Taxation is not a "market signal", though it may be intended to "send a signal" to the market.

Nowhere in the US Constitution is there an enumerated power which authorizes the federal government to engage in behavior modification through taxation.

Interestingly, those who advocate taxation as the solution to problems rarely bother to mention what would be done with the tax revenues, as if that were an issue devoid of economic consequence.

And when taxation approaches 50% of GDP, it most definitely IS a "market signal", as is the spending which the governments do with it, as you point out.

The "deal" is that they are extra-Constitutional, as is much else our government does. Income redistribution is not an enumerated power either.

High percentage targeted taxation definitely sends a signal to the markets, as was the case several years ago with the "luxury tax", which very nearly destroyed several industries before it was repealed. Government did not write the law of unintended consequences, but it is subject to it regardless.

The distinction is between behaviors in which consumers desire to engage and behaviors in which the government doesn't desire consumers to engage.

The tax system is certainly viewed as more palatable to government officials, since they are the recipients of the revenue.

My observation would be that governments tax virtually everything, to different degrees. They tax very broadly to make the total extent of taxation very difficult to determine. They tax selectively at differing rates to send signals to the markets which are inconsistent with the signals emanating from the market participants.

No question consumers will desire to engage in behaviors like smoking etc. that are viewed as undesirable by governments, often because many consumers do not know any better. Similarly many average consumers are probably oblivious to the realities underlying the looming energy crisis. For example when consumers go shopping for a new car and they see showrooms full of affordable gas-guzzling SUVs and trucks, I'm sure many consumers view this as it must be just fine to continue buying and driving them.

Change CO2 to GHG.

I learned that ""The impact of human activities on the atmosphere and the accompanying risks of long-term global climate change are by now familiar topics to many people. Although most of the increase in greenhouse gas (GHG) concentrations is due to carbon dioxide (CO2) emissions from fossil fuels, globally about one-third of the total human-induced warming effect due to GHGs comes from agriculture and land-use change. U.S. agricultural emissions account for approximately 8 percent of total U.S. GHG emissions when weighted by their relative contribution to global warming."

Keith Paustian, Professor, Colorado State University John M. Antle, Montana State University John Sheehan, National Renewable Energy Laboratory Eldor A. Paul, Colorado State University

We are being “rope-a-doped” by the “religion” of global warming into poorly thought out actions that are counterproductive and needlessly damaging to the average mans’ already strained finances while ignoring the 800 pound gorilla in the corner. Oil and natural gas supplies are dwindling, yet some are apparently determined to make the situation worse.

Using less energy (both at the production and consumption levels) and our own sources saves us money. Also means less CO2. Higher prices are driving consumption down and technology is increasing production efficiency as well as promoting efficient economic access to our own energy supplies. This effort can accelerate if governments will kindly stop adding more “rocks” to the backpack. Cases in point: (1) using corn derived ethanol costs the consumer more money and actually increases CO2 emissions (2) massive reductions of power plant CO2 emissions require using even more energy, causes huge increases in plant costs while actually increasing pollution levels (3) taxing CO2 emissions will needlessly further drive up costs while providing no measurable benefits, all in the hope man can “un-alter” the climate in the distant future.

What’s more dangerous: lack of energy or CO2 emissions?

We need to concentrate on the real threat, use common sense and stay on target.

Michael,

I guess it comes down to whether you'd rather be warm and wet or cold and dry.

Ed

Fire and Ice Some say the world will end in fire, Some say in ice. From what I've tasted of desire I hold with those who favor fire. But if it had to perish twice, I think I know enough of hate To say that for destruction ice Is also great And would suffice.

Robert Frost

t doesn´t matter if this occurs with low or high emmissions, and other environmental concerns.

My suggestion is changing this situation via a tax signal by which value added is also related to the right use of natural resources, which are associated with the amount (weight) of materials and fuels.

Rafael,

"...tax signal" is correct; not market signal. "...right use of natural resources" by your definition of "right".

"Tax scollection around the globe are mainly concenerd about getting a fractio of the value that is being added."

They should be concerned about funding the essential functions of government; and, then, performing those functions effectively.

Ed

http://wattsupwiththat.wordpress.com/

How about acknowledging the DATA? Why ignore documented cooling?

Ed

I think that your idea of a "weight tax" certainly is an interesting concept. In my view it is a type of consumption tax which most economist would agree is preferable to an income tax, at least those economists not befuddled by the ghost of Mr. Keynes. I would suggest to you that weight is a little too narrow to have the intended outcome, however. We would probably find that exotic materials and/or production processes would appear that would have an unintended negative impact. I would suggest that a broader parameter is preferable, but your concept is a good one.

Dennis

http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf

Read just the first page, and esp. the footnotes: vis. "Numbers in square brackets indicate a 90% uncertainty interval around a best estimate, i.e. there is an estimated 5% likelihood that the value could be above the range given in square brackets and 5% likelihood that the value could be below that range."

Is the question: "Why did Gaia not do what the models projected she would do?"; or, "Why did the models not project what Gaia would do?"

While the model projections are an interesting topic for evaluation, they are a lousy substitute for data. Data, however, are an excellent substitute for modeled results.

The data is certainly "An Inconvenient Truth".

I have many years experience with the general subject of modeling empirical data collected in another field of applied science, electronics engineering design. There are many common elements to modeling in any field of science.

"While the model projections are an interesting topic for evaluation, they are a lousy substitute for data. Data, however, are an excellent substitute for modeled results."

Your statement above in general is true, but what must be appreciated on the subject of climate change is that real data from the future is missing. The intended purpose for modeling past data is to not only explain the past but predict the future. In the absence of future data, there is no choice but to put one's faith in model predictions, with the practice of refining the model as you collect more data. It works very well in other fields of engineering design. Models become very powerful tools to predict future data once the model has been sufficiently refined such that its mathematics become purely physically based, and not simply curve-fitting math.

In essence I have a lot of respect and understanding of people in climate science who are trying to model the earth's climate behavior. They in fact are bedeviled because to prove the quality of their modeling predictions far into the future is practically impossible to replicate in a laboratory.

"Real data from the future is missing" on all subjects.

I also have experience with models, as a user rather than as a modeler. I know how sensitive complex models are to the myriad of assumptions which allow the models to function. I also know that models can "go off" dramatically.

I am not a climate scientist, nor have I played one on TV. I haven't even stayed at a Holiday Inn Express recently. I have not dug into the details of the climate models or the assumptions underlying them.

I do not believe any of the models predicted the recent global cooling which is documented in the four sources shown on the site I linked above. It obviously remains to be seen how durable this cooling trend will be, impressive as it is.

I have far greater respect for the climate scientists who have "worked the problem" than I do for the politicians who have summarized their conclusions for other politicians through the IPCC.

Unlike the IPCC crowd, he has a GOOD idea when the models are telling him something that doesn't ring right. Also unlike the IPCC crowd, he doesn't go shouting from the rooftops that something is going to go pop in the markets because often, embarrassingly they don't.

What every geologist knows from extensive analysis of mountains of data is that determining a trend line is 99% art 1% science. The IPCC crowd is pretending that THEIR 1% is somehow art while the rest is science. Of course in that statement, I'm NOT including those honest climatologists I've referenced in other posts here, like Christy who disagreed completely with the "assessment" report and 400-500 other brave souls who've gone on record with their opposition. If this cooling trend continues (and given how random weather is, who the heck can determine a trend?), the brave souls might well turn out to look like the prescient ones.

And Ed, it appears that the "dramatic recent cooling spike" you refer to is still within the range of variation about the upward trend line. Let's wait another few years before calling that raw data.

It is data now; and, hardly "raw" data. It may be a trend in another few years.

Ed

This whole thread (and the article) is starting to bother me.

First off, the premise of the article is that cars are a big factor in global warming. Well, they are, both they will already be subject to change due to oil depletion. Electricity generation via coal is a far worse problem for global warming, and far harder to solve. You can play all the tax games you want, but at the end of the day, unless and until you can find something to replace coal, and at about the same cost, then nothing substantive will be done about global warming.

And then there's the global warming denier crowd that for some reason pick this article as a place to deny global warming. But the article was dealing with the current political REALITY that global warming has been accepted by most all countries worldwide, including the U.S, Europe, Russia, China, India, Japan, and others. I could also argue that Gerald Ford should have beaten Jimmy Carter in 1976, and it would have about the same meaning as some of these posts.

Oil depletion is a problem and an opportunity to rework our energy system away from fossil fuels. Given at least the potential reality of global warming, this is the perfect time to take a hard look to getting us off coal, if practical. Nuclear power might be a great help in doing this (which I know Edward and I think Jeffrey agree with me on this) so I don't even see the point of this global warming debate. It's a stupid, petty, tyranny of small differences, because you have no real problem with the same means to the same ends; it's just the motivation to get there that is problematic to you.

If we weren't also facing an oil depletion crisis, then the issue of global warming would be much more problematic, because the motivation to change would rest solely on the predictions from places like the IPCC. But that's not the case.

As I have said here before, if energy independence is the goal, then let's develop a plan to make the US energy independent. If, on the other hand, eliminating CO2 emissions is the goal, then let's develop a plan to accomplish that. However, in the CO2 case, we cannot achieve any reaonable set of global policy goals on our own; energy independence we can do on our own.

My problem is that I believe the two plans would be quite different. As you suggested, the energy independence plan would focus on transportation. The CO2 elimination plan would focus initially on power generation. Both plans might well reach the same end point, ultimately, but I suspect they would follow very different paths and timelines.

I have actually developed a conceptual plan which accomplishes both by 2050. Executing that plan would not be cheap or easy, but it could be done. It would be very helpful if we could decide what we need/want to do and then decide how to accomplish it.

What I see happening now, at all levels, is an attempt to get the US "a little bit pregnant", rather than an honest approach to identifying and quantifying problems and developing solutions. That approach will almost certainly delay the process, increase the total cost and increase the consumer pain resulting from the transition. I have no idea what its supporters see as its upside.

I guess I agree with you and Michael Keller, oil depletion is the hole in the boat right now, and easier to fix as well (though still not that easy...)

I'd like to hear your plan (25 words or less....just kidding) on getting energy independent by 2050. My "plan" would be to have a mix of 80% electricity, 10% biomass, and 10% other for our energy use. "Other" would be remaining fossil fuels or synthetic fuels (derived from electricity).

http://www.utilitiesproject.com/documents.asp?grID=111&d_ID=4296 (registration required, but free)

Ed

I believe that the alternate strategy of mandating CO2 reductions will only destroy the nation’s economy because of crushing costs driven by inferences that simply can not be proven and are further suspect based on the planet’s history.

On the practical front, “ENERGY FREEDOM” focuses on deploying prudent regional mixes of energy/fuels/generation that take advantage of local opportunities while ratcheting up efficiency requirements at both the production and consumption levels. This ratcheting includes penalizing the inefficient with fees while using the profit-driven market to reward those who use less energy.

Examples 1. Inefficient generating plants (whether coal, gas turbine, combined-cycle, nuclear, solar, wind) pay periodically ratcheted upward fees tied to net efficiency being less than targets. Fees (say $/mWh and sliding scale) would be levied by the regional power markets, with the money used in conjunction with item 2 below – the politicians are kept at the periphery. The idea is retire the “old iron” that not only wastes a valuable commodity (energy) but adversely impacts the environment as well. Efficiency targets set at Federal level. 2. Nobody gets permanent subsidies, although help would be provided for development and initial deployment efforts. No initial help for the wildly inefficient (e.g. extremely unproductive solar arrays in say, Cleveland; corn ethanol is on its own). The regional market decides what succeeds. 3. Consumption is subject to similar fees based for being inefficient; gas hog SUV’s pay a yearly fee, initial tax break (funded by the inefficient) for buying exceptionally fuel efficient vehicles. The consumer wins by keeping more of his own money.

My general thinking is that attempting to establish CO2 targets is “too hard” based on the highly polarized political landscape and large number of “sacred-cow” which includes industry, state and local governments as well as environmental camps.

In the final analysis, who can argue with using less energy?

The consumption part of your suggestion is exactly what's going on in Canada, and especially in the province of Ontario. The biggest incentives are for more efficient use of electricity in Ontario.

Carbon taxes are not a big deal, yet, in Canada with the exception of British Columbia who just last week was the first provincial government to announce them. The Canadian federal government already has additional retail taxes slapped on SUV's and tax breaks on energy efficient vehicles, with recently heavier tax breaks on gas-electric hybrids. The federal government also offers all Canadians huge rebates to have their homes upgraded with more efficient HVAC, windows, and insulation.

Lots of interests: oil companies, electrical utilities, all of these entities are based on the notion of growth. They have no incentive whatsoever to curb energy use. There is no business model in place that allows for such an entity to be incentivized to reduce energy usage. That's a big part of the problem. Even if the cost of electricity was taxed very high (to discourage consumption) the utilities would still be better off producing more rather than less for a given infrastructure.

A possible answer is to allow more distributed production (every user is also a producer) This would provide the incentive for MORE renewable energy production (because it can be sold) and LESS usage (better to sell what you produce rather than use it). But this is not an easy task, due to the cost and intermittency of renewable energy sources.

Distributed power seems reasonable to me, so does renewable. Technology can cover the intermitency.

While the big guys might object, they would get little sympathy. That's why they will lose in the end.

Mike

A big potential lies in distributed small-scale privately-owned generators. Can you just imagine the competition for large central generators if a substantial portion of the population had solar PV, solar thermal, or windmills on their properties with the ability to sell excess capacity back onto the grid automatically.

Smart grid technology would be critical to enable this stuff, including price communication technology with utility companies and in-home energy display monitoring. But you are exactly right, the utility industry normally has little incentive to invest in this for consumers, unless government intervention was helping or forcing them to.

I will take a step back in the whole series that is jumping to a divisive conclusion. The following is taken and adapted from "Powerful Times" by Eamonn Kelly.

The GHG dilemma can be poised as the question "Should I believe in God," that the philosopher Blaise Pascal reason that he should. GHG is a timed bomb or not. Michael can choose to believe, or not. If GHG is not a timed bomb, and Michael does not believe, Michael is smart - but otherwise there is no great upside. If GHG is not a timed bomb, and Michael believes, Michael is foolish, and may have denied himself some earthly pleasures - unfortunate, but not dreadful. If GHG is a timed bomb and Michael believes, Michael is saved - a fantastic outcome. If GHG is a timed bomb, and Michael does not believe, Michael is doomed - a terrible outcome. Weighing these up, it clearly makes sense for Michael to choose to believe GHG is a timed bomb because the prize for being right is much greater and the cost of being wrong is much more appalling. As evidence mounts of our shared global challenges, I think we will make the same wager as Pascal and choose to take these challenges seriously and address them collaboratively. The prizes awaiting us if we succeed are glittering indeed, as the costs of failure are frightening to contemplate.

Jim,

You assert that “There is no business model in place that allows for such an entity to be incentivized to reduce energy usage. That's a big part of the problem,” and I disagree. EWPC is a market architecture and design paradigm shift that enables the development of business model innovations and growth as “Products and services will have incorporated new technologies and fewer materials and they will, therefore, have more value,” as Rafael asserts.

In both instances, my suggestion is to transform ourselves in a network of engaged individuals with an invitation to join a Global Citizens' Call to Arms.

Is extremely high-priced energy a clear-and-present danger? Yes. Will it crush economies? Yes. Will our children be worse off if we do nothing? Yes.

I think the longer range GHG problem (regardless of whether it’s real or not) can be easily addressed as an adjunct to solving the near term crisis - energy.

As to EWPC, I am having trouble understanding how it fosters phase-out of inefficient (and polluting) old generating plants. With no debt, these facilities are cash cows and it's easy to refurbish them (re-tubing old boilers is not hard and is obviously cheaper than building a new plant). How, exactly does EWPC phase them out? Remember, I’m engineer so I have trouble with complicated economic theory.

Call-to-arms? I'm in, where do I enlist?

This is not just for engineers, you need to get out of the box. Get the New York Times Bestseller "Collapse: how societies choose to fail or succed," by Jared Diamond. Maybe it is too late already to stop the collapse process fueled by GHG's.

Todays utilities and regulators are the drivers of the main barrier to progress in the current system. You wrote "Distributed power seems reasonable to me, so does renewable. Technology can cover the intermitency. ..While the big guys might object, they would get little sympathy. That's why they will lose in the end."

You enlist by making the following commitment: under the call to arms, old utilities would get little sympathy by separating the utility grid from the utilitiy enterprise and by getting regulators out price controls of customer's electricity purchases, Regulators retain T&D transportation tolls price controls under a utility compact with a responsibility to transport. EWPC levels de playing field and enables innovations and development of the resources in the demand side on the open market under prudential regulations.

Utilities are creatures of regulation; their managements do what is necessary to succeed profitably within the regulatory environment in which they operate. Changing the utilities can only realistically be accomplished by changing the regulatory environments. This must be done very carefully, to protect the $trillions invested in the current infrastructure by millions of US citizens; and, to protect the financial environment for the incremental investments which will be required to enhance the current infrastructure, so that it can reliably and efficiently gather power from remote, diverse and intermittent sources and deliver it to consumers.

Part of the new "utility compact with responsibility to transport" must be real cost plus profit pricing of service. Utilities cannot be expected to charge the same fee per kWh for transportation of power from 30% available sources as from 90% available sources of the same capacity, since return on investment would differ by a factor of three. Utilities also cannot be expected to bill consumers with on-site generation based on net power consumption, since the utility investment to connect and serve the consumer with generation is at least as high as the cost to connect a consumer without generation.

The most important steps in any process to change the regulatory compact must be a clear and consistent presentation of the new "rules of the game"; and, a clear and consistent presentation of the transition time line. Those steps establish the investment and operating environment for the future; and, they will determine the success or failure of the new regulatory compact.

California 2000 demonstrated quite clearly that new regulatory compacts need not always succeed. There is no need for a national-scale demonstration, just to be sure!

The power industry high fragmentation (thousands of utilities in 2000) is one of the sources of opportunity to introduce the communication paradigm of the third industrial revolution, where the demand side is the key to innovations. The utility enterprise side – the state regulated retailer – shifts to the open market under federal (and hopefully worldwide) jurisdiction to enable economies of scale and scope to introduce much needed consolidation. Today´s reality can be understood by a general agreement that "There are massive problems to be solved in the electric industry, costing massive amounts of money, and with very little time to do it," that is giving rise to the Global Citizens' Call to Arms.

The lesson that Dee Hock, CEO Emeritus VISA International, gave us: “Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior. Contrary to today’s highly complex rules, resulting from several incremental extensions of the vertically integrated utilities paradigm, the new “rules of the game” are truly simple.

It is well known that price controls are inefficient and lack transparency. Lack of transparency is one side of a coin, the other side being corruption. So the questions are always answered by those that control the political process, as debates get locked, and to get them unlocked the hierarchical force of the authorities is employed. Please read Slicing the Last of the Regulated Monopolies to learn more about how the California debate led the wrong way.Electricity Without Price Controls is a market architecture and design paradigm shift away from the VIUs paradigm based on “simple, clear purpose and principles,” as can be seen in the article Synthesis Proposal Agreement of EWPC. Under EWPC, questions are answered without getting into debates.

Also, I've sat in meetings with haughty Midwest Utility executives who were clearly putout that they had to sell into the market place. I suspect therein lies the rub with EWPC.

Over the years, I’ve noticed that municipal power invariably has lower cost power than private utilities. Also, I have observed that when muni's and privates are on the same playing field, the competition works out well for the consumer.

From what I can gather, Jose Antonio's EWPC will foster competition and I believe it is the way to go. However, "big government" advocates seem unable to let go. California was a pretty good example of "re-regulation" as opposed to deregulation. The PJM regional transmission operator looks like it sort of works, although rates are somewhat high in certain areas. I’m uneasy about allowing utilities to buy and sell themselves because I’ve seen the affects of the ensuing leveraged debt. Allowing the financiers to take control of utilities is a mistake. Utilities should be dedicated to supplying customer’s low-cost power.

EWPC is about returning the power industry to production capital from financial capital which loves to operate under uncertain rules. EWPC is designed for certainty of rules. The system operator is in charge of long (adequacy) and short run (security) systemic risk and regulation on the open market is prudential. EWPC is about low cost and/or high value power.

From my limited understanding of your proposed EWPC electricity market structure, to me it suggests that necessary investments in infrastructure and generation capacity would be made properly and in a timely manner, while at the same time electricity costs for all consumers would be minimized through true competition. Innovation by default would automatically happen for development and commercialization of new energy technologies purely from the enabled business competition of "second generation retailers".

Under normal business circumstances, I might agree with this if the second generation retailers were also technical innovators themselves. The innovation we see in other industries is usually done by companies who benefit from doing the R&D and then profit by commercializing read capitalizing on it. They don't do R&D for charity purposes, it is to eventually make a return with a profit on their investment. Capitalizing is the key word here because R&D and new innovation commercializing requires lots of money and in the case of our electricity system lots of lead time. The money for this activity is usually funded by profits and / or external investments of either private interests or governments.

For the electricity industry EWPC strongly implies that the second generation retailers would be responsible for directing profits and investments towards new generation, transmission, and conservation and efficiency technologies for consumers, while at the same time also plan the whole electricity system using accurate demand-side forecasting. The trouble is I doubt very much energy retailers would ever be capable of making these wide ranging R&D and system planning decisions themselves, or making timely investments in the infrastructure and in consumer energy conservation and efficiency technologies.

Minimizing costs to consumers is an admirable goal. But the electricity industry is not your typical economic sector because large investments are needed for building system infrastructure over long time frames, much longer than in most other sectors of the economy. Consumer energy conservation and efficiency technologies also involve whole other industries like automotive and appliance manufacturing. Putting it simply, for retailers to have the ability to make EWPC work, I suspect they would have to use profits over many years from consumers before realizing any substantial reductions to consumer cost or even a return on their investment. This strongly suggests consumer costs would INCREASE under EWPC in the short term to fund the profits required for the necessary R&D and investment.

If we succeed in this ambition one of the consequences will be reduced GHG emissions (by many believed to be of crucial importance in a geologically short term perspective – let us say the next one hundred years). But, let us for a moment just focus on the energy supply and demand equation.

Limiting weight could contribute to reduced energy needs – all other things being equal. But a more direct way of punishing high energy consumption is tax based on all energy consumption – whether in the form of direct electric power use, use of remote heating or cooling, or use of fuels. Since the problem is related to the dwindling fossil fuel resources it would seem logical to raise taxation on the use of non renewable resources (also including uranium), but reduce the tax on sustainable renewable resources. A child would understand this, but will our politicians have the guts to take the required action?

We all wish to keep our way of life, and we will all oppose ‘stupid’ politicians that try and force us to change our habits. Clever politicians would use both the carrot and the stick. They would not just force us to accept rather dramatic cost increases as a result of higher taxes on the use of fossil resources. They would sweeten the deal by offering financial support of buildings with low energy demands, and they would offer free or low cost public commuting services of excellent quality, and with all required flexibility and personal security.

If we look at mid range personal transportation we now see a very fast behavioural change in many countries. Who wants to wait for hours at the airline security checking stations, and who wants to drive a car on congested roads with the ever present threat of a speeding ticket (also no possibility to have a few beers or some wine when having lunch or dinner). Taking the train, sitting in comfort, being able to relax, or use the time to work on the PC, is just so much better. The only trouble is the transport to the train (solution – better public transportation and better taxi services).

Looking at goods transportation we still have some unsolved problems. Our society is now built on ‘just-in-time’ deliveries and we lack reliable alternatives to door-to-door deliveries via truck. But, with our present skills it should not really be much of a challenge to arrange new terminal systems securing fast and reliable longer distance transports via rail or ship, and including reliable urban deliveries via suitable urban truck fleets.

Leisure activities also involve transportation. We need the car to go shopping, to go to the marina, or to the golf course, and we want to be able to travel in comfort in a nice looking car boosting our personal image. Here we need a change of attitudes. It must become fashionable to drive vehicles with a high environmental rating (and I do not mean a Hummer driving on ethanol). The leading set in different social circles must be enticed to set an example by using vehicles identified as belonging to a recognized group of specially classified leisure vehicles offering very clear advantages concerning energy consumption and choice of fuel.

I'm not sure a utility (retailer) really requires large R&D expenditures in the normal sense. What they need is competition to be more efficient. Should they make investments to become more efficient? Sure, just like everybody else and just like everybody else they need to be smart about how they spend the money.

The large capital cost of new facilities requires funding, but again, competition needs to pick the lowest cost project. The Utility’s profit (return on their invested capital) should be tied to getting the facilities built quickly and in a cost effective fashion. If they fail, their profit (return on invested capital) gets smaller or evaporates. Seems fair to me. Why should they be guaranteed a profit?

A fly-in-the-ointment is unwarranted government intrusion in the process, invariably driving costs needlessly upward for everybody. The regulators are attempting to mimic competition, but I’m fairly certain that is not the lowest cost option.

Selling power into a regional market (common now) should work as long as it is set up properly. Utilities try to reduce costs because (1) other generators are in direct competition with them (2) they can make more money.

I think (but I’m not entirely sure) that is where EWPC is headed as far as electrical generation is concerned.

Consumers try to save money by reducing power consumption. However, I remain fuzzy as to who the consumer actually deals with under EWPC. Presumably, a contract would be made with Utility X for power at $”z”/mWh for some period. How the Utility pulls that off is irrelevant to the consumer. If he’s unhappy, he signs up with Utility Y.

Jose Antonio – is this more or less the idea?

This is a very detailed account up to September 30th, 2007. The EWPC article The Sixth Disruptive Technology explains that 2GRs innovations will concentrate in the development to integrate a mix of the other five to develop business model innovations. The other five technologies - demand response, distributed generation and storage, energy efficiency, AMI and the smart grid - are known but have no been tightly integrated to power system planning, operation and control, as needed to produce all the benefits expected. 2GRs operate at retail and wholesale. I recommend reading the article and the links to get an understanding of all the things that can be done to develop the resources of the demand side. The resources of supply side are already well developed. Much of the benefit of EWPC will not come just from low cost, but from customers receiving higher value from electricity.

This is the whole article that was posted. Some of the remarks have been updated later on.

A set of 6 disruptive technologies can be identified “To do a better job of managing our dwindling energy resources…” AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and will be tightly integrated by business model innovations - the sixth disruptive technology - developed by 2GRs into a systemic superior solution. The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency.

The Sixth Disruptive Technology 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.

Mr. Miller contribution, on the critical reality of AMI, helps further the case for Electricity Without Price Controls (EWPC), in unsuspected ways, “to do a better job of managing our dwindling energy resources,” as a set of 6 disruptive technologies emerge. AMI and the Smart Grid are the fourth and fifth disruptive technologies to allow a breakthrough paradigm of the power industry for the 21st Century, as the required technologies become available, and are tightly integrated into a systemic superior solution in the coming years.

The first three disruptive technologies are demand response, distributed generation and storage, and energy efficiency. Just like System Thinking in the Fifth Discipline contemplates the whole, the Sixth Disruptive Technology to be developed under competition by a new institution, the true competitive retailers, which I call Second Generation Retailer - 2GR (hit link here and further down to get more details) will contemplate the whole relationship with customers, by tightly integrating the other five disruptive technologies with their business model innovations. As Albert Einstein said: "Technological progress is like an axe in the hands of a pathological criminal."

My hero, the Swedish Uno Lamm and the father of HVDC, who won the Pacific Intertie Project for ASEA after facing a strong opposition by [the same] California IOUs [referred below], and later estimated to save customers more than a billion dollars a day, after negotiating a license agreement with General Electric is quoted saying something like this in an interview in 1988: “among Americans, when the heat of the combat ends and a decision has been arrived at, all the trouble disappears and the people work hard to implement the decision in the best way.” I strongly hope this will be the case of EWPC.

Mr. Len Gould has insisted against the idea of competitive retailers, ever since the beginning of downloads, debates, reflexive dialogues, and generative dialogues, that have occurred in the Energy Central Network environment. I am glad to submit to the general audience that the business model innovations that 2GR competitors should develop will be the sixth, and most important, disruptive technologies to integrate demand in power system planning, operation and control. Thanks to Mr. Gould once again for being such a great sounding board. I hope that all the trouble should disappear as the paradigm shift to EWPC gets underway.

I agree with just one exception the assessment Mr. Miller makes that reads “. . . the magnitude of the problem and the opportunity in addressing energy management requires a more expansive and advanced definition of AMI as the use of smart meters, with advanced two-way communication technologies, that enables utilities to:

0 Meet their business & operational needs for meter data collection

0 Empower all their customers to actively and frequently participate in demand response and energy conservation

0 Help move toward a smart grid

The exception is that the utility concept is obsolete. Under EWPC the commercial role utilities play is replaced 2GRs. The utility itself becomes just the wires only integrated transportation (T & D) system, which will have the center stage of the industry (I extended Dr. Richard Tabors, of MIT, idea of a center stage transmission utility). Private utilities will help avoid the inefficiencies of public officials in many jurisdictions.

The industry is poised once again to the competition virus, only this time we will know what we are doing. Instead of deregulating the industry under the principle Economy First, Reliability Second (E1R2), which led to large scams, competition will be introduced by re-regulation, under the principle of Reliability First, Economy Second (R1E2), which is the most economic for society as a whole.

My suggestion is that the open market should be under prudential regulations, with generation and retail becoming worldwide independent activities under WTO discipline, so global merger and acquisition activity won’t undermine a truly competitive industry (this is a good inside from deregulation scams).

The Economy First concept referred to above did not take into account all of the customers costs, but up to the meter, so a perverse incentive of price spikes led to low reliability, as power systems were operated close to capacity frequently. So the Economy First was good for scams. Incremental remedial action with NERC mandatory standards is insufficient and inefficient, as can be seen in NERC Compliance and Power Sector Structure.

The above difficulties are also explained in a different way by Jack A. Casazza, as the scrambled egg, that can’t be unscrambled. That would mean that The BIG California LIE was supposed to get away with a much larger scam than the Enron’s scam, as vested interests extended the obsolete VIUs paradigm well beyond its useful life, by tilting the competitive balance in an equilibria away from the best economic outcome for society. That is what is fueling a backward movement away from real retail liberation in Europe now. It is to the best equilibria that EWPC is concerned. As Einstein said; "We can't solve problems by using the same kind of thinking we used when we created them."

The Reliability First concept of EWPC, which I claimed to have discovered, preserves the aim of the regulatory compact of the VIUs, which is to plan, in this case the integrated transportation system itself, for maximum welfare of the whole. That said, the VIU that has demand as an externality, can be separated in two parts without any loss of generality, in order to improve the efficiency of the power sector as a whole by integrating demand: 1) an electric transportation system that interfaces with 2) the money system operating under an open market, with a value chain generation, retail, and customer.

The above idea, and what is to follow, has emerged, in the discussion with intelligent and important people without which it would have not result as fast and as cheaply, from the 2005 EnergyPulse [seminal] article An Alternative Business Case for Demand Response, where I wrote: “A new value chain is required in the power business for commercial activities, from generators and wholesale brokers, to competitive retailers, to end-users; while transmission and distribution monopolies are forbidden to interfere with those activities, charging a toll for their services. This is an essential element of the market design.”

To dig further into my discoveries (as you will see as leader-designer), in the same article, I also wrote:

Professor [Fred C.] Schweppe [of MIT] "envisioned a world of customer-based electrical generation and storage, "which has been happening in the Dominican Republic, for quite some time, missing only the Demand Response [DR] System and a truly competitive retail deregulation to fulfilled the dream of a country without blackouts. There is an example of the airline industry that will help explain the importance of DR. The DC-10 initiated commercial air travel at the time of the Great Depression, it happened when all required technologies became available, and were tightly integrated.

In that same sense, electric power systems will also “fly” reliably (a very low frequency and duration of crashes) and experience commercial quality electricity under complete deregulation, when Demand Response gets tightly integrated with AMI and other existing technologies under a proper market design. DR will enable the system to operate within the Normal Operating State, returning back as soon as possible from the Alert and Emergency States with Demand Response actions. This is poised to be the End-State of the electricity industry for the long run.

By the way, as I read the analogy of Peter Senge’s Fifth Discipline, once again, I see that I have been following unconsciously the section “Leader as Designer,” which I recommend to potential leaders in relation to what they think their role is, as Senge’s states that “it eclipses them all in importance. Yet, rarely does anyone think of it.” Well, I forgot about it, but kept thinking of it, without being fully aware! As Einstein said: "The secret to creativity is knowing how to hide your sources."

As I envisioned in my article, AMI technology is one of the key technologies to change demand as an externality forever. Demand integration will occur under a different paradigm breakthrough shift. The shift I discovered is retail competition and ultraquality transportation (see Synthesis Proposal Agreement of EWPC), which (I now articulate) should be tightly integrated by 2GRs business model innovations. Albert Einstein said: "Everything should be made as simple as possible, but not simpler" and "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."

So, a new generation of energy measurements is just one of the technologies to be integrated. The new utility will be a wires only utility in charge of transportation (T& D integrated) at every location under a federal regulatory compact, which by the way solves the federal state jurisdictional problems (see A Warning to the US Congress and the European Commission). The new Energy Policy Act of the US should definitely consider another New Deal restructuring, this time under EWPC. Europeans can do so easier, as their mandate calls for retail liberation to be implemented already.

Four days ago I wrote the article 2nd Disruptive Technology Crossed Chasm, and it should have been recognized energy efficiency as the 3rd Disruptive Technology to Cross the Chasm of Geoffrey Moore’s Technology-Adoption Life Cycle model, by decoupling sales and profits. So, we can certainly recognize from the article that AMI is a the 4th disruptive technology that have crossed the Chasm, as AMI seems to be in the process of leaving the Bowling Alley and entering the Tornado, while energy efficiency is the bowling alley at a few locations, although they are costly incremental shifts away from the VIUs paradigm.

The interface standards mentioned in the article should enable the separation of transportation and retail, which no longer will be regulated with price controls, as retail will be the subject of competition. As firmware downloads may differentiate 2GRs business plans, I am happy to recall the business case of a very low cost worldwide meter that I envisioned in my article a Dominican strategy, which was published in the May-June 2006 issue of the IEEE Power&Energy Magazine, just like they are doing for the US$100.00 laptop computer and the US$40.00 or so cellphone. Such low cost meter could be very promising for power service in the Bottom of the Pyramid.

By the way, it would be nice to know where the Smart Grid is in the Technology-Adoption Life Cycle model. I suspect it is already in the Early Market, and trying to cross the chasm. In the article Solving Smart Grid Cost Recovery are elements to help the smart grid cross it.

To get further details, readers could go the Electricity Without Price Controls Blog of the Energy Central Network, where another 22 articles already support the paradigm shift to EWPC. Even more complete is the Grupo Millennium Hispaniola blog, which already has more than 1,800 entries, and several articles, and presentations, in Spanish and English, most of which are about EWPC. All that information has been posted in the name of the progress of humanity.

To close my comments, I would like to suggest a very important activity. Next Year will be 10 years of the death of Professor Schweppe. I suggest a movement should be organized to go to MIT (readers should write letters to MIT management to make it possible) to give thanks for his great achievements in the name of humanity. As Einstein said: "Peace cannot be kept by force. It can only be achieved by understanding."

In addition, as I claim to have extended Schweppe’s regulated energy marketplace to become a competitive environment, I took the risk to write what seems to be an egotistic Conspiracy Theory Against Mr. X. I can’t deny it is egotistic, however, as those who were supposed to say that EWPC won the first phase of competition, I wrote it as a theory because I think is the fastest way to mitigate the negative influence that politicians have in the power industry. As Einstein said: "Weakness of attitude becomes weakness of character."

To further rationalize my attitude, if I didn’t make the above claim, it may happen that Lao-tzu (quoted from the Fifth Discipline) would be right once again, as “The bad leader is he who the people despise. The good leader is he who people praise. The great leader is he who the people say, “We did it ourselves.” My claim is not based on “either/or thinking.” but on the end of the “tyranny of the OR” and the embracing the “genius of the AND,” as Collins and Porras suggested in 1994. Einstein also said: "Common sense is the collection of prejudices acquired by age eighteen."

If after reading the above, you agree getting EWPC underway bypassing Casazza’s scrambled egg, and agree with the conclusion of suggesting me as a candidate for a Nobel Prize (I am told that only alive persons can be candidates) or agree with both, please by all means do so. The effect of the suggestions will send a strong message to governments across the world and especially to my loved Dominican Republic that has wasted for 11 years the opportunities to have electricity become our most precious country brand. Think of my contributions about EWPC as equations written with the input from other brilliant people, like all the thinkers quoted in my work so far and add the Einstein quote that says: "Equations are more important to me, because politics is for the present, but an equation is something for eternity."

Reference: The Critical Role of Advanced Metering Infrastructure in a World Demanding More Energy , by Eric Miller , Vice President, Itron Software Solutions.

I agree in prinicple utilities should not necessarily be guaranteed a profit too, but system reliability is viewed by the public, and by governments, as paramount. And this means I assume preventing utilities from failng financially if they must bear the cost of maintaining a reliable service. It would appear Jose's EWPC system might relieve this dilemma somehow, and since he has a lot to say about it, I clearly need to read it all again before I completely understand it.

Utilities in the US are not "guaranteed a profit".

Ed

Why include electricity use in this tax and then give it back to those who made non-fossil electricity? No government payback is ever close to the amount collected. Why does anyone really care how much electricity is used? Electricity use by itself doesn't cause pollution or any fossils to be used. It does directly contribute to economic growth though. It would seem better to just tax the use of fossil fuels and any other activity that directly do affect our crisises (importing oil, mining, emission release, etc.) I don't see any environmental cost to person A making way too much renewable electricity and person B using it to help the economy.

I won't argue about whether or not governments should be sending market signals, since they do all the time, nor whether or not a tax is the way to do it.

My problem is with the requirement for this proposed tax to be global. There is no vehicle to accomplish this. And clearly, no developing country is going to harm their economic growth/consumers incomes by doing it. So in the meantime, all that a carbon or weight tax in the developed economies would accomplish would be to further increase the cost of living/manufacturing for their employers/population, putting themselves at a further competitive disadvantage.

As has been pointed out in recent weeks, growth in China and India in the next two decades will have them emitting CO2 at a rate equal to the worlds emissions currently. So if every other nation went to 0 emissions, CO2 would continue to accumulate.

Not sure how a tax that is not equittably distributed will stop this.

All assuming we are not looking at global cooling as a more significant threat than warming.

Think about that again. Try explaining how a utility which is guaranteed a "profit", or even is guaranteed to cover its expenses, is required to file for bankruptcy protection. I realize that it fits with your pre-conceived notions to make the statement above, but the statement conflicts with reality.

Ed

My point was also that from the consumer's POV, the bankrupted utility just changed names and kept on running. The regulators made sure of that At no time did the odds change for other competing energy technologies to compete with them because those roadblocks stayed in place.

From the stockholders' point of view, things looked much different. I suspect that is true from the management's point of view as well.

I worked through a utility bankruptcy. Trust me, it was no fun for a department manager and employee/stockholder.

Would you have preferred that the utility shutdown? Would their other customers? Who would have benefited? Would the DG industry have been able to fill in?

I know you are not too impressed with some utility managements. I was not too impressed with some state regulatory commissions either. Generally, when the excrement hits the air moving device, there is plenty to go around.

Ed

However, would like to see the regulators significantly increase the penalties imposed on the miscreants who infest parts of Wall Street as they have created large numbers of bankruptcies.

Utilities do not make their decisions on their own; they have "help" from their regulators. In the case of PG&E, for example, the help came in the form of retail price caps, in an environment of rapidly rising wholesale prices. Had regulators permitted retail prices to rise as wholesale prices rose, demand would have been reduced, profits would have declined or disappeared, but losses would have been avoided and bankruptcy would have been unnecessary.

I don't disagree that utilities should be allowed to fail when the utilities make bad decisions. I don't agree that utilities should be allowed to fail when their regulators make bad decisions. The utility compact purportedly assures the utility the opportunity to make a reasonable profit if it operates intelligently. When that opportunity is "regulated" away, the compact has been breached, in my opinion.

Ed

Ed

Ed and Michael raise the important point that utilities may not always be necessarily properly managed or efficiently run, and may indeed make bad decisions under a regulatory environment. We certainly have this scenario in Ontario under heavy government regulation.

Regarding your EWPC marketing structure, in the other Energy Central article on America is Running Out of Electricity, I think Len Gould has a huge point... "2GR retailers without defined market incentives to take what actions you would like them to take, won't."

Consider also what you wrote Jose...

"Tam is right that “energy efficiency is far cheaper than any power technology and there is vast potential to increase efficiency in the US. . .” and elsewhere. But a cost efficient implementation cannot be done by regulatory mandates"

In your proposed EWPC, investing in CONSUMER energy efficiencies and conservation technologies will never be a profitable activity for an energy retailer, since by definition consumer energy efficiency and conservation enable consumers to use LESS energy. The competition between retailers you are proposing may perhaps encourage investment in themselves and in generation and distribution but only to maximize their own efficiencies, with the result being minimized lower energy prices for consumers. While this may be a respectable goal for the electricity industry interests, lower energy prices many argue will encourage some consumers to use MORE energy, not less.

The same argument applies to investing in distributed local generators that are owned by consumers or private interests. If I as a consumer want to build or purchase a solar thermal system or solar PV system to install and operate on my property, and then expect to sell any excess generation capacity back onto the grid in competition with retailers, it is ridiculous to think that retailers or anyone else in the electricity industry will be business motivated to invest in the equipment to commercialize this to consumers. Anyone who suggests they would be motivated is probably dreaming

In an electrical power growth scenario (or forced retirement of the "old inefficient" iron), the power company has a big incentive to go along with helping the consumers becoming more efficient. Significantly less risky strategy for the company and its stockholders than building a new plant. The "market" will cause the price of power to go up (more demand) -- you actually see this effect in the regional power markets right now. Part of the price increase could be diverted for some consumer efficiency improvements. Based on the historical record, entrepreneurs would build the new plants, provided regulators don't make it too risky of an adventure.

Under a declining market for power, price should go down and efficiency improvements should not need help from the utility. You actually do see lower prices in regions with softer demand/surplus capacity.

If the issue of global climate change goes away, will support for nuclear go too? If GCC advocates are exposed as misguided at best and self-seeking at worst, do we want to share the taint?

No, better to only offer solid justifications for new nuclear like economics and national security and local air pollution. These are clear issues that favor nuclear with much less controversy.

The current concern regarding global warming may cool; and, the currently dormant concern for global cooling may heat up; but, global climate change is so ubiquitous and all-encompassing (hurricanes, drought, deluge, etc.) that it will likely remain the "Holy Grail" for decades to come. How could the environmental community justify continuing to search, in the absence of the "Holy Grail"?

Eventually, someone might even make a movie about it.

Readers should be advised that EWPC is a paradigm shift away from today's paradigms. Such paradigm reconfiguration changes our believe's system. This is why an infinite set of questions can be made about EWPC, which can be limited if we concentrate on the essential elements (see Todd's question below). So, for an unbiased review of my earlier answers to Len's questions, I am supplying two instances where another reader intervened.

1) Please check Final: IMEUC not a Market Architecture and Design to see a response to Todd's statement on the second day of comments (8.22.07) under the article of the 1st link above: "Jose Antonio, I'm curious of your hangup with Len." Todd has offered what was a very difficult test:"I would enjoy it if you could itemize your proposal in very simple distinct items (no links) to clarify it."

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

After Len couldn't respond to Todd's standard, that would lead to the essence, he wrote "I've long lost patience, Jose. My published descriptions of IMEUC (see links above) are far more detailed than anything I've found on EWPC."

The itemize proposal of EWPC in very simple distinct items (no links) to clarify it "is the generic market model paradigm: retail competition with active demand and ultraquality transportation. That is the essence." That was part of a more complete response in the GMH article Solving the Tough Electric Power Market Problem.

2) Please read also comments under the article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill. You will see that on he writes that I have not answered 7 question, but then I answered the 11 questions mentioned above, one by one. You also will see how Jeff Presley offer himself as an imparcial person on the market vs. market competition, but later on went silent after my article IMEUC: Unreliable Service and Price Spikes. As we all know, silence is more eloquent than words!!!

I, for one, await your eloquence with great anticipation.

Independent Market for Every Utility Customer - Preliminary Business Case

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

With specific questions answered at

Independent Market for Every Utility Customer (IMEUC) Blog site

So, are there any outstanding questions? If so, please state. Otherwise, lets have some similar detail for open criticism on EWPC, or some of Don's anticipated "silence is more eloquent".

The problem is that we don't want "far more detailed" information. On the contrary, We want to learn the essence to satisfy Todd's very difficult test: "I would enjoy it if you could itemize your proposal in very simple distinct items (no links) to clarify it."

I then continued to request more details from you and you went off on a debate vs. generative dialogue rant. Personally, I think you and I have different definitions of a debate because my definition is one of a tactful, courteous conversation with the goal of a logical progression toward an end consensus. That seems to be what you wanted also. Either way, the result of this exchange was yet more links to follow towards more conversations with even more links. This not only is frustrating for your reader, it makes point-by-point issue debating (or generative dialoging?) impossible. Strike two.

Still not willing to just drop the issue and go uneducated in EWPC, I contacted you in private E-mail and made yet another offering that ended up going nowhere. In your defense, you did write:

"Yes, I am interested with your help, under a scheme that separates competition in two stages, as explained in many of my comments. The object is to come up with the emergent market architecture and design, which I suggested after a long term research and design work done by myself. As you may be aware by now, in the second stage, company vs company competition, 2GRs integrate active demand in the demand side by developing business model innovations. So, the second stage will have generators (supply) and retailers (demand) competing among themselves in the wholesale market, and retailers competing with retailers in the retail market. I think that's all that is needed is to enable such competition with a robust, complete and fully functional market in the first stage. In the discussion of the first stage, there many details that require a lot professional consulting effort. So, it is wise to concentrate just on the essentials items."

All I really got from that is that the first stage is not defined yet and you want to 'come up with it' and the second stage pits 2GRs against each other in competition to supply the retailers who also compete for sales. As Len repeatedly comments, I flat out fail to see how less electricity sales is incentivized to either group. When others voiced this same concern and your answer was either avoided or buried 3 links down, I came to the assumption that there was no answer yet. Conditional strike three.

I don't know your full intentions for such strong promotion of EWPC, but it sort of seems that you aren't trying to coordinate opinions to solve the problem as much as promote it as your idea, unchanged. I don't see any other reason to copywrite so many public comments. I hope I'm wrong but the evasive comments have killed my interest in this subject. Perhaps you can change that.

"...it is wise to concentrate just on the essentials items." They are the generic market model paradigm: retail competition with active demand and ultraquality transportation. That is the essence."

All of the articles writen on EWPC and all the comments are "holographic image[s] from a different perspective of the whole EWPC market architecture and design paradigm shift."

Power Markets Essential Requirements By José Antonio Vanderhorst-Silverio, Ph.D. Systemic Consultant: Electricity First posted in the GMH Blog, on March 5th, 2008. Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement. Thanks Todd for your post. We should forget the details, and focus just on the essence. In addition to the ultraquality requirement (not considered at the outset of deregulation), there are 8 possible discreet combinations of the following three variables. Every feasible paradigm (of the 16 possibilities many are just not feasible) needs to select a YES or a NO as an answer to make a paradigm shift. 1) Wholesale Competition: YES or NO; 2) Retail Competition: YES or NO; and 3) Active Demand: YES or NO. (Also not considered at the outset of deregulation.) In the essence of EWPC all four variable are YES. The combination of Active Demand and Ultraquality Transportation (retained by the closed transportation market) leads to the requirement of Demand Integration to power system planning, operation and control, which is accomplished by 2GRs while performing Retail Competition and Wholesale Competition (in the open market). Under vertical integration (fully regulated plans – Don’s paradigm) all three answers are NO. Ultraquality is a YES, but property of generation and transmission, as Inactive Demand is considered as an externality. The world changed making vertical integration unfeasible, and as a result we need to change policies, from Inactive Demand to Active Demand, as you explained on 1.15.08 in the excellent contribution that I named as An Undiscussed Elefant. Here again, to keep the ultraquality requirement leads to the need of Demand Integration by 2GRs. At the outset, restructuring had inactive demand and separate transmission and distribution, with distribution most of the time under the incumbent utility. Lack of an ultraquality requirement and active demand in the original restructuring market architecture and design made it unfeasible. Trying to fix the BIG flaws of the original restructuring has resulted in an inordinate increase in complexity (as many unneeded rules tied to earlier contractual and regulatory arrangements remain buried while giving unnecessary commercial rights) by adding costly incremental extensions of Capacity Markets (a feature of vertical integration), NERC mandatory requirements, recently Demand Integration, etc. That is an extremely destructive and uncertain method to get there. Since IMEUC has NO Retail Competition nor Ultraquality, and thus NO Demand Integration to power system planning, operation and control, it is just an incomplete and unfeasible proposition. The above is just another confirmation that EWPC is the winning market architecture and design paradigm. Should we keep wasting time and money fixing unfeasible propositions?

Power Markets Essential Requirements

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

First posted in the GMH Blog, on March 5th, 2008. Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

Thanks Todd for your post.

We should forget the details, and focus just on the essence.

In addition to the ultraquality requirement (not considered at the outset of deregulation), there are 8 possible discreet combinations of the following three variables. Every feasible paradigm (of the 16 possibilities many are just not feasible) needs to select a YES or a NO as an answer to make a paradigm shift.

1) Wholesale Competition: YES or NO 2) Retail Competition: YES or NO 3) Active Demand: YES or NO. (Also not considered at the outset of deregulation.)

In the essence of EWPC all four variable are YES. The combination of Active Demand and Ultraquality Transportation (retained by the closed transportation market) leads to the requirement of Demand Integration to power system planning, operation and control, which is accomplished by 2GRs while performing Retail Competition and Wholesale Competition (in the open market).

Under vertical integration (fully regulated plans – Don’s paradigm) all three answers are NO. Ultraquality is a YES, but property of generation and transmission, as Inactive Demand is considered as an externality. The world changed making vertical integration unfeasible, and as a result we need to change policies, from Inactive Demand to Active Demand, as you explained on 1.15.08 in the excellent contribution that I named as An Undiscussed Elefant. Here again, to keep the ultraquality requirement leads to the need of Demand Integration by 2GRs.

At the outset, restructuring had inactive demand and separate transmission and distribution, with distribution most of the time under the incumbent utility. Lack of an ultraquality requirement and active demand in the original restructuring market architecture and design made it unfeasible. Trying to fix the BIG flaws of the original restructuring has resulted in an inordinate increase in complexity (as many unneeded rules tied to earlier contractual and regulatory arrangements remain buried while giving unnecessary commercial rights) by adding costly incremental extensions of Capacity Markets (a feature of vertical integration), NERC mandatory requirements, recently Demand Integration, etc. That is an extremely destructive and uncertain method to get there.

Since IMEUC has NO Retail Competition nor Ultraquality, and thus NO Demand Integration to power system planning, operation and control, it is just an incomplete and unfeasible proposition.

The above is just another confirmation that EWPC is the winning market architecture and design paradigm. Should we keep wasting time and money fixing unfeasible propositions?

Two FALSE assertions in one sentence (you're improving).

1) IMEUC makes no statement about ultraquality relative T&D, and I can see no reason why it should or why EWPC does. What is the benefit? That decision belongs with each individual ultimate client of a particular regional T&D system. What may make sense regarding T&D reliability in New York city may not make sense in rural Pakistan. Designs which make sense for an Apollo moon rocket may not make sense for a low-volume-production agricultural tractor. Quality has to fit the market with consideration of all factors.

2) IMEUC depends HEAVILY on demand integration to manage quality of service to customers, that is the core of its entire design. Smart grid technology is integrated with a careful market design to allow realtime price to optionally substitute for your absolutely gold-plated T&D system when and if it provides much lower cost. The balance is continually adjusted by market forces.

Several others not worth covering.

Finally, how about giving us the details of what the market structure is which the EWPC 2GR retailers operate in? What specifically sets up their incentive to invest in demand management systems when the benefits largely accrue to their competitors? SPECIFICS please or nothing.

In general, EWPC can't work.

Retail competition. How exactly is that defined? I'm assuming it is the local distributor marketing their wares (electrical service) to their customers while trying to lure customers away from their competing companies. If this is true, the monopoly territories are gone and they are not selling based on quantity but rather quality of service. If Retail competition is trying to outsell the overall volume of their competition, then there is no incentive to conserve or break up monopolist territories. Both really make the case for separating the quantity (generators) from the quality (distributors).

Active Demand. Is Active Demand meant to only include some non-customer entity actually controlling DR equipment or does it also refer to a scenerio where a public price fluctuates relative to everyone's collective costs and demand simply responds without any hard feedback?

Retail competition replaces the monopoly retailer. Since distribution gets integrated with transmission, there is no longer an incumbent retailer that owns the wires and serves as a barrier to progress. Different from the state monopoly retailer, the competitive retailer should operate under a federal jurisdiction generating great incentives to develop business model innovations for market a related segments.

Active demand just means having means to offer demand reduction, generation and storage beyond the meter in sufficient quantities as to be important to power system planning, operation and control. Large demand side energy efficiency projects should be coordinated with transportation and generation expansion plans.

Let's keep on the essential requirements, which is all that is needed for the debate and dialogue of the market vs. market competition.

It is very important to agree that vertical integration is not in the market vs. market competition as it doesn’t have the capacity to respond cost effectively to Active Demand and Demand Integration. FERC and NERC are having a tough time on the requirements that are overextending the capability of the vertical integration paradigm.

Vertical integration has an ultraquality requirement and answers with a NO in each of the three other questions. As such, EWPC is the largest shift away from vertical integration that keeps an ultraquality requirement. As will be seen, IMEUC does not have the essential ultraquality requirement.

The ultraquality requirement satisfies the essential criterion disclosed by Fred Schweppe el al in the book “Spot Pricing of Electricity.” The criterion is "Utility Control, Operation and Planning: Consider the engineering requirements for controlling, operating and planning an electric power system."

In fact, ultraquality is a true and non-trivial requirement absolutely necessary that involves the concepts of system adequacy (long run – power system expansion planning - systemic risk of system failure) and system security (short run – power systems operations planning - systemic risk of system failure) that I understand goes well beyond our debate and dialogue, but that I have delved in the past in many earlier posts.

As the world has changed and Active Demand is waiting for the market barriers to be taken down, both system adequacy and system security will include Demand Integration to power system planning, operation, and control, activities that will be performed by 2GRs. System security plans, developed with security constraint unit commitment simulations at wholesale considering generation resources, need to be extended to consider also demand resources to perform Demand Integration.

IMEUC intends to use prices to balance supply and demand, but prices are non-trivial also. Jay Forrester, the Father of System Dynamics explains that “… supply and demand are not balanced by prices alone, as is commonly done in economic models. Inventories, backlogs, and delivery delays are the primary short-term balancing forces. Prices then change as a result of over or under supply of product”

From the system security plans, power system operators select from the all the generating units (inventory from generators) available the generating stock that is operate synchronized to the grid and under EWPC power system operators need also select from all the demand stock available to respond (inventory from 2GRs) the corresponding demand response stock to operate the power system at ultraquality (being able to manage effectively at all times, with the needed redundancy, potential backlogs and delivery delays).

BTW, how are 2G Retailers incented to invest in such systems under EWPC when the benefits accrue to their competition who does not so invest? And my otrher questions? (Again)

Once again, even oil markets don't "use prices to balance supply and demand, but prices are non-trivial also." Those markets operate according stocks and flows, which makes Jay Forrester as important as ever.

I am glad that Len pointed out that IMEUC is also technology dependent and based on a market prediction. That makes it a very risky proposition. PHEV depend on batteries that have a lot of difficulties associated with them, including economic (i.e. competition with other technologies), environmental issues, etc.

EWPC is very robust, because it is generation and storage technology neutral, from the supply side and the demand side. Markets should be allowed to determine what technologies will have the best chances, as it is impossible to predict the best technologies.

Under EWPC 2GRs make money on energy flows in both directions, but most of the money will come from information intensive technology investments at the federal market level. That money will come from increase the efficiency of customers’ investments and energy purchases and the coordination savings resulting lower wholesale market prices.

Instead of an obsolete, monopoly, and fixed business model, in which energy sales are linked to profits, 2GRs will develop business model innovations while integrating demand to power system planning, operation and control. The competition that doesn't invest in business model development, will take big risks in the retail and wholesale markets. At retail, customers will select the best business deals offered, which will be the result of business model innovations on every market segment. At wholesale, lack of business savvy will result in mistakes in customers aggregation parameters transaction costs risks.

During the transition, in which some customers might be still under price controls (served by those that don’t invest!), unlike customers without price controls, they should subject to direct control (interruptions!!!). No cross subsidies should be allowed between all customers on price controls and all those without price controls, including the potential cross subsidies related to interruptions of customers on price controls. This means that the idea of a monopoly service of metering infrastructure should not be allowed. Competitive 2GRs will need to install a standard hardware metering system, differentiating them with software and firmware downloads.

"...it is wise to concentrate just on the essentials items." They are the generic market model paradigm: retail competition with active demand and ultraquality transportation. That is the essence."

Still waiting for answers to the problems of EWPC, as posed above.

IMEUC is far more market-based than is EWPC. EWPC "apparently" turns the entire market over to a few priveleged 2GR retailers, and restricts all others from direct access to the actual suppliers. (How, by regulation perhaps? What do large industrials think of that? Another question which won't get answered.) IMEUC simply PROVIDES A MARKET, a free amd open marketplace where all ideas and developments can compete fairly at all levels. IF 2GR retailers are a good idea (??) then they will predominate under IMEUC. IF they can sell electricity to customers cheaper than the generating companies can, then they have the floor.

Thats IMEUC! Congratulations, you've seen the light!

Thank you for the correction. I didn’t invent that one. It is not one standard metering system; it is just one standard meter with only one hardware spec and many 2GRs that purchased them in the open market from multiple sources. Eventually it should get mass produced for the whole world at very low cost, so that customers at the Bottom of the Pyramid get electricity and credit for their response. IMEUC is one metering system for only one monopoly market manager.

Every 2GR will have their own private metering system as they develop their business model innovations, which will differentiate them with the software and firmware downloads.

"Given the near future connection of large numbers of PHEV battery chargers, eventually becoming grid-wise, eg. able to feed power back if the price gets high enough, that number is if anything, conservative..." is something that may just not occur. IMEUC is technology dependent. EWPC is dependent on what 2GRs do to implement their business model innovations, with whichever generating or storage technologies in the market.

Mission accomplished!!! This are comments received and responded under the article Power Markets Essential Requirements. Readers will find that the two assertions questioned, are certainly true: IMEUC has NO Ultraquality, and NO Demand Integration to power system planning, operation and control. Ultraquality is a system characteristic.The incentive system is spelled out clearly. While IMEUC is technology dependent, EWPC is technology neutral. A standard meter is needed for 2GR to develop their business model innovations. Nothing else is needed to reconfirm the winner in the market vs. market competition, this time based on the essential requirements: retail competition with active demand and ultraquality transportation.

Readers are advised to go over to the EWPC blog to make their comments known. I understand that we should not keep wasting time and money fixing unfeasible markets propositions.

Electricity customers in Pennsylvania and other states that restructured their power industry to create a more competitive market now pay more for electricity than consumers in noncompetitive states, a study released Tuesday concludes.

On average, power users in restructured states pay 2 to 3 cents per kilowatt hour more than customers in states that didn't restructure, according to "Electricity Prices and Costs Under Regulation and Restructuring," a study published by Carnegie Mellon University's Electricity Industry Center. A kilowatt hour is one kilowatt of power used in one hour.

"Were we surprised by the results -- absolutely," said Jay Apt, executive director of the center and one of the authors. "We didn't expect what we found."

The study's authors were the CMU center's co-director, Lester Lave; Apt; and Seth Blumsack, a Penn State assistant professor of energy policy and economics.

The study looks at what companies pay for power and what they charge their customers. The professors found that utilities in restructured states were in general more efficient and productive, getting the most from both man and machine.

"However, consumers are not seeing the benefit of gains through competition," Apt said.

The 39-page study is based on an examination of data from 71 utilities in 37 states that have and haven't restructured their power generation. Among the companies examined are Allegheny Energy Inc.'s power distribution units that do business as Allegheny Power.

While the study was funded by several utilities, including one of the largest regulated power companies in the country, Atlanta-based Southern Co., Apt said the CMU Electricity Industry Center receives funding from a variety of utilities, along with such groups as the Sloan and National Science foundations.

"We feel that it's still a little too early to give a final grade to restructuring when it hasn't run its course," said David Neurohr, a spokesman for Greensburg-based Allegheny Energy. "It took nearly 100 years for utilities to advance before restructuring, and restructuring only has been in place about 12 years."

Neurohr added that when restructuring was put in place, all utilities were placed under rate caps that, in his words, "were too low for most companies to compete."

"I admire companies like Allegheny (Energy) and Exelon (Corp., parent of PECO Electric in eastern Pennsylvania), who have managed to successfully navigate very hazardous, unregulated markets," Apt said.

Apt added that utilities in restructured markets such as Pennsylvania also have seen significant increases in their stock prices. Allegheny Energy in the last four years has seen its stock price jump 440 percent, from $12.03, to $64.99 on Dec. 21. Its stock closed Tuesday at $51.83, up $1.18.

Because the electric power industry is so capital intensive, Apt suggested that when a utility goes to Wall Street to borrow money to build a power plant, money lenders require stronger earnings from a company in a competitive market.

"That level of price markup might be the cost for added risk for operating in a restructured market," Apt said.

(c) 2008 Tribune-Review/Pittsburgh Tribune-Review. Provided by ProQuest Information and Learning. All rights Reserved.

Could it be that your paradigm has some unintended consequences?

That’s not the EWPC paradigm. That is a low system leverage intervention of the losing restructuring paradigm described above as:

"At the outset, restructuring had inactive demand and separate transmission and distribution, with distribution most of the time under the incumbent utility. Lack of an ultraquality requirement and active demand in the original restructuring market architecture and design made it unfeasible. Trying to fix the BIG flaws of the original restructuring has resulted in an inordinate increase in complexity (as many unneeded rules tied to earlier contractual and regulatory arrangements remain buried while giving unnecessary commercial rights) by adding costly incremental extensions of Capacity Markets (a feature of vertical integration), NERC mandatory requirements, recently Demand Integration, etc. That is an extremely destructive and uncertain method to get there."

EWPC is a high leverage system intervention that will empower the customers. Please read Utilities vs. Neelie Kroes for more details.

Sounds like greater uncertainty to me. As Apt would have it, "Because the electric power industry is so capital intensive, when a utility goes to Wall Street to borrow money to build a power plant, money lenders require stronger earnings from a company in a competitive market. That level of price markup might be the cost for added risk for operating in a restructured market."

Perhaps EWPC can bring that electric energy in at 4 to 6 cents per kilowatt hour more than in states that didn't restructure. Wonder if ratepayers subject to such leverage will feel that their social welfare has been maximized.

Please take a hard look at the GMH article Another EWPC Discovery where I show how uncertainty is larhely reduced in the power industry, based on the three power markets essential requirements.

EWPC will bring electric energy costs lower for customer precisely under those states that didn't restructure after a transition when stranded costs are paid out.

States that did restructured are more difficult (will take longer), if they have again significant new stranded costs to shift to EWPC.

Those states that restructure and don't have significant stranded costs to shift to EWPC can get lower costs faster for customers than states that didn't restructure.

The low leverage intervention is leading to a zero sum game where genarators are taking consumers for a ride. Aptly put, on page 25, “A natural question is this: if generators are earning higher revenues in the RTO auction markets, and if they have lowered their costs by becoming more efficient, where is the money going?” One explanation is provided by Bodmer (2006), who demonstrate that share prices of low-cost generators operating in restructured markets have increased dramatically since the late 1990s. Another explanation may be that generating firms are demanding higher returns in exchange for being forced to take on more risk. Given that our data set consists of distribution utilities that are still regulated in some fashion, it is perhaps difficult to square the risk explanation with our particular sample. A third possibility is that firms are able to exercise market power in ways that the RTO market monitors do not detect.”

Sounds like even greater risk, Jose. Looks like those liberated customers will be buying some pretty expensive kilowatt-hours. That is, if any are available!

I insist that IF the price I pay for electricity is to be determined in an unregulated market THEN I MUST HAVE ACCESS TO THAT MARKET MYSELF!! EWPC doesn't provide that, nor does the identical system currently operating in Ontario. (comperirive generation, regulated T&D, competitive retailers free to install as much load management as they are willing) Only IMEUC can provide that. Note that I did NOT say that IMEUC was my preference, see the IF which starts this paragraph.

1st) ENERGY PRICE CONTROLS

For decades now there are no price controls in fact. Even if we consider geographical areas, where regulators determine electric energy prices. In my consulting practice for industrial, commercial and institutional energy users it is fair to say that they are constantly monitoring energy prices and accordingly shifting to the most economical energy package. Let me give 3 examples:

From oil to electricity

A few years ago a major multi national company operating in the agro business sector accepted my suggestion to change from a fuel oil boiler to an electric boiler because at that specific point in time it was cheaper, due to available non-firm electric energy for that purpose. This energy user is a regulated one.

From electricity to oil

On-peak hours for the corporate world is far more expensive that off-peak. Depending on the regulations (time of use rates) using on site diesel gen sets are cheaper. Peaking power generation has become a very popular arrangement. A major IT company accepted this concept and is using for years now their diesel gen sets during on-peak hours, These gen sets were originally for emergences now they are a cost reduction tool! On-peak rates are twice the cost of the diesel gen set costs (fuel + operations + maintenance).

Cogeneration

As opposed to purchasing electric energy from the public grid to run a plant and fuel to run boilers and other thermal loads, developing a cogen project is a way to reduce costs.

These examples are very popular among corporate energy users around the globe - show a very interesting and intriguing reality:

* The end user´s perception is that regulators may set up rates but ultimately it is the energy user who decides what to pay because the name of the game is comparison!

* Regulators are not perfect. The may set up rates too high or too low. If it is a too high scenario energy users will find better options (on-site generation for instance) if it is too low they will replace their energy sources for electricity. If they are setting the rates exactly at the same price as the market would, these regulators would not be needed at all!

2nd) ENERGY PRICES

The current model (regulated or de-regulated) is not properly addressing the global warming challenge. It s fair to say that energy prices are inelastic. They have been for decades or even centuries! If we are to face the global warming threat we must find a new mechanism. The purpose of the tax on weight is to signalize a new pattern. Energy costs are small compared to most products and services. Even at US$ 100/barrel energy is still a minor cost for most products and services.

Tax on weight would signalize a new approach to designing products and services. Without this tax why should the supply side try to come up with energy efficient products? Or dou you expect that most of us would choose a better efficiency car just because we are concerned about the global waring threat?

Rats!!

On telling slide near the end, shows that of all PUC comissioners, 53% are lawyers and only 7% are businessmen. That sets my base objection to BAU regulation.

Len,

Len Gould: “'The Apt study result is certainly no surprise to me." But it happens that the article in the link is not the article referenced by Don.

Readers should hit the links found by “googling” IMEUC to make their own conclusions. That is going to turn out in a good boomerang hint!

Agree! Restructuring “. . .was CLEARLY designed only to benefit large industrial customers.”

Disagree on access! EWPC customers will have access to highly competitive retail markets. Most small customers everywhere access indirectly the wholesale markets by accessing retail markets. The economic reasons are most obvious and well understood by businesspeople.

Rafael,

From what you wrote, I understand that you are not concerned with the small customers that remain under price controls all over the place and that, believe it or not, are the source of a lot of risk management potential at much lower costs than most large customers. All customers large and small should be considered. When one does that, Brazil becomes a candidate for EWPC development. I will put your country back into the BRIC EWPC candidates.

Don,

The CMU Electricity Industry Center working paper can be said to have found that the low leverage restructuring interventions are a customer rip-off. Incremental improvements in generation are good, but can no longer be the source of a high leverage. In addition, those system interventions are restricted to states of the US, provinces of Canada, or countries of Europe. Restricting risk management on the supply side is very inefficient. Risk needs to be managed also at the demand side aiming to produce the best risk management mix, among customers, 2GRs and generators.

As provided by the EWPC market architecture paradigm, the source of a high leverage system intervention can only come from increasing returns by developing business model innovations, based on the third industrial revolution, which can initially be deployed in the larger federal market of the US, the whole of Canada, and the whole electricity market of the European Union or maybe surprisingly in one of the BRIC countries.

I am sorry to say that no numbers can be given before the innovations are developed. Recall that “EWPC is very robust, because it is generation and storage technology neutral, from the supply side and the demand side. Markets should be allowed to determine what technologies will have the best chances, as it is impossible to predict the best technologies.” What is needed is to level the playing field by taking down the barriers for the development of the resources of the demand side, so that risk can be managed in the best way.

Highly Suggested readings on the high leverage intervention:

Utilities vs. Neelie Kroes

Enabling AMI’s Growth

Innovation and Risk Taking in the Power Industry

A Warning to the US Congress and the European Commission

Using gen sets during on-peak hours, pre-packaged micro-cogeneration, electric boilers as well as other slutuions as mentioned in my above comment are applicable for "small" energy users as well.

Even for residential energy users that are not able to choose time of use rates the coments are applicable because they pay the highest regulated rates (low voltage rates). It facilitates alternatives because the current price is so high.

For example: cogeneration using natural gas driven microturbines is a solution that may make sense for selected small hotels and lodges. Getting hot water, steam and electricity from a micro-cogen unit is a clever way to reduce costs if the comparison is the low voltage public grid.

Even at my own home, because of the super high electricity regulated rates, I have retrofitted water heating from electricity to LNG with a substatial cost reduction. It used to be cheaper to heat water via electric energy!

The bottom line is, in my view: end users are discoverng that in spite of the heavy regulatoy environmente we live in, they have the right to choose the energy sources portfolio they want - they are free to choose anyway. They are free to contract what they want. They even may contract the local distribution company!

In my consulting practice I found out that what really matters is the state of mind of the decision maker. If this person is thinking as a "captive" energy user or as a free energy user solutions will be driven accordingly. It is the state of mind that mattters!

What you are proposing is a low leverage intervention of the development of Active Demand, in which all customers that can't justify those investments will need to pay more and more for the common infrastructure. I think that high electricity prices in Brazil have that process already under work.

One unintended result of your suggestion is the development of the very costly Everyone For Himself (EFH) market, instead of implementing a high leverage Demand Integration (of the Active Demand) to power system planning, operation and control, under EWPC via 2GR Retail Competition. I know that, because we already have in the Dominican Republic most probably the largest (in relative terms) and oldest EFG market in the world. That is one asset we have as a play ground to transform our EFG market into a vibrant high leverage EWPC development.

The worldwide electric power industry is overdue for a transformation with a high leverage system intervention to get into the third industrial revolution. Brazil has the opportunity to invest in the Dominican Republic to help develop EWPC. That opportunity is also available for the US, Canada, Europe and the other BRIC countries.

Which companies of those countries want to come over to bring electricity to the third industrial revolution and reap the benefits in their respective countries?

Just a quick remark on my phrase " it is the state of minmd that matters".

It is interesing to see how different companies react to the same given set of circumstances.

Sometimes I see that the upper management doesn´t care about the energy contracting options available and they are too scared to experiment.

Others are outraged by the hignh energy prices and they make it a special goal to find cheaper alternatives.

Accordingly, sometimes you will deal with very well informed industriial directors who are interested in learning in depth the otions, advantages and disadvantages, and of course the associated risks.

Sometimes the upper management is not interested at all and not willing to focus on this matter. They ask a lower ranked manager to take care of this issue.

In many cases I noticed that there is no enthusiasm to understand the heavy regulations vis-à-vis energy contracting from the public grid.

So many factors are at stake that each case is a peculiar one. It means that by far electric energy is not considered as a commodity.

The good news is that it becomes a fascinating challenge to discover and explore the energy options for each client. I would say that the human factior, by far is tihe most challenging factor.

I am not suggesting as you say "a low level of intervention".

I am only telling what clients face when they have at look at the existing conditions of the energy markets.

I do not create these conditions. As a consultant for energy users, I have to let the cleints understand their options, whatever they are in that given business environment. Regulated or not.

In this process I have discovered that energy users do not have adequate representation before the regulators and most ofetn than not they are not even interested in spending time and resources fighting for a better system.

Perhaps because of this lack of interest the supply side has become very strong, making heavy, expensive regulations happen.

It is amazing to see that this situation has become so "one sided" and for so long that energy prices skyrocketed opening new options for cheaper alternatives.

The bottom line in this cases is a huge transformation taking place. Energu users even under heavy regulatory envioronments are going for new options which ultimately come near to the free markets.

It is interesting! Perhaps because of these different regulatory enviironments we find around the globe, free to chose energy users may have different perceptions of what is a de-regulated market.

"Advocates say direct access allows customers to choose rates and services that help them compete and manage risks while developing a broad power market that can provide more options and lower prices for customers.

Opponents say expanded direct access could undermine the long-term stability needed for investments in the power system, shift costs from one group of customers to another and produce unintended consequences such as the failed deregulation."

Let's see. The last experiment cost CA ratepayers an extra $23 billion over a two year period. With a little luck or maybe pure EWPC, CPUC and company can double the extra cost of that travesty.

The mental models (the state of mind that matters) of most people are bias by the vertical integration paradigm, where demand is an externality to power system planning, operation and control. The “state of mind that matters” need to shift worldwide the EWPC paradigm to Integrate Demand.

The "huge transformation taking place" under ALL “state of mind that matters” is going to lead your country to the EFH market. It is as simple as that.

Don,

Thank you.

Please help the CPUC consider the EWPC article High Leverage Shake-Up in California.

Len,

Fair means are provided to each stakeholder in above article.

I am very happy that the article originated active discussions as well as a huge readership, (according to energypulse´s statistics).

It seems to me that there is room for active discussions about what do do from the energy users propsective in association with global warming. It might be appropriate to discuss how we could stimulate mankind to go for less use of energ, materials and accordingly emmissions.

Human behavior plays a very important role. In my consulting practice I see on a daily basis that decision making is well beyond technical, financial and management issues.

It is about perceptions and motivations most of the times! It may seem strange and weird but it took me about 20 years to recognize (as a narrow-minded electrical engineer!!!) that the human factor is so very important.

It means that we have a lot to discover. We have to explore this area: how to stimulate the human behavior in the right direction!

If it were "just" about regulated or de-regulated markets we would have examples in this world where there is adequate (low) use of energy, low emmissions, and high standards of living. As of now there are no developed countries to show it! Still it is true that high standard of living is bonded to high per capat energy consumption.

Thanks again and I hope that we will keep in touch!