Alternative Business Case for Demand Response and refined in the post Letter to Dr. Alfred E. Kahn which helped you say “José you are closed!” The integration of demand into power system planning, operation and control, will increase demand elasticity, reducing shortages relative to vertical integration on any given event.

3) How can a fragmented bunch of small-cap "Retailers" finance items such as new-build nuclear?

Ja, ja, ja…nuclear! All you need is a robust, complete and fully functional retail and wholesale markets. Second generation retailers are not small-cap retailers. Today’s utilities should be restructured by separating the commercial regulated retailers from the physical distribution which should be integrated with transmission to become transport. Under EWPC a lot of mergers and acquisitions activity and competitive, as well as business model innovations will lead to worldwide competition after a transition. See also item 5.

4) What specific benefits do the "Retailers" provide to customers?

This has been answered at length in earlier posts. Edward A Read Jr. understands it very well.

Sorry. Generators will need to have a retail department to handle non-trivial retail management. Economies of scale should be the result of activities under my response on item 3.

6) What mechanism under EWPC would be used to deter gaming by artificially with-holding generation?

Anyone withholding committed generation under a day-ahead security constraint unit (generating and load under EWPC) commitment is liable to pay large sums under the balancing market.

7) Are wholesale market transitions private or public information? Retail contracts?

This will be the result of the detailed design of the prudential regulations, which I suggest should be negotiated at the WTO. The main reason is that small and poor customers in developing countries are being taken for a ride. The information that should be transparent should emerge.

8) How could any mechanism to defeat gaming be set up if market transactions are private?

Already answered on item 7.

9) How does EWPC deal with "spinning reserve" and "standby" costs?

Under EWPC a whole system approach, instead of an incremental approach will be performed. Research needs to be performed to distribute systems 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?

This is a good of a paradigm shift at work. Under EWPC, retailers’ incentives are aligned with those of the customer. If they weren’t the customer would elect to choose a retailer that would satisfy his need for higher value added. The last sentence on the top of the GMH blog reads “Let’s enable electricity with the maximum value added to the customer.” However, under vertical integration, native load incentives are perverse and go counter customer interest.

11) Why would "retailers" bother to encourage conservation when that simply reduces their gross sales?

That is a problem of perverse incentives under monopoly service, which cannot be solved by piece meal interventions, such as how is conservation added to current rates. Utilities solutions are answered with their obsolete business model winning rate cases to the regulator. This answer complements that in item 10.

I understand your suggestions. However, I know what happened with the telecommunication sector. We are under a tough world change, like that of the 1930s.

So, please read the following quote to see if it makes sense.

I will give you all a quote from Megatrends on the "Law of the Situation: the railroads did not understand."

Suppose that somewhere along the way a railroad company, sensing the changes in its business environment, had engaged in the process of reconceptualing what business it was in. Suppose they had said, "Let´s get out of the railroad business and into the transportation business." They could have created systems that moved goods by rail, truck, airplane, or in combination, as appopriate. "Moves goods" is the customer-oriented point. Instead, they continued transfixed by the lore of railroading that have served the country so well - until the world change.

Of this phenomenon Walter B. Wriston, chairman of Citycorp, in 1981 said: "The philosophy of the divine right of kings died hundreds of years ago, but not, it seems, the divine right of inherited markets. Some people still believe there´s a divine dispensation that their markets are theirs - and no one else´s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else. All the king´s horses and all the king´s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard

I will be trying hard, from yesterday on, not to be insentive. I have learned, the hard way, that we should concentrate our differences on the opinions, which can be changed without hurting the other the human being. I expect others will do the same.

Have a nice day.

Regards,

José Antonio

Or suppose someone along the way had said, you know, this oxygen-breathing on land is really not sustainable. Why don't I do away with this oxygen-breathing business and grow some gills. I would certainly reduce my own carbon emissions, and my grocery bill would surely decline.

_________________ The point being that, yes, when you know something is going to lapse into partial obsolescence, like railroads, then yes, it's better to move onto something else. That's a pretty tautological message. Is the vertically-integrated electric system at that point? A fair look at the evidence says: hardly.

Unfortunately, it does. How else do you explain 4 lobbyists for every politician in Washington DC?

That is a very interesting accounting question. I will speculate how to approach it.

Energy used for travelling should be accounted differently from energy used purchase and/or sold to the system. That could be a very simple computer program.

More complicated (but also easy to program) is that plug-in hybrids will need to have a very detailed data on transactions with the power system day ahead and balancing markets. The latter is more volatile and better fit for plug-in hybrids opportunities.

Under EWPC 2GRs will have a great opportunity to develop bussiness models innovations for that segment of the market. What you identified, will depend on the market rules, but as transactions costs get cheaper and cheaper, that may not be a problem at all.

How do you see the tax problem now Henry?

1) How can it (sic EWPC) manage to implement effective demand response and avoid the huge "free rider" problem?

[This question is a key element of the EWPC paradigm shift, but belongs to the second phase of competition: company vs. company competition. It will be answered by 2GRs business model innovations. Any customer trying to be free rider will find how effective competition is. The huge free rider problem is under monopoly.]

The free rider problem is NOT restricted to monopoly systems, and in fact is less of a problem there than under competitive retailers. The problem is that without a SINGLE SET OF MARKET RULES WHICH APPLY TO EVERY CUSTOMER EQUALLY and which adequately reward demand response (IMEUC) , there will be free riders who choose to benefit from the peak demand reductions of others while taking no actions themselves. EWPC, from what I can make of it, offers to allow independent private retailers to "creatively design their own retail market rules" to "exploit the resources of the demand side", which then introduces the additional problem of retailers becoming free riders on other retailers, as well as customers on customers. IMEUC is NOT a monopoly electrical delivery system, it is a free and open market where all participants (generation and customers) interact under a single set of rules, just as every other large free market does, and must. EWPC must either adopt this feature from IMEUC, or be open to free riders.

ditto the other questions, which I won't bore people by adressing at this time.

Thank you very much for your collaboration.

First, I would like to recall my introductory remark “In my answer to Edward it is evident that any solution that does not pass the tough test of Todd is because it is not modeled with essential requirements, but a proposed implementation, like the SMD.” To any knowledgeable reader, that test is of the utmost importance, for IMEUC to be a candidate of an acceptable market design and architecture. However, I don’t dismiss that your EMEUC proposal may have useful features for a market architecture and design.

In that respect, thank you very much for your suggestion to enhance EWPC. That is an important collaborative step. What I had in mind so far was to have a set of clear, robust, and transparent set of rules. However, after consulting with experts we might end up with a rule just like the one you propose.

Len, please correct me if I am wrong, Do you think that there is just one right answer (close market solution) to the company vs. company competition? Although it may seem counterintuitive, I am operating with a vision of an End-State with markets (open market solutions) designed to allow for innovative solutions to emerge and compete. I may be wrong, but that is how I think it should be. If you think I am wrong, please explain very clearly where my lack of vision is.

I took a lot of care to get as complete as possible a response to all 11 of your interesting questions. In the mean time, I would prefer no to discuss your counter response to your original question #1, until you go over the other 10, saying if you agree or you disagree and why. Please complete them so I can get the whole picture. I understand you may forget about clogging up the thread, as it is much less important than your collaboration to help EWPC emerge.

Kind regards,

José Antonio

This is my humble advice looking to the future. What I see is that vertically integrated utilities should look very carefully the business they are in, which is winning cases to an intermediary of the end-customer, based on average prices. Maybe then they will understand the above message, as end-customers that get the worst deals (as legally other customers free ride them) find out that they have more and more alternatives as times goes by.

What I mean is that there are innovative business models waiting for the native load barrier to come down. The business models will deal directly with the end-customers, and produce greater growth for the economy. These are times where efficiency will count, as new behaviors will set in as customers’ budgets get squeezed as it is already happening everywhere to the middle class.

The case of Ohio is ripe for that, as vertical integration is a zero sum game. Industries want lower prices and have the lobby power to get it, as Mark wrote. The result is systemic, as even more customers get to the edge (with higher costs than their peers will find out competitive alternatives), new rate case will raise prices, and a vicious circle sets in, for lack of the correct market design and architecture.

The scenario with a heavy carbon tax will accelerate the situation as electricity prices will raise even more. Congress even with great lobbyist will eventually need to act as they did in the New Deal in the 1930s. As the systemic delay is long, by then it will be too late to act, as they become tombstones in the corporate graveyard.

Please don't see the whole message as negative, which is not. It may be counterintuitive, but that is how you get out the box. The chicken of the golden egg is about to die after close to a century.

I will give a new perspective to try to place all of us on the same page.

Another reason for making sure that Len agree or disagree on all 11 items is because many of his questions are coming from a vertical integration (inside the box) paradigm, while EWPC is a paradigm shift that I am claiming is a non-trivial doctrine (outside of the box). That is, for the reasons that Paul Samuelson said that many intelligent people may not understand it (maybe because they stay inside the box, as any skeptic would do).

I like to add, that under vertical integration customers were separated under neat customer classes with average rates. But as time went by, that assumption has proved to be way off. That means that customer requirements may differ substantially, and by making that they pay a proportional part of the investments in generation, transmission, and distribution, many of them will be paying for something they don’t need, which gives an incentive to find alternatives which are available and getting cheaper and cheaper. So the concept of free riding from the vertical integration paradigm (that why I wrote, “as legally other customers free ride them”) differs widely from EWPC free riding.

In conclusion, Len’s response to the questions is of the utmost importance to find out if he still inside the box and making incremental improvements to the vertical integration paradigm with IMEUC.

Thanks for your attention,

José Antonio

You inquired "How do you see the tax problem now?" I don't see this as a tax problem. The market will adjust one way or another. Similarly, the government will adjust. They seem to have an infinite capacity for devising ways to wring dollars from citizens. I do see it as a significant economic variable that has been ignored in the analysis of plug-in hybrid vehicles. If the part or all of the economic benefit of a plug-in hybrid comes from avoided taxes as opposed to higher efficiency or cheaper BTU's we should be honest about that in our decisions to select technologies.

Henry Nelson

I just think that technology could solve the accounting problem involve. That way, competition with cars fueled with gasoline and diesel oil would be transparent.

gasoline with $0.75 / gal ? ($0.0203/kwh) tax: $3.00 / 37 kwh / gal / 25% = $0.324 / kwh

electricity w/out tax, 80% usage effic $0.11 / kwh / 80% = $0.138 / kwh

electricity with ($0.0203/kwh) tax, 80% usage effic $0.11 / kwh / 80% + ($0.0203/kwh) = $0.158 / kwh

So the current $0.75 / gal road tax on gasoline is not really too significant to the issue. electricity with ($0.0203/kwh) tax

Please forward this letter to the author: EWPC Superiority in Carbon Emission Reductions, to your representatives in the US Congress, in Ohio's Congress, and other places where the impact of Energy Bills transformation is being discussed.

Of course, the letter is also for the author, writers, and readers to reflect.

Thank you

José Antonio Vanderhorst-Silverio, PhD

Ken

It's a problem. Not doubt about it. You can spin it this way and that, but it will be a problem if PHEVs become a significant portion of the vehicle fleet. (One could argue the same thing would occur with higher mpg vehicles as well, and perhaps this is why the government was lax in getting them boosted.)

There is evidence of this issue with diesel fuel, which (I believe) is colored in different ways to represent road use vs. off-road use. Something like that. But I'm sure people still cheat, as they would with something based on mileage driven or charging performed.

There are other things that could be done. More toll roads. Tax tires. I'm not horribly sympathetic to this issue as large trucks are responsible for 90% of the degradation of our highways and roads anyway, not passenger vehicles.

Maybe if our gov't didn't spend so much money protecting overseas oil assets that belong to private companies, they'd have the funds to keep our roads in shape without fuel taxes. (OK, that was not very constructive.....)

My grateful thanks to Jim Beyer for inspiring with his "...please, please..." my letter to the author EWPC Superiority in Carbon Emission Reductions, in which it becomes very clear that my posts are intimately related to the object of his article, with EWPC vs. vertical integration carbon emission impact. I suggest emphatically that everyone should take time to read it.

Regards,

José Antonio

I didn't check the math, nor Len's assumptions, but I think that as system electricity reduces its carbon impact, the environmental policy will incresingly favors PHEV.

For areas getting electricity from coal plants, PHEVs provide little relief from CO2 emissions. It might even get worse. But the prospects are much better because future sources of green power (even at a premium price) could effectively power PHEVs at a reasonable price compared with gasoline. The fact that PHEVs have greater flexibiliity in WHEN they need to be recharged is also very favorable. But the immediate benefit of PHEVs is in their ability to displace oil use. CO2 reduction would come later.

Just to try to be balanced, the big problem with PHEVs (and EVs, for that matter) is battery cost. Battery cost dominates any per use calculation, so much that a rise in electrical pricing from 5 to 20 cents per kW-hr is small compared with the pro-rated battery pack price per charging cycle. Even 20 cents per kW-hr electricity equates to only about $2.00 gasoline per gallon. On the other hand, a battery pack costing $500 per kW-hr and good for 2000 cycles, would have a pro-rated cost of $2.50 per charging gallon-equivalent. And $500 per kW-hr would be very inexpensive for a battery pack today.

Henry: "If we up the efficiency from 25% to 40% (I'm guessing at that number) the carbon balance swings in favor of burning gasoline." -- Not if the PHEV is employed as I suggested, to act as a storage system for off-peak wind, solar, tidal etc. generation, and as a night-time load leveller to keep nuclear baseload operating at full efficiency. At that point it's primary energy source (electricity) is carbon-free.

Kenneth: "PHEV's is based on the home owners electric metering system somehow knows just how much electricity is used to charge the batteries in the PHEV? Also there is some way to determine just how much of that charge is used for driving and how much might be used in the house if the PHEV is the power source?" -- If you look up my articles on this site describing the operation and cost benefits of IMEUC

Independent Market for Every Utility Customer - Preliminary Business Case

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

you may see why I contend that a) the measurements you discuss are easily included in such a system (eg. the PHEV is simply considered by the meter to be a(nother) onsite local generator / load which is metered bi-directionally to the grid and charged or credited for its excess contributions just like any other generating entity. b) the costs of providing this added service are zero, because the entire system is entirely cost-justified by the many other benefits it provides to customers.

My comment was on Jim's brief mention of a tire tax. At first look, I think this is a pretty good idea. Tire wear is directly correlated to road wear, even at the large truck level. Sure they may get more miles out of a tire, but they have many times the tires so they would still pay more per mile. Again, this correlates well to their road use.

The other part of this is that it decouples driving from energy use and road repair revenues. As with the consumption of electricity, moving people and goods around isn't the problem and if taxed, they would negatively influence economic growth. We should only be taxing the bad parts of driving and using electrical energy, i.e. their carbon emissions/pollution/resource depletion. This will encourage clean energy creation/consumption and transportation as they won't have any fuel tax.

Edward A Read asked me a few crucial questions to whose response he has not written a word about at all. In my research to answer Ed’s questions I discovered the very important insight about the “non-trivial doctrine,” which goes as follows:

Paul Samuelson said that a doctrine is non-trivial when “it is attested by thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.”

From that statement, I have concluded that vertical integration is a doctrine or a paradigm.

That essential criterion, as simple as it seems, is non-trivial, because many intelligent and important people have never been able to grasp nor understand, like the eminent Harvard economist Bill Hogan, which extended Schweppes’s research on spot pricing of electricity without really understanding it.

In fact, Hogan missed one of the four criteria which is: “consider the engineering requirements for controlling, operating and planning an electric power system.” The lack of that essential criterion had lead, for example, to the incremental development of capacity markets and NERC mandatory standards.

To consider those requirements, EWPC has included the architecting imperative of ultraquality service, which is fulfilled with the essential requirement of ultraquality transportation, making EWPC a non-trivial paradigm.

To respond Len’s only advice about my response to question #1, the free ride requirement is in reality an equity requirement, which under vertical integration meant that there should not be any energy cross-subsidies. However, as time has gone by, hidden supply security has become strong, as customers’ needs have spread. So, to adequately reward demand response, which is about supply security, is not an exact science, but it is about the (changing) perceptions of the customers, being one of the strongest signals to the need of retailers. So IMEUC automatic response is also unfeasible.

So every reader of Energy Pulse can interpret Ed silence easily, but not that of Len after dismissing 10 questions. Len responded only one of 11 responses to very insightful questions, reiterated with high emphasis by the strong message "please respond previous 7 questions as yet unanswered." Now he has no excuse as his only rebuttal has been challenged.

As you must have read, I figure that many of the properly answered questions were directed under a mental model which assumed that EWPC was similar to other deregulation experiments (I correct now - changing my opinion - it was not at all about vertical integration).

So, with a lot of respect for Len, there are still 10 answered questions which readers should assume that a response like "ditto the other questions, which I won't bore people by addressing at this time," means that your original questions did not at all corresponded to your emphasis.

I like to clarify that Len has all his right to posts his articles, but my interest have shifted to show that vertical integration, a non-trivial paradigm, is obsolete and that EWPC another non-trivial paradigm is emerging as its replacement.

Your kind and professional attention to closing the open loops is most desired. As you are not your opinion, I wish you well.

Best regards,

José Antonio

Vis a vis your role as David, don't you think the question Joseph answered in response to the tautological railroad message deserves some generative reflection? That question and its answer were, "Is the vertically-integrated electric system at that point? A fair look at the evidence says: hardly."

Sorting through your attempt to slay Golaith, I ran into, "Sorry. Generators will need to have a retail department to handle non-trivial retail management. Economies of scale should be the result of activities under my response on item 3." Sam Insull, at the end of the 19th century and during the first part of the 20th century discovered vertically-integrated electric systems provided such economies. For his trouble, a large segment of the public who had benefited from implementation of his discovery , spurred on by populist politicians, sought to jail him. This seems to be an interesting footnote to serious present-day reflection on EWPC. We on the left coast observed what happened when enlightened populists constrained the wholesale market, but not the retail market. We're still paying for that and the idea that a level playing field was needed to allow renewable generation sources to compete.

Dear Mr. Giegler,

Thank you very much for a decent comment at your stature and for reading with interest something I wrote.

While I have not read about Nassim Nicholas Taleb's books, I have read about Samuel Insull, Edison’s Secretary, which you quote on many earlier posts. I suggest you also read Gordon L. Weil’s, “Blackout: How the Electric Industry Exploits America.” Insull's world’s, - the business model of wining rate cases to regulators that do not understand the non-trivial vertical integration - is not today's world, when the information technology revolution is claiming the transformation of most industries, market architecture and design.

My strong opinion is that vertically integrated utilities are just plainly obsolete and abusive. EWPC is emerging to allow the introduction of competition in the open market value chain - generation, retail, customer-, under prudential regulations. System engineering and ultraquality transportation of electricity controlled market do without the need of inefficient NERC mandatory rules, in line with my response to Edward A Read Jr. first question about a (worldwide) single market structure [and rules].

As a reminder, I copy a paragraph of my response to Edward about my opinion: “Although it is highly worthy, my confidence on EWPC doesn’t depend on the carbon tax. It depends on a non-trivial truth about electric power systems, which is a very complex machine whose design and operation is not a subject of debate, but on the work of a systems architect. It also depends on large changes experienced on fuel [costs] and transactions costs. Lowering of transactions costs allows the integration of demand to the power system with the development of the resources of the demand side, which leads to the development of robust, complete and fully functional retail and wholesale markets.” Forget Sam Insull, his scams are not longer needed!

The whole debate with deregulation was designed to be easily won by incumbents that don't want to compete. Thanks to the non-trivial EWPC such a debate can now be shown to be a hell of a great waste of time and resources for the whole world, and incumbents which don’t deserve the helm of IOUs, for lack of leadership. Engineers need to take back the leadership of the industry, by claiming the controlled (not the open) market of EWPC. The IEEE would do its job by recognizing the challenge.

I believe there were intelligent people in the US, Japan and Europe, working for the utilities that could have developed EWPC much earlier, but maybe there were not.

Maybe not; because there was not anyone left that really understood the non-trivial vertically integrated utilities as a whole with the system’s architecting background. Defending the vertically integrated utilities paradigm, Jack Casazza has written at length of the loss of institutional memory in the power industry. Professor Fred C. Schweppe, a system control genius at MIT, understood the great complexity of the non-trivial vertical integration paradigm, and led the development of Spot Pricing of Electricity, but died in 1988 when he was most needed. Besides Casazza and Schweppe, how many people do you know that truly understood or understand the non-trivial vertically integrated utilities paradigm?

The origin of EWPC is 1996, when I was retained to "solve" the electricity problem in the Dominican Republic. I am glad that my clear 1996 vision, based on Schweppe´s and Casazza’s work is becoming a reality, as my intuitive understanding can now be ascertain as another true and non-trivial paradigm (EWPC). It seems that unintentionally and subconsciously, I was working hard until 2003, to prove that my vision is needed. Since then, I became aware of my capacity to fight Goliath. While, I am not my opinion, let's just leave it to the test of time whether David will win once again.

Best regards,

José Antonio Vanderhorst Silverio, Ph.D.

Edison "invented" the vertical integration electric monopoly; Insull added the “invention” of regulation to get political insulation from the Sherman Act. Hence, you too can be absolutely sure that Insull was the mastermind that “invented” the scams. In the process, he completed the non-trivial vertically integrated utilities (VIUs) paradigm, which regulators have never learned. The results: scams then, scams now.

IOUs “… continued transfixed by the lore of…” VIUs “… that have served the country so well - until the world changed.” Many of the essential assumptions of the VIUs industry are fictitious and no longer hold. Long run generation contracts bets, Inactive demand, average rates, yearly demand charge, supply orientation, lack of competition, demand can be forecasted, planning under certainty, incremental rate cases to incorporate “innovations,” perverse incentives, many customers (most of the best) have alternatives to avoid the system, etc, etc,

While not a VIU, the industry is already in the process of being torn apart, as you can see from the case of the state of Ohio. As there is only one stable end-state (EWPC) for the future, if the state of Ohio goes back to VIUs, it will have lost the best opportunity to get a competitive power sector.

Going from the old paradigm to the new paradigm cannot be done incrementally, as it brings a lot of waste, by paying rates (the higher the rates, the better the scam) for each incremental feature (demand response, energy efficiency decoupling, NERC standards, etc., and getting many costly unneeded things in the process. There is a need for a breakthrough process, and the knowledge to get there is already available. All tinkering have already been done with deregulation. There is a great difference between tinkering and non-trivial system design, done by professionals.

IOUs should look closely to Detroit. Ma Bell did not bring cell phones. IBM lost to MS. The financial industry is already transformed.

The state of Ohio and the Dominican Republic have the opportunity to be the first places in the world to implement the paradigm shift and introduce enough predictability to avoid throwing good money after bad, as EWPC signals the end of financial capital and the reintroduction of production capital to the power industry. A partnership between the state of Ohio and the Dominican Republic, which have a great export and job development potential under DR-CAFTA, can be negotiated.

Comments are also invited on the Electricity Without Price Controls blog of the Energy Central Network.

Neither the US Congress nor the European Commission should be intimidated by you posts. It’s just details that won’t revive Goliath.

I am sorry that I am unable just yet to forecast how competition, innovations and global economies of scale will turn out under EWPC. I am sure that competition will behave much better than the monopolies under proper prudential regulations.

Most of the new economies of scale will not come from the Insull IVUs iron strategy of the supply side central stations; they will come from a bits strategy on the demand side, which is a very different ball game from that of 100 years ago. The new strategy will be a bit strategy as the driver is the information services technology.

Your post contrasts a few differences in the paradigms. The comparison based on average prices set by the regulator is totally insufficient for today’s world; the comparison should be based on the value added by electricity services to individual customers.

In effect, under VIUs typical bills means that customers can be classified neatly under customers classes. For many years that assumption does not longer hold in the USA. Add that to the list of fictitious assumptions. What’s needed is retail competition that satisfies widely different end customers’ perceptions.

I found very interesting that reliability services is three times the competition transition charge. Is that all the cost remaining from the deregulation complot?

Does the energy charge include generators that offer reserves costs? I doubt it doesn’t. Do base load generators generate in the neighborhood of $0.078/kWh? It seems very, very high! The difference is reliability costs (load following and/or regulation) that were lumped under the energy charge to be paid by the average customers. Such charges have large hidden reliability cross subsidies between customers. EWPC is about sending efficient price signals to customers, which depends on the development of the demand side bit strategy.

The decreasing rates you show for the beginning were when Insull was madly combining economies of scale to rapidly increase market share with the now obsolete two part rate. I am well aware that the scams were not visible as two economies of scale - generation and interconnections - mutually reinforced each other, when oil was artificially cheap. As explained earlier, regulators were not prepared to see the over collection from the customers. It was when OPEC raised oil prices that the scams became visible. You could see the 1970s as the end of Alvin Toffler Second Wave: the result, a changed world and the end of the "natural monopoly."

In short the economies of scale of the VIUs are no longer enough to satisfy the widely varying needs of customers in the 21st century. As you may have seen on Extra, Extra… Goliath is Defeated Once Again!, the EWPC breakthrough also solves the jurisdictional - federal/state - and - EC/country - problems of the USA and Europe, respectively.

Wishing you well,

José Antonio

As Jeff Presley suggested in his 9/10/07 comment, the IT "bit strategy" of simulation might compensate somewhat for being "...unable just yet to forecast how competition, innovations and global economies of scale will turn out under EWPC...". His comments on the stranded costs generated by implementing new, true paradigms might also be worth considering.

As for complot costs and what's in the $0.078/kWh, perhaps the note on the left coast utility bill summary that "Your electric energy charges include charges for that portion of your energy usage provided by the Department of Water Resources (DWR).... DWR is collecting 5.823 cents for each kWh it provides." helps explain the situation.

Why is it that this discussion reminds me of something Cervantes wrote about jousting with windmills?

Thanks for the update on the data. It seems to makes more sense now. Presley suggestions on stranded costs are commented below to show how they evolve in the California case.

Leonard Hyman, a noted research analyst, wrote that the utilities scoffed at the idea of deregulation when he spoke to them: “… I got the impression that they viewed restructuring as a nutty scheme that would never got support beyond a few regulatory staffers.” But deregulation plans continued and Hyman wrote: “I think that this movement perturbed the utilities. I’m not sure that the big utilities agreed on what they wanted… but in the end, they got together and went for what looked like a last minute deal.”

“The deal”, said Hyman, “look like this: the utilities would collect their stranded costs, however defined, what looked like the real prize, and they bought into the rest of the proposal.”

The above fits with Adam Kahane impression: "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."

Kahane added about 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..."

Now, if we stop, and recall that electric power systems are non-trivial paradigms under the control of the VIUs, we can come to the conclusion that the California utilities did not have the required leadership to be in business. The whole world knows that the California debacle was very costly. What many people don’t know is the costlier damage done by a big lie to perpetuate an obsolete scam to the whole world. It is because of such irresponsibility that I repeat the need to consider A Vertical Integration Conspiracy Theory for the US Judiciary, from which I select the following:

“According to Eamonn Kelly in his book “Powerful Times: Rising to the Challenge of our Uncertain World,” page 35, Winston Churchill said: “A lie gets halfway around the world before the truth has a chance to get its coat on.” On page 36, Kelly says that “Conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.”…

Picture yourself in the year 2000, and as a practical analyst that knew about the protection inherent in utility regulation and also knew what had happen in the US Midwest in the summers of 1998 and 1999. … “The debate in California has changed remarkably over the past year or two. Discussion now focuses not on whether retail competition or direct access is possible, but on how to make it happen. The three California investor-owned utilities affected by the commission's decision convened an industry working group, called the Western Power Exchange (Wepex) to address the issues related to implementing the new competitive retail market.” Please answer, to the best of your knowledge, if there might be some ground for a complot theory on which Enron was a just a casualty.

So, to go back to the starting point, please inform the amount of DWR charges that correspond to high price long term contracts of good old days regulation that fostered inefficiency (old scams), which led to the restructuring experiments, in the first place. That is where the comparison of vertical integration and EWPC should begin.

Best regards,

José Antonio

Our recollections certainly differ. The failure in leadership occurred in state government and the CPUC during the period leading up to the crisis and while the crisis ran its course. Some say because the governor and his proxies kept the IOUs from entering long term contracts with generators. Others say by not halting the nonsense of a constrained retail market running on top of an unconstrained wholesale market. As I recall, the IOU leaders you denigrate had their hands full trying to determine how to gracefully declare bankruptcy while this condition persisted. Yet others noted the attempt to stimulate "competition" led to disastrous marginal pricing policies. A recall election removed some of the principal players, possibly because they tried to hang the responsibility for their actions and inactions on federal agencies and out-of-state predators. If you really want to read some first rate CYA documents go back and retrieve CAISO market analyses for the '99 to '01 time period. The lack of recognition for the limitations of what Ed Reid calls "source of opportunity" power is striking. So is the evidence of what Fred notes as the disincentive to invest in new generation and distribution. Seems like restructuring experiments, fostered, not by VIUs, but by dreamers who saw competitive power sources where there were none, did not appeal to investors. Must have been the undue influence of uncertainty...

A complot in which Enron was a casualty, you say. Maybe, maybe not. I do know LADWAP sold power into the market for higher prices than Enron did during the crisis, for whatever that is worth. As for your circular reasoning back to the starting point, it has too many presuppositions to interest me. DWR was commissioned by Gray Davis, after the horse left the barn, to buy power for the retailers. At about the same time one of his aide's financial position in a wholesaler was disclosed, as I recall. As Len and others point out, such positions are the type of things EWPC should accentuate. Or, depending on your outlook, exacerbate.

In my opinion, Len, Joseph and Jeff have made valid criticisms and good suggestions that you have not addressed adequately. If David is to have at least some chance of success that will have to change. Goliath looks much less vulnerable with each unsupported assertion.

Herman Wouk, in his play "The Caine Mutiny Court Martial", has an expert witness describe the Navy as: "A system designed for geniuses for execution by idiots". I am not convinced that the CA "deregulation" scheme was not a system designed by idiots for execution by geniuses, who regrettably failed to appear timely.

Also, the performance of the CA wind power infrastructure during the very warm period in the summer of 2006 says about all that needs to be said about "source of opportunity" power. I also wonder whether BPA has re-evaluated the portion of its hydro resource which is truly reliable.

Ed

Divine Dispensation of Electric Markets is Gone By José Antonio Vanderhorst-Silverio, Ph.D. Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Dear Mr. Giegler,

Thank you very much for your recollection of the process, which I respect, and for giving (I think) EWPC and my humbled opinions the benefit of the doubt for the first time.

I have placed my last recollection in the link The BIG California LIE, to which I added as the leader paragraph: “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”

Although you are not interested on going to the starting point, as I explained above, state government and the CPUC were restructuring precisely because by entering long term contracts with generators, customers rates were very high in California in the first place. I am sure that customers are still paying those long term scams in the rates. To make a fair comparison, that is the point to start to do downloads, debates, and reflexive, and generative dialogues, which I considered have already been done.

Maybe state government and CUPC didn't know that they were going in the correct direction, but it seems that the guardian of the non-trivial VIUs didn't know either. What a shame! Instead of a win-win balanced approach that weighted well the truth and the service, IOUs went just for (what’s in it for me) the power and the money.

That is precisely why I responded to Joseph with the “Law of the Situation: the railroads did not understand,” (see my post of 9.11.07 above) that applies to VIUs, from which I extract, “Some people [IOUs for example] still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else [under EWPC for example]. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”

When energy costs were low, the business model of winning rate cases to the regulator didn’t bother the customers. But since the oil embargo in the 70s, customers are ever more interested in competitive prices, as free society recognized that IOUs cannot control anymore the electricity markets. I have followed Donella Meadows advise (see link Let's Get Out of Back Rooms to a Generative Dialogue) to end the divine dispensation to the IOUs. But after many things have occurred during more than 30 years, with the obsolete VIUs controlled market, customers like those of the state of Ohio want and effective and efficient re-regulation process.

Whether the judicial investigations, which I suggested, are executed or not, taking of course your recollections into account, I am very sure that Goliath is already dead. I am also sure that after reading this complete message, taking into account the whole EWPC context, you, Len, Joseph, Jeff, Fred, and anybody else, will agree that David killed Goliath, once again, even though, anyone is free to remain skeptic, which I definitely respect too.

So let me comeback to today’s reality. Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.

Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.

In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.

I hope you agree now that the divine dispensation that IOUs markets are theirs - and no one else’s - now and forevermore is gone.

Best regards,

José Antonio

The Anti-System Utility

By José Antonio Vanderhorst-Silverio, Ph.D. Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

This introduction, and the next to last paragraph, are taken from the article link Divine Dispensation of Electric Markets is Gone:

Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.

Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.

Reading carefully the article by Warren Causey, I come to the following conclusion:

The sum of the potential value of the grid plus the sum of the potential value of the enterprise is greater than the potential value of the utility, meaning that the utility instead of being organized as a system, it can be though as an anti-system.

What is the problem? Incumbent’s monopoly mindsets and political interference.

The monopoly utility operates a cash cow and so the priority is the enterprise, not the grid, nor customer service. In addition, the utility is also a political target. So grid’s investments are postponed, over and over.

What’s the solution? To restructure by a paradigm shift from VIUs to EWPC.

In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents IOUs should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.

As the grid is integrated with transmission, the resulting transportation utility budget is applied entirely to the modernization of the greater grid in a given area. As the regulated enterprise is transformed into several competing enterprises (aka Second Generation Retailers), the political target disappears, and investments, innovations, and jobs with a lot future are created.

A Warning to the European Union and the US Congress By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Dear Mr. Giegler and Mr. Gould

In the post European Confusion and Tail Chasing, Marty Rosenberg reports that “This week comes work that the European Union wants to break open the energy markets. Again. I thought it was supposed to have happened July 1… The initiative is perplexing, particularly considering the fact that the major governments of Europe cannot keep their hands off the energy business.”

Just like in the US, the European Union wants to break open the electricity market with a faulty market architecture and design that keeps “native load” intact.

We ought to Mr. Giegler hero, Sam Insull, the ingenuity of the creation of the deadlock that the US is facing with the federal and state jurisdictional separation that lead to The Anti-System Utility. This is an excellent example of system thinking in action, as the 1st and 7th Law of the Fifth Discipline apply: “Today’s problems come from yesterday’s “solutions” and “Cause and effect are not closely related in time and space.” FERC and its pair in the EU will play its role with a transformation to EWPC, allowing the development of federal wide competition in the US and Europe by 2GRs initially, with worldwide competition later on.

EWPC applies the 8th Law of the Fifth Discipline: “Small changes can produce big results – but the areas of highest leverage are often the less obvious. Two example of high leverage are the change in structure from VIU to EWPC, and the introduction of competitive retailers.

EWPC takes into account the possibility of a transition, in accordance with the 6th Law of the Fifth Discipline: “Faster is slower.”

As state regulated retailers, aka “the enterprise” by Warren Causey, are transformed into federal competitive retailers, the negative political influence will be strongly mitigated. The open market activities in the value chain will change the need of financial capital to production capital, as predictability is reinserted into the industry.

The most important element to enable the open market and the key to predictability is a transportation grid with ultraquality. The motto “reliability first, economy second” is what should drive the industry from now on. As the deadlock is eliminated, new investments, innovations, and jobs with a lot of future, will be created. Financing base load power plants will be easy, under a predictable environment.

US Congress and the European Commission need to digest EWPC very fast. The political distortions in the power industry at the state level in the USA and at the country level in Europe can be strongly mitigated by performing a paradigm shift to EWPC.

Please take a look a the last post Solving Smart Grid Cost Recovery, written under the article New Trends Emerging For AMI Cost Recovery, by Will McNamara, Principal Consultant, KEMA, Inc. I dedicate it to Len Gould as a reminder of my appreciation for his stubborn behavior. I think he should try to get a piece of the pie in the new industry organized under EWPC.

After many downloads, debates, reflexive dialogues and generative dialogues, I have two humble question to ask: Is EWPC the winning market of the first and cooperative stage of competition? Are we ready to introduce competition in the power industry with a negotiated transition, of course?

If you think no, to either question, explain very clearly your case to the audience, with facts, and without links. If you think yes, please, by all means say so.

I know that the next thing that should happen is to find out that there is a lot of value destruction made in the industry during the past decade. However, there are much more opportunities to add value, for those who have invested dearly in innovative solutions, but that the "native load" barrier don’t allow it to be implemented.

Silence is the best message.

Thanks to all that helped me get to this point.

Best regards,

José Antonio Vanderhorst-Silverio, PhD Systemic Consultant: Electricity

Unlike some others, I am not promoting IMEUC to gain anything personally, simply to see the best system possible for all stakeholders, which IMEUC is.

I also must strongly dissent from EWPC's proposal to combine all transmission and distribution into a single mopoly entity. Transmission should be a private competitive industry operating under the direction of an ISO, whereas distribution must be a regulated mopoly but operating as much smaller units, eg. individual businesses per city / town / country, matching their skill sets to the complexities of their local situations. Some can be as complex as Toronto Hydro with all the skill sets demanded there, others as simple as a rural county co-operative.

That sort of error simply indicates the sorts of errors you've incorporated into that small part of EWPC you've so far disclosed. BTW, how do you propose that the market operates under EWPC?

Energy Central Blogs - IMEUC - Independent Market for Every Utility Customer

"eg. individual businesses per city / town / county, matching their skill "

I acknowledged your dissent only in the first post. It is in accordance with what I proposed. The second do not qualify. However, I will be waiting for all comments until Sunday before addressing any.

My response could be in some case a good intention to explain a true and non-trivial subject to intelligent and important people.

I also want to make sure that dissenters are not just skeptics, which is only natural that they exist and which I respect to the best of my abilities.

So if you dissent in any other way, please do it in the same way you did the first. Not links at all.

I will not repeat this acknowledge message to others in favor or against EWPC being the winner of the first phase of competition. However, I will be reading then, and if there is a need to post another message to clarify or eased the process, I will do it.

After that, the second phase of competition (company vs. company) will certainly only occur in the real market, after they are set up, and not on this media, with generators and 2GRs after the detailed consulting work are competed by a professional team of experts and the markets are set up and running.

Yes, Mr. Gould: I want to compete for consulting business at that moment. I think that is very respectful, especially after investing for quite a number of years with very thing occasional financing.

In the mean time, please wait until Sunday!

Best regards,

José Antonio Vanderhorst-Silverio, Ph.D. Systemic Consultant: Electricity

I don't believe I've directly criticized either of your proposals, in fact I barely understand what they are about. What I did note however was the continuing debate across multiple threads that never seemed to end or come to conclusion. Therefore, I opined that a simulation might be in order because BOTH of you have circular reasoning and the only opportunity to discover the "real" output would be a "real world" test. However, the 'real world' isn't beating a path to your doors to implement these schemes, probably for good reason. A simulation might indeed find things neither of you had considered, which would be a good thing.

As Don and Ed have mentioned, leadership failure on the part of politicians isn't to be ignored, it is to be expected. We would simulate before we put up a large bridge, before we built a large building, why not before we implement a large change to the status quo, that could deleteriously effect millions?

That was my one and only point, that this problem is actually easier to heuristically define than either of you seem to realize and the outcome would certainly be interesting if not incredibly valuable. It seems there would be SOMEONE out there willing to fund this, maybe the same folks who fund EPRI, or even EPRI themselves? Admittedly it is far too scientific an approach for our politicians to utilize, they are all about gaming the system, not systematically utilizing gaming theory for predictive purposes.

I return you now to your previously scheduled squabbling... :)

On the other hand, I don't think anyone knows how the customer will really respond; time and time again they can be shown to not really care how much they spend (or waste) on energy, especially electricity. It's still too cheap to alter their behavior in many circumstances. I don't know how you can accurately measure that response with a simulation. I am of the belief that real-time electricity pricing may allow for huge efficiency improvements if the customers took advantage of such information. I guess that is hard to prove without trying it, but simulation might bear it out to some extent. What sort of inputs would be needed for such a thing, assuming typical production plants and business and residential users could be reasonably modeled?

There is some data available from utility programs. They have found, not surprisingly, that consumer response is greatest when: the consumer is exposed to the full range of real prices; the consumer "knows" what the real prices are; the consumer can program the meter (or some other device) to make automatic decisions based on a series of decision rules, subject to manual override.

In all of these utility programs, there was a predetermined test period, after which the program would be terminated. I would expect that consumer reaction was limited by the knowledge that the real time pricing would not continue.

The real reason consumers don't care is they know there is a big bad PUC out there that will set pricing according to political whim rather than economics. It is similar to the land line phone business where companies bear the true brunt of the cost while consumers get to ride along for free (ok, subsidized) because of the considerably higher rates paid by commercial users. As I said before, businesses don't vote, people do, and consumers vastly outnumber companies.

Len thinks it would be easy to just setup a test in the real world, but he seems to be neglecting the costs of all those TOU meters and other gizmos needed. Simulations cost money, but aren't prohibitively expensive and if loaded on a website and made to look somewhat like a game (ala the Chevron experiment), a pretty good sample could be achieved in short order and as Jim says, tease out the problems.

Dear intelligent and important friends,

This is not a process to develop a consensus. On the contrary, so far no one has written her o his approval about EWPC being the winning paradigm. At the moment, only one real objection has been made, the one by Mr. Gould which I acknowledged earlier.

In addition, as advanced in the post Final: IMEUC not a Market Architecture and Design, IMEUC – a physical solution – clearly cannot compete. If you read the post, please consider any allusion that may seem to be a personal attack, as being an attack on the opinion, not to the specific intelligent and important person or persons.

EWPC is not about the best system solution. If we want to promote innovation and economic growth, there should not be such thing, in real life, as a single best solution for the whole market to start with. Instead, we should develop a market environment for the second phase of competition where – the real market - will be enabled, so that each market segment is populated with the best (several competitor that shift market share as time goes by) business model innovations interact in the USA, Europe, etc. and eventually worldwide.

We all due respect for Mr. Presley and Mr. Gould, I will show tomorrow that there is definitely no need at all for simulation, nor implementations to this process. Goliath is dead forever. Nothing will buy time to get him out of the grave.

Some heavy duty friends seem to have opted so far for the silence approach, which I mentioned. Thank you very much, that's fine.

As a lesson learned, however, in this and future debates and dialogues, I suggest that we should take the silence message as being like the “no objections” documents that the multilateral institutions provide. That way, this media will be much more effective.

Any comment or suggestion is invited.

Have a nice rest of the day.

José Antonio

Article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill Viewed 2100 Times 81 Comments so far.

The counter paraphrase of Wouk is wonderful. However, given what they would have had to work with, geniuses that arrived early couldn't have untangled the market mess. Being a wee tad prejudiced, I believe the seeds were planted back in the administration of Governor Moonbeam when he helped SCE and SDG&E decide against proceeding with the Vidal and Sun Desert plants.

Len,

The comments by Joseph and Jeff that contained ideas that seem to beg consideration by those seeking electric market reform, or further fragmentation of VIUs, have been copied and posted on the IMEUC blog. Unfortunately, one of them got copied and posted twice.

Jose,

Could it possibly be tomorrow when you will be able to forecast how competition, innovations and global economies of scale will turn out under EWPC? Enumerated in dollars and cents saved by a typical consumer? Amazing!

A simulation should cost on the order of $25-100K depending on bells and whistles. You should contact the folks who did the Chevron site to see and what they charge. It would be easy enough to write a grant proposal to pursue this, I wouldn't recommend draining the old piggy bank do do it. :)

My plate is too full right now and the kind of simulations we are running are strictly based on physics and geochemistry, not human interaction. Our software cost about $25K and is exceptionally useful four our purposes.

The Economist group had this company do the Chevron site. You could contact them, ask what the budget might be to do the site and then write up a proposal adding in a surcharge to pay you and Jose's time to oversee the project. Who knows, in a year you two might be the best of friends? :)

Bottom line, deregulation AS DELIVERED is a disaster, but Re-regulation might not be the optimum solution either. Forward looking entities will want to keep their fingers on the pulse of the public about this and anything that only ends in 5 zero'$ is pocket change to them.

IMEUC: Unreliable Service and Price Spikes

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

In an attempt to compare IMEUC with EWPC as the wining market architecture and design, Mr. Len Gould started yesterday (September 22nd, 2007), the Energy Market Simulator Design – Software Design Blog. Its second post is entitled Opening discussion.

Mr. Gould states that “The reason for this initiative is that it is my response to a prod by Jeff Presley.” In what follows it is shown that there is not a need to look further, as a simulator already exists, and its information’s confirm the EWPC is the winner of the first phase of competition with the VIUs, as IMEUC doesn’t even qualify.

Using systems dynamics, Dr. Jason Black’s, Ph.D. theses at MIT, already simulated a shift from the Vertically Integrated Utilities paradigm to an incremental paradigm that apparently integrates Demand Response. Dr. Black’s simulations did not consider the most important criterion of electric power utility service, which was suggested by the late Professor Fred C. Schweppe, also of MIT. That criterion, "considers the engineering requirements for controlling, operating and planning an electric power system," being the key distinctive element of the Electricity Without Price Controls (EWPC) paradigm; In layman's terms, the criterion can be expressed as "reliability first, economy second (R1E2)."

By the way, the R1 part is the key to develop the optimal transportation system, which results from the minimization of the sum of all the costs of investments (included those of supply and demand), costs of operation, costs of maintenance and costs of outages, so in a sense “reliability first” is about developing the best economic transmission system for the expected supply and demand of society.

Because of the lack of the R1E2 criterion, the thesis leads the untrained observer to the false general conclusion of “pernicious effect from… increase price volatility due to reductions in generation capacity reserve margins.” The R1E2 criterion prevent the possibility of price spikes occurring under EWPC, but which will occur under IMEUC, making it just another faulty deregulation experiment candidate.

The model system includes three alternatives: IMEUC distributed end-user level (so now we have IMEUCs paradigm available), a Disco incumbent retailer and an alternative First Generation Retailers (1GRs), whereas, EWPC is centered on Second Generation Retailers (2GRs). 1GRs have low competitive capacity as they operate under the VIUs paradigm in which the incumbent Disco retailer can foreclose competition. Incumbents are afraid of 1GRs cherry picking their customers.

Under EWPC, there is no Disco retailer, nor cherry picking, as 2GRs compete with each other. 2GRs have incentives to innovate – by developing business model innovations - to maximize value, minimize costs, or both, for individual customers, and, as a group, have the potential to maximize social welfare, something IMEUC cannot do. They optimize by obtaining as close as possible the required information of the (changing perceptions) preferences and conditions of all customers. While getting that information, they satisfy as close as possible the R1E2 criterion, something that is prohibitive and excessively complex to do by the system operator.

Systems operators all over the country are already operating with especial demand response retailers. In Geoffrey Moore’s Technology-Adoption Life Cycle model, Demand Response has already crossed the Chasm to the Bowling Alley in a few jurisdictions, as Pragmatics “Stick with the herd!” Many others are in the Early Market as “visionary companies get ahead of the herd!”

In the mean time, many Conservative VIUs, under the lack of leadership of IOUs and regulators want to “Stick with what’s proven!” By starting the new blog, Mr. Gould is trying to get into the Techies “Just try it!” stage, but it not possible, as they are trying to avoid the retailers, one of whose essential role is to fulfill the R1E2 criterion.

At the same time, there are other secondary economic requirements, the E2 part of R1E2 that should be mentioned. 2GRs compete and use the increasingly detailed information to reduce free riding. A IMEUCs benefit, such as being better at curving free riding, is insufficient to be the wining market, as the system operator or market manager will need to perform the required and unavoidable essential retail function to maximize social benefits. In addition, IMEUC would need to receive a large subsidy under a mandate to get implement it.

I am working on other posts for tomorrow.

I have taken in very positive terms Jeff’s suggestions, with a much close time horizon. In that respect, I have written the following:

I see IMEUC potential as a worldwide niche, which I would call the IKEA market segment, where the bares bone retail exchange would work. With today’s oil prices and with a carbon tax almost here, I see that many cost conscious customers and techies would like the market segment and expend the time to learn the regulations and go thru all the red tape required, especially in developing countries. However, as Joseph pointed out, “I am in government, and I represent ordinary folks. They don't want to think about electricity all day long. They want to watch TV at night and have toast and coffee in the morning.” All other retail customers would go to a regular 2GRs to keep their lives as Joseph suggest.

Presumably, you have adjoined Black's simulation with R1E2 constructs and shown that minimized individual customer cost results. And, in the process, that pernicious price volatility due to minimum reserve margins has been eliminated. Pardon my skepticism, but until you quantify such results and show them side-by-side with results from the VIU paradigm run on Black's simulation, your arguments ring hollow. Touting maximized customer value sounds too much like maximizing customer cost.

For agreeing that we have IMEUC out of the way for good. That is good progress!

Regards,

José

You REALLY need to get out more, Jose. For example in Ontario, your theory of "monopolies distorting the retailer condition" is ludicrous. Ontario IS EWPC (monopoly t & d, absolute reliability by regulation, weak retailers having no impact on the system). It doesn't work. (excess prices, no evidence of competition in any creative way). I'll ABSOLUTELY need to see the criteria and result documents of any supposed simulation of IMEUC.

However, keep up the good work. Your own actions are far better at discrediting you than anything I might do.

Jeff: Somehow I doubt it. BTW, I think it would be necessary even before approaching the people who did the Chevron simulation to prepare a set of requirements. What inputs, what algorithims, etc. I've started a blog on the blog site for discussion.

IMEUC recognizes a) there is no/insufficient financial incentive for retailers to invest in demand control. b) retailers incentive under existing de-regulation (EWPC) is to sign long-term contracts with generation, then sign up customers to equally long-term flat-rate-per-unit contracts. c) no body in existing de-regulation / EWPC has sufficient financial incentive to implement demand control until it is too late to intercept serious shortages. (see Ontario government needing to legistlate even dumb TOU metering to get anything done). d) waiting until customers are incented by regular outages caused by shortages for them to "convert" to a theoretically existent retailer who implements peak load management to manage shortages is too little too late to avoid crippling economic damage.

It seems to me to be FAR more of a stretch than I will grant, to propose that "progressive retailers will suddenly magically emerge with competing market systems to handle peak load" (where will they get the standardized controllers, appliances, central information messages?). Evidence to date contradicts. It is necessary to set up the required market first.

Free Market and Central Planning, Under R1E2

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Dr. Stephen Lee has written the timely article Free Market or Central Planning?

My answer to his question is both: free markets and central planning, but with the added condition of electric system reliability first, money system economy second (R1E2).

The Vertically Integrated Utilities paradigm became obsolete in the 70s. The obvious elements had to do with the excesive capacity required and corresponding high rates and the change in the range of customers supply security needs. After that, many incremental paradigm shifts have occurr.

It is necessary that the industry should undergo a real paradigm shift. The electric system and the money system should be functionally separated. As the money system has supply and demand, and generation and retail are fully competitive activities, the functional separation has good cohesion.

The natural monopoly transportation system is what remains as the electrical system. To optimize the transportation system, it is required to consider total social (demand, transport, supply) welfare needs, and not just the optimization of transmission, distribution, or both, by themself.

By applying the reliability first, economy second, criterion, the development of the smart grid can proceed and as each competitive retailer develops, with business model innovations, the resources of the demand side, to integrate demand into power system planning, operation and control, a robust, vibrant, and fully functional, electrical and market, power sector can evolve.

Transmission open access and the native load requirement by IOUs are an incremental step and a strong barrier to competition, respectively. The case for reintegration of T&D is clear. The case for optimization of distribution and regulated retail under a business model of IUOs winning rate case to the regulators is dead wrong, as it is a win-lose proposition.

Those are some of the concept that have emerged on what is now electricity without price controls (EWPC) that I have developed since 1996.

Thanks once again to all that have serve as a sounding board, without whose help I would no gotten this far.

José Antonio

In order to really apply market economics to all customers, including small retail, we FIRST need to set up the market. Lifting regulation without setting up the market is (has been) a recipe for disaster. Ask professor Banks about Sweden.

Thanks for all the trouble you have gone through to question EWPC. Don’t think I have the intention to caused you harm.

I expressed a high appreciation to your strong determination. But, remember that Geoffrey Moore suggests two phases of competition, which I claim to have won by EWPC. So, with regard to lifting regulation before setting of the market, take a look above at a recent post, where I wrote:

“the second phase of competition (company vs. company) will certainly only occur in the real market, after they are set up, and not on this media, with generators and 2GRs after the detailed consulting work are completed by a professional team of experts and the markets are set up and running.”

Almost two years of hard work, based on more than 9 years earlier of research, as can be seen in the BMG blog, that you consider fragments and I agree many of they are, sum up to a hell of a lot of pages with many, many insights.

I like to read what Professor Banks and Mr. Jeff Presley have to say.

Please, don't be so hard on yourself.

Best regards,

José Antonio

Dear Mr. Pullins,

Your comments on utility trends are very interesting and timely. If I understand correctly your post, your opinion is that:

1) Nothing is being done about integrating distribute resources to control, operation and planning of the grid.

2) Good utilities ideas die at the utility-commission interface.

My opinion is that to integrate distributed resources and to absorve good ideas, power sectors all over the world need to undergo a proper paradigm shift as explained in article "Free Market and Central Planning, Under R1E2 ," which I posted today on EnergyBlogs.com.

Regards,

José Antonio Vanderhorst-Silverio, Ph.D.

Ref: All the issues in the same room

Updated from original.