Independent Market for Every Utility Customer - Preliminary Business Case

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

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

"At the same time, consumers expect higher quality power to operate the increasing number of digital devices that we amass each year. "

I see this oft-quoted issue as a red herring which should largely be ignored by system planners. For example, I carry in my shirt pocket a machine capable of doing all realtime data processing I need done (though it hasn't quite evolved to where id does YET). It's entirely battery operated and runs 12 hrs on a charge. Given a bit of development, it will eliminate my need to have a continuously powered desktop computer with super-reliable power supply. Planners should ignore "consumer electronics" requirements re. reliability and quality, thousands of electronics engineers are working on taking that one out of the discussion. Large business datacentres and unusual offices with special requirements are a special case and should / will deal with the issue internally with flow battery UPS's etc.

Level of Reliability should be simply a market factor purchased as needed just like Level of Power etc.

Ed Reid

Your article is an important input to an ongoing generative dialogue on the future of the power industry.

Improving on your fresh approach to peak managing, I suggest the EWPC article Well Beyond Low Reserves Managing, whose summary is:

NONE of today’s utilities should be allowed to take as inevitable a bare bones approach to increase efficiency, introducing a high leverage shake-up to the industry. Unlike traditional utilities, competitive Second Generation Retailers will have “end-to-end responsibility and be willing to have a stake in delivering results… ” to end-customers.

Your timely comments on the suggested improvement are expected.

As can be seen in the summary of the EWPC article Customer Reliability and System Reliability, “Demand Integration is based on the fact that reliability has two sides: ‘On one side, system crashes are mitigated by a least cost mix of supply and demand risk management tools that may be applied in time and space. On the other, DR is the key to the segmentation of customers supply security (a kind of insurance).’”

This summarizes the critical statements in this article because it insists utility companies need "partners" who can participate in both developing and running these new systems. But partners are by definition separate business entities who must make a profit from developing and providing products and services to a utility company and its customers on a continuous basis. Since these systems will involve providing in-home consumer technologies and services, it strongly implies higher billing rates to pay for them.

The consumer should therefore have and will demand a huge say in how the money should be spent on in-home technology and services. This is completely opposed however to the normal business practices of utility companies because they are normally free to dictate which partners in-home products and services will be provided to consumers - unless perhaps other energy market systems are adopted like IMEUC for example.

Agree utilities are monopolies and monopolies can dictate... It is the same as saying "NONE of today’s utilities should be allowed to take as inevitable a bare bones approach to increase efficiency, introducing a high leverage shake-up to the industry."

2GRs are not monopolies, they compete by developing business models, under the EWPC wining market architecture and design paradigm. Under EWPC, "The consumer [can] therefore have and will [have] a huge say in how the money should be spent on in-home technology and services." That is how the high leverage approach is obtained.

It is very clear now that IMEUC as a market proposition doesn't fulfill the Demand Integration and Ultraquality essential requirement that are needed. The expected result of IMEUC adoption will then be a low leverage intervention.

Almost TWO YEARS AGO, on 4.6.06 under the EnergyPulse article What a surprise: Prices move both ways, I wrote, “What the economists did was the contrary as proposed by Schweppe et al. … ” Instead of developing a marketplace that sent price signals to end customers, so that customers would response to prices in the long run thru energy efficiency and in the short run with demand responsiveness, they kept an irresponsive retail mass market with the invention of open transmission access. The result has been markets that exacerbate fuel volatility instead of mitigating it. Markets that kept the perverse incentive (as sales volume increases, utilities earn more) on the retail market against energy efficiency and demand response.”

In the article “Let the Market Decide” in Ohio, I wrote: “To demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy” is a tall order, exactly what the late Donella Meadows suggested . . . in 2001, and that have inspired (together with other insights) the breakthrough paradigm shift to EWPC market architecture and design. EWPC turns around 180 degrees the industry away from the perverse incentives against energy efficiency, by completely letting the market decide effectively.

So it is very clear that price signals are not just short-run real-time price signals. There are also hourly, daily, weekly, and long-run signals. Many customers prefer not to respond to either. So, we may have many market segments, only one of which will have incentives to respond in real-time. The market mix will of course shift as time goes by.

The incentive question was also addressed on the EWPC article No Need for Regulated Price Caps - II: ending in “… a systemic incentive to non-free riders will result, as they get the pressure for efficient prices and efficient choices. So, if only one or two retailers are truly competitive (2GRs), they will end up with the whole market.

In the EWPC article IMEUC: Unreliable Service and Price Spikes, I wrote that “Under EWPC, there is no Disco retailer, nor cherry picking, as 2GRs compete with each other. 2GRs have incentives to innovate – by developing business model innovations - to maximize value, minimize costs, or both, for individual customers, and, as a group, have the potential to maximize social welfare, something IMEUC cannot do. . .”

It is intuitive that real-time prices should govern incentives for advanced in-home technology for all customers. But, the incentives for a large share of responsive demand can be estimated well ahead of real-time, leaving just a market segment for real-time balancing which may have been already negotiated by retailers. That is how there are incentives for investing in energy efficiency, as well as incentives for week ahead, day ahead and hour ahead demand response markets segments. Second Generation Retailers will develop a mix to address those segments. Those incentives are very easy to estimate as the difference between having responsive demand or not.

In the EWPC article The World Shouldn’t be Running Out of Electricity, I wrote that “2GRs do not have those perverse [utilities] incentives as they offer customers no just low costs, but even more so, high value propositions to stay in business by developing information intensive business model innovations. The whole point is that customers will be able to invest in long term projects in coordination with the long term development of the power system, while 2GRs integrate demand to power system planning, operations and control, as well as compete among themselves and generators in the wholesale market by aggregating their retail portfolios.” One of the many optional customers’ investments will be on the physical in-home technology that best fits to the home and that satisfies the standards for such installations.

Along comes the "Information Age". Management best practice changes for everyone in an information enabled environment. Suddenly concepts like JIT, ABA, LEAN, etc become the new competitive norm. As a regulated business segment the GRID is not an early adopter. The industry concern is not how to deliver value to the community but rather how to protect the competitive position of the Utility and how to appropriate value that is created by the change. Hence Ed's "Nice Commercial".

The main thing that the smart grid requires is the ability to have near real time communication. Everything else can be addressed multiple ways.

As with any regulated monopoly the end user has little to say in what happens. The only way that you can measure success is if the value (cost of living, quality of life, service level) to an average consumer improves or declines after implementation. As regulated infrastructure the change should be value neutral to the Utility. If their value position improves then the value is coming out of the consumers pocket.

I have yet to see an energy improvement program that wasn’t more value friendly to the purveyor than it was to the consumer.

Although I though the article was well written I was unable to discern anything "Fresh"

I'd be interested in the author pointing out the "Fresh" items

The FRESH approach is in the breakthrough EWPC market architecture and design paradigm shift. "NONE of today’s utilities should be allowed to take as inevitable a bare bones approach to increase efficiency, introducing [EWPC for] a high leverage shake-up to the industry."

Quoting Donna Karlin, "... Breakthrough.. It's very different than making small changes... that might or might not be sustainable; it's the tipping point that shifts paradigms permanently. It changes the way you process thought, the way you tackle something and interact, deal with issues, lead others,... it's all of it. You will never be the same or 'go back' because the fundamental way you think will come from a different place altogether."

The utilities paradigm comes from demand as an externality (inactive demand and no competition). EWPC comes from - a different place altogether - Demand Integration (which come from Active Demand and Retail Competition) to power system planning, operation and control.

I'm alternating between scepticism and total disbelief. Is this what you consider an answer to "What provides EWPC 2GR retailers incentive to implement costly efficiency and demand management programs when their obvious incentive is to sell more rather than less" ?

Not only typically fuzzy, as is all of EWPC, but wrong, UNLESS THE 2GR RETAILERS ARE LEGISLATED TO IT.

And what about the "FREE RIDER" problem among your 2GR retailers? (eg. why should 2GR Retailer A invest in demand management systems when most of the benefits will accrue to his competition?) How exactly do you bend present anti-monopoly laws to allow sufficient collusion to overcome that one? (or in fact these two).

What you call fuzzy, showed very clearly with a few examples that incentives is not a new issue. In fact it is being dealt for the past TWO YEARS.

"Costly efficiency and demand management" business model innovations software and firmware development have great economies of scale in the federal and world markets.

The Free rider issue was already responded in the EWPC “No Need for Regulated Price Caps – II,” concluding...- I repeat from above that -. “… a systemic incentive to non-free riders will result, as they get the pressure for efficient prices and efficient choices. So, if only one or two retailers are truly competitive (2GRs), they will end up with the whole market."

The two retailers was what you initially wrote to trying to minimize EWPC. Just like in the banking system, retail is an open market competitive activity that operates under prudential regulations. Much more than two will develop initially. My recomendation is that those prudential regulations should be worldwide regulations.

Leaders have enough information about EWPC to make a decision on the FRESH breakthrough approach. The U.S. is having great difficulties on their financial markets, because they forgot to follow on the systemic risks fundamentals. Just like all other markets, there are implementations difficulties. EWPC is a very good, simple, and familiar market, with well defined systemic risks fundamentals.

I am very sorry to say that IMEUC just doesn't classify, by among many other flaws, not having the required systemic risk fundamentals.

And Jose, as usual your much-hyped and oft-used "I won't answer that here because the answer is over at this other link" only works IF THE ANSWER IS OVER THERE, which agian in this case it is NOT. I realize you're depending on that to snow the people unprepared to hunt the link down, but I'm actually interested in your answer. WHEN?

... “The design of default service (also called basic or standard service or provider of last resort) was identified as the most significant determinant of the success of retail electricity choice. A poorly designed default service undermines competition. If default service is designed to satisfy all residential consumers’ needs, or if it bundles and spreads risks among all consumers, or if it is priced below market, then it is unlikely that new retail electricity providers will enter the market. With few choices, consumers are left with only the poorly designed default service, and with limited benefit.”

During such a transition, 2GRs will have both types of customers (as there is no incumbent retailer), with increasing development of the resources of the demand side, as the default service will have essentially all the “free riders” being subsidized by peers. Hence, a systemic incentive to non-free riders will result, as they get the pressure for efficient prices and efficient choices. So, if only one or two retailers are truly competitive (2GRs), they will end up with the whole market.

And Jose, as usual your much-hyped and oft-used "I won't answer that here because the answer is over at this other link" only works IF THE ANSWER IS OVER THERE, which agian in this case it is NOT. I realize you're depending on that to snow the people unprepared to hunt the link down, but I'm actually interested in your answer. WHEN?"

As an example of above. I invite readers to read the blog entry Jose Antonio refers to above, and evaluate in what way it constitutes an answer to my "Free Rider Problem in EWPC" question (NOT), at No Need for Regulated Price Caps - II."

Now it is very clear that the my “assumption ‘the default service will have essentially all the free riders being subsidized by peers.’" was available, right where I said, in the link of just mentioned EWPC article.

Those 1GRs, the ones that "wait for their competition [2GRs] to spend money on demand management," will have no aggregated demand response wholesale economic transactions and will have to bear large payments to reserve generators and 2GRs with business model innovations in the respective market segments. Maybe I forgot to explain that very important incentive to 2GRs.

With respect to systemic risk, the analogy to the financial industry was just an analogy. I am taking about the lack of IMEUC for power system long run and short run systemic risk.

By the way, my recent response to Don Giegler under the article The Good, the Bad and the Ugly II applies much more to you than to him, especially with respect to your black and white perceptions of the world. This time, please hit the link!

I interpret your EWPC market proposal from many of your discussions on this website with Len Gould and others that a "running reserve" would not be needed because of "demand integration" with "power system planning". In my limited knowledge of your terminology, I assume "running reserve" means standby generation capacity to handle peak demands with some extra for safety margin.

If demand integration is supposed to eliminate the need for a running reserve, it implies that the system planning must have knowledge of demand in the near and distant futures. I submit that this is impossible because a huge portion of residential demand by consumers is DISCRECTIONARY power use.

For example the power system has no technological way to predict when I am going to switch some appliance on, nor does it have any technological way to predict when I am going to add a new appliance to my residence that will increase my energy usage from that point in time onwards. If the system must always give consumers the freedom to use power on demand whenever they choose, then there is no way for demand integration with system planning to possibly work in EWPC.

Even if demand response technology were implemented throughout the whole population, in order to be effective the power system would have to control it to guarantee load shedding in some consumers to respond to increased demands from others. This scenario would never be allowed by most consumers on a widespread scale because power is purchased with consumer's money that ultimately pays for the system, and the public would never allow power to be doled out in a bread line for those who need it most.

The only plausible way for the power system to optimize their efficiency and minimize costs is by engaging and incenting the consumer with technology and clever pricing incentives, not by controlling the consumer. And the only practical way to engage the consumer in any system that must respond to discretionary demands in real time is for the consumer to use their smart meter - first as a traditional billing meter and then as a (nearly) real-time communication link to the power system and its companies. Reading Len Gould's IMEUC proposed system, it is the only scheme I've read about that even comes close to doing this.

Your interpretation of "running reserve" is way off.

Please hit the link on my 3.17.08 post above to get to the EWPC article on "Customer Relaibility and System Reliability," read it very slowly. While at it, don't forget to read my one and only EnergyPulse article. Then change your post please.

Thanks

A few hints. You need to think probabilistically (I know that no many people are skilled to do it). That is how "a least cost mix of supply and demand risk management tools that may be applied in time and space." result in an optimal size of rotating reserves that satisfy what the aggregation of customers selected service plans. Forget the idea that of the obligation to serve. Things are not black and white.

Above you wrote “The consumer should therefore have and will demand a huge say in how the money should be spent on in-home technology and services. This is completely opposed however to the normal business practices of utility companies because they are normally free to dictate which partners in-home products and services will be provided to consumers…” and I agree with you.

In the EWPC article PCT One of Many Business Model Innovations, I quoted that “Bowing to public pressure, the California Energy Commission has removed its proposed mandate for utility-controlled thermostats from its 2008 energy efficiency building code.” That is an example that the regulator can’t impose one single system to all customers.

Since the regulated utility enterprise is a monopoly, it is unable to satisfy individual customers whom have different perceptions and “have and will demand a huge say in how the money should be spent on in-home technology and services.” The solution for that is to replace the utility monopoly with alternate providers with their corresponding business model. That is what EWPC provides: a technology neutral market architecture and design.

I don’t understand your position. The “normal business practices of utility companies” – their business model - is to earn a return by winning rate cases to the regulator. Do you want to keep the utilities as a monopoly or do you want that they separate the utility grid from the utility enterprise, introducing competitive retailers that replace the utility enterprise? I need your response to this key issue before anything else.

I read your blog post link from 03.17.2008 and there is no mention of what "running reserver" is. The intented goals of you EWPC system are admirable but I cannot see or understand how it would achieve it.

Len Gould's proposed IMEUC market system article, archived on this website, specifically describes a system where the consumer would have ownership of his billing meter and its communication software that links it to electricity industry companies, and is the only way I can see that would revolutionize the industry. As long as we have the present system of utility owned meters, there is no practical way to change the present system because only one utility will have access to and control over a consumer's energy use data.

The smart meters that are now emerging in the utility industry typically all employ proprietary radio networks to communicate with the utility company. These radio networks have built-in security features such that any other party attempting to develop consumer demand response technology or any other in-home devices must be given access to their meter networks by the utility company that owns the meter, and especially by the smart meter manufacturer who makes it. Without this access, meaning without a commercial agreement and intimate technical support, it is virtually impossible for any private enterprise to develop and commercialize new itechnologies that integrate with the new smart meters.

Your EWPC market proposal may have good intentions, but the meter manufacturers and utility companies who own their meters will NEVER relinquish control over who gets access to their meter systems and its data as long as they pay for and own the meters. IMEUC addresses this problem directly, but EWPC makes absolutely no mention of how to adress this.

I disagree with both parts of your statement that "IMEUC addresses this problem directly, but EWPC makes absolutely no mention of how to adress this."

NEVER is a great wish. “. . . utility companies who own their meters will NEVER relinquish control over who gets access to their meter systems and its data as long as they pay for and own the meters.” Well, what is needed is that 2GRs own and pay for the meters.

Back in 2005, in the EnergyPulse article Energy Bill 2005 - A Waste of Time?, the author Amatsia Kashti, wrote “But more importantly, this is the first time that metering is taken out of the hands of the utilities, its traditional operators. . .”

In response to that, Len wrote in 2005 that “Smart meters should be taken away from the distribution entity [the utility] and set up as a separate monopoly for each distribution region, which should then operate an electronic energy market to which the meters communicate . . .” But, ". . . utility companies who own their meters will NEVER relinquish control over who gets access to their meter systems and its data as long as they pay for and own the meters.” Bob, is that what you understood?

In that same article, I disagreed it should be a monopoly and showed that Energy Bill 2005 was not a Waste of Time, by saying that “Dr. Kashti analisys should be completed by including the Demand Response part of the bill and to look at other benefits that an AMI infrastructure will bring to the business case for such enlarged service. . . that will lead to the End-State of the electricity industry requires a true retail deregulation [now re-regulation], where retailers compete with each other, and where as Dr Kashti says 'metering is taken out of the hands of the' distributors (utilities that will then simply transport electricity to end users).”

My last comment in Dr. Kashti’s article led to Warren causey’s article Strategic Perspectives on Utility Enterprise Solutions, under which I posted a comment that replaces the utilities by retailers (now 2GRs) in the metering function “. . . instead of Utilities Enterprise Solutions, a Retailers Enterprise Solutions arrives, which will make much more business for IT suppliers than expected under the Continuity Scenario. The main reason is that current business models are at the end of there useful life, while new technology is available to be transformed into competing innovative business models, leading to true deregulation [later on I change that to re-regulation] of electric markets.” Searching, I found that you made a post under the article The Future Utility Customer Service Model, back on 2.13.07, that mentioned repeated that quote.

Under EWPC, the utility doesn’t own the meter. The utility as we know evolves into a wires only transportation only utility. As the regulated utility enterprise – the retail arm of the utility – shifts to 2GRs in the open market, they own the meters as part of their Retailers Enterprise Solutions.

Please take a look at the EWPC article Missing From Gridwise and especially my first comment. It may help you support EWPC.

Your EWPC proposal requires the separation of the "Utility Grid" from the "Utility Enterprise". What you are suggesting is all the wires, transformers, and all the other distribution infrastructure be removed from the ownership of the exisitng Utility companies. Good luck without governments forcing this to happen, since much of it is paid for and owned by the utility companies already. You cannot simply just confiscate it all from them without compensating them for it financially.

Even worse, much of the new smart meters and their infrastructure that many large utilitiy companies all over North America are now buying is being purchased with borrowed money from banks. Do you think for a minute that the lenders will tolerate their loans being pulled away from the borrowers ? Who would assume the liabilities for all these debts ? There would have to be massive government intervention in the banking industry to effect such a change, because banks require their loans to have designated ownership and responsibility for paying them back.

I really suspect your EWPC proposal is a pipe dream at best.

After many, many, interchanges with me, you truly have surprised me this time, as apparently not having understood what EWPC is all about. Please recall the EWPC article Innovation and Risk Taking in the Power Industry (notice that you should also have seen the EWPC article K2007 Retailers’ Enterprise Solutions), which started like this:

Kevin and Bob,

Kevin’s article is a welcome contribution on the future of the electricity industry. Bob's comment reflects the difficulties of utility monopolies to innovate and for regulators unable to take on technology risks. My comment will show a necessary shift on the utility of the future to become just a transportation utility. As can be seen, I am taking the opportunity to integrate a few of EWPC articles to show how to create value by introducing innovations and risk taking to the electricity industry after making a necessary paradigm shift.”

Sooner or later the utilities will be restructured in the U.S. (please see High Leverage Shake-Up in California), Canada, Europe (please see Utilities vs. Neelie Kroes), the BRIC countries and elsewhere. When that happens, the immense value destruction the utilities will have caused will be born by their societies, which will by then be way behind centered on the low leverage monopoly intervention that keeps intact the obsolete utility business model of winning rate cases to the regulator.

It is in the best interest of stakeholders to go for breakthrough value creation with the open development of the resources of the demand side, by introducing all sorts of innovations around the industry as the GridWise Architectural Council enhanced with EWPC provides (this time please see slowly the EWPC article Missing From Gridwise). If you are really interested in developing high leverage solutions, instead of just disputing, I think you should also go back and follow all of my recent articles after the high leverage shake-up article (I guess you already saw the words “pipe dream” in one of the comments) in the EWPC Blog to get up to date.

You are correct that the only places I have written "running reserve" in EnergyPulse have been quoting Len and you. However, I suggested that you read it slowly because the idea behind it is contained is the probabilistic term "traditional "LOLP" supply side risk management." So the whole expression "DR is poised to be the demand side risk management tool to complement the traditional "LOLP" supply side risk management tool," means that some of the "rotating" (that is what most engineers used instead of ‘running’) reserves are supplied by demand response to complement generation "rotating" reserves. As demand response penetration increases (as a result of customers’ perceptions of benefits from incentives given), rotating reserves decreases. That is why I wrote the EWPC article Well Beyond Low Reserves Managing in response to the author’s article.

Finally, If you don’t understand something, don’t hesitate to ask.

Perhaps one or two articles definitively detailing entirely whatever it is you call EWPC, as Todd requested long ago, would clarify things for many of us, and avoid the necessity for you to continually reference blog postings and comments dispersed all about the net. Providing endless links to fragments of ideas which may or may not be relevant to an issue in question is a poor way to define a market system.

Everyone is awaiting your third article.

The author Gary Paul states the key issue in this article: "Make smart metering programs the foundation of Smart Grid or Intelligent Network initiatives by looking beyond the meter-to-cash process to generate value for all participants in the electrical energy market (including generators, system operators, transmission and distribution service providers, retailers, energy service companies, consumers, regulators and legislators)."

The smart meter and what it has the potential to do with communication links to other technologies and power industry players is the key, and is at the heart of your IMEUC proposal.

Bob Amorosi, M.Eng.

Thanks to both Bob and Len,

I know very well that my post "Everyone is awaiting your third article" was completely unnecessary if I had taken the good side of Len post, which I didn’t. Reading closely with a positive mind, giving him the benefit of the doubt would thoght that he had accepted that IMEUC is long gone; so, asking Len to write that 3rd article was a negative reaction to his post that I understood as a discussant.

Now, I have changed that opinion, and have taken only the positive elements on his post this time and will try to work out as if he and Bob were cooperating on a generative dialogue that supports EWPC as an emergent paradigm. Please take this as the draft of the article Len asked for, with no links at all. Please help simplify it, no complicate it.

What we need is clarity and direction to support EWPC in the market vs. market competition. EWPC has emerged with the help of both discussant and people interested in the generative dialogue. It has emerged for a world where demand is no longer an externality and there is a need for a power system that should operate at ultraquality, with the help of demand response, in a wholesale, retail, customer value chain.

The essence of my response to Todd is "the generic market model paradigm: retail competition with active demand and ultraquality transportation" is unchanged since it was issued July 7th, 2007. It supposed to be obvious the generic model includes wholesale competition, as 2GRs link both markets.

The articles just support that essence. As I wrote earlier, "I believe that every article can be though of as a holographic image from a different perspective of the whole EWPC market architecture and design paradigm shift." There is no need for more articles to get to that result, if we now considered that essence as the basics for the breakthrough. What is needed now is that I concentrate on finalizing the EWPC Book.

Repeating the quote of Donna Karlin, "... Breakthrough.. It's very different than making small changes... that might or might not be sustainable; it's the tipping point that shifts paradigms permanently. It changes the way you process thought, the way you tackle something and interact, deal with issues, lead others,... it's all of it. You will never be the same or 'go back' because the fundamental way you think will come from a different place altogether . . . breakthrough is "... the epitome of the 'AHHA!' moment bringing absolute clarity and direction." Such clarity and direction comes to the power industry for both the open market and the closed transportation market [the new utility, with a responsibility to transport] in the essential requirements of Active Demand, Retail Competition, Demand Integration, and Ultraquality Transportation."

The utilities paradigm (with a responsibility to serve) comes from demand as an externality (inactive demand and no competition). EWPC comes from - a different place altogether - Demand Integration (which come from Active Demand and Retail Competition) to power system planning, operation and control.

"Demand Integration" as you define it means "active demand" that is no longer an "externality" to the existing utility company structures. For demand to lose its externality character it must therefore become INTERNAL to the power system, and thus directly affect power system planning, operation, and control. This is admittedly crucial to what you are suggesting in your EWPC proposal

If the existing utility paradigm views customer demand information as an externality, it means to me it is an external variable that utility companies do not or cannot actively monitor or feed back into the system. I think this is the correct interpretation of your wording.

To make it the opposite of an externality means the power system and its players, however they may be organized in some new paradigm, must use past, present, and future customer demand information. Retail competition I would assume would give consumers choice of who to buy power from. Nice end goals, but the question is how does one use past, present, and future customer demand information.

The answer is by using the customer's billing smart meter for real-time data communication with power system players and in-home demand response and energy monitoring technologies, all in addition to as the traditional billing mechanism. The only way I see this happening is if the consumer has real-time access to consumption data in the meter, and data from the power system, to be able to configure how it communicates with power system players (whether they be retailers, generators, or whoever), and how it communicates with their in-home technologies. Len Gould's IMEUC is the only system proposal I have seen that specifically says this is how smart meters should be designed and used by the consumer.

I find your post as that of a discussant that is defending a utility monopoly. However, I will answer as if you were an innovator cooperating in a generative dialogue to have your system as part of the business model of a 2GR market competitor.

"If the existing utility paradigm views customer demand information as an externality, it means to me it is an external variable that utility companies do not or cannot actively monitor or feed back into the system" is NOT the correct interpretation of [my] wording."

The utility paradigm is the Old vertically integrated utility paradigm, without many of the incremental extensions done since the 70s, which still has a business model of winning rate cases to the regulator. Today, that paradigm is very fat with many unnecessary rules, things and activities that make the addition of new technology a low leverage proposition.

With their Retailers’ Enterprise Solutions, 2GRs will also execute those non-fat activities performed by the traditional utility enterprise that are required and the many more needed for the competitive environment included in the business model innovations that integrate in-home technology, AMI, etc. Competitive 2GRs will develop (with help from their partners) their business models to integrate demand (think that it is at the wholesale market) to power system planning, operation and control. EWPC is technology neutral, and as such can house all hardware/software/firmware propositions in a competitive environment.

2GRs will take risks with their short run and long run planning forecasts, based on the information they get from their customers. The procedures of power system security, known today as security constraint [generating] unit commitment (2GRs will offer their forecast info for the demand side], cannot be left to the near-real time operation (base load units need many hours to go on line), nor the trip of a large generating unit be tackled by smart meters alone.

Price then is not the result of just supply and demand as the first chapter of economic textbooks, since there are inter-temporal linkages to be taken into account, in addition to system security. That is because responding to price information without power system security results in an unstable operation. Security will have demand side and supply side reserves commitments. In practice, there will also be a large market segment for the many customers that will be just fine as price takers that find as a cost effective alternative.

Retail customers will be able to buy power from the 2GRs they choose and/or produce their own power. Wholesale customers can buy from 2GRs or generators. It is the familiar way most markets operate in other industries.

"With their Retailers’ Enterprise Solutions, 2GRs will also execute those non-fat activities" -- what specifically is their incentive to do so under EWPC's market design? I've seen no evidence of any thus far, so must assume the EWPC design lacks any, as I've asked for it many times.

"EWPC is technology neutral" -- Again, the FREE RIDER problem. Why would any competitive retailer invest in costly demand-side systems when the benefits accrue as much to their competition as to themselves? If your design, as it appears to, ALLOWS free riding then most if not all retailers will do so, and you're right back where current de-re-regulation has dumped us. Also, if a retailer DOES so invest, is it under a long-term contract with the customer? What happens to the equipment when customers sell and move premises? Is the customer allowed to break the contract? Is the new owner of the premises bound to the contract? Is the retailer allowed to recover their equipment? This sort of strategy ONLY works for long-term-stable customers such as large industrials, no surprise as that's the market it's been lifted from.

"The procedures of power system security, known today as security constraint [generating] unit commitment (2GRs will offer their forecast info for the demand side], cannot be left to the near-real time operation (base load units need many hours to go on line), nor the trip of a large generating unit be tackled by smart meters alone. " -- you have obviously not read or understood the market design in IMEUC, which provides the grid operator / dispatcher detailed advanced data on the following day (or more if desired) projected load profiles which are definite, enforceable by legal contract, and deliverable.

No incentives or mandates for "2GR" retailers to act any different than "1GR" retailers, ie. in their own financial interests. In summary, I can see NO clear distinction IN THE RULES between EWPC and the system now being used in most de-re-regulated regions in N America where, as Prof. Banks will confirm, it is failing miserably.

Finally, please actually read the IMEUC design articles before commenting on them so erroneously.

In what way is a multi-year electrical supply contract with an EWPC "2GR" similar? What it is, is identical to current failed de-re-regulation systems in N America (where no retailer I know of is doing ANYTHING toward advanced demand management.)

These discussions go on endlessly and I for one shut down as soon as I see them. You both refer to previous articles and the articles have links to links that fo back forever. I would suggest that what you both need is a basic restart that shows both in diagram and table form a comparison to old utility monopoly system and the modified systems we now have in some states. It should start with the generator of power and go in all the steps to the user. I suspect the two of you would have to cooperate to make it useful.

Ken

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

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

2) How can it GUARANTEE no shortages?

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

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

5) Why would generation choose to sell to middle-men if they can sell directly to the customers at no additional transaction costs?

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

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

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

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

10) What specific provisions are made to enable / encourage small Distributed Generation / residential CHP, when that ideal future trend goes directly counter to the interests of the "Retailers" and large incumbent generation?

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

For a start.

The summary to Bob's objection is that Demand Integration is a must that is complemeted with Ultraquality Transportation.

The fat activities result in unnecessary costs payed by customers to utilities "earned" in each incremental extension of the Old Paradigm.

Demand Integration to power system planning, operation and control by 2GRs result in large coordination savings for society as a whole, both in customers' multiyear investments and operation costs. Letting every customer for himself is a weakness in Gridwise that is filled by EWPC.

Under EWPC near-real time operation is not based on perfect information, since forecast are allways wrong. The closer to real-time the better the forecast, letting the system operator manouver with the reserves his has available.

EWPC is more familiar than having a monopoly transporter (the utility) selling to them or having all retail customers pay transaction costs to a monopoly market manager for an average service to access generators. Customers do switch 1GRs whenever they want, but that is a big mistake that reflects in the lack of Ultraquality Transportation and the incentives for coordination savings in the development of the resources of the demand side.

For Free Riders, it ended on 3.20.08 above with “Now it is very clear that the my “assumption ‘the default service will have essentially all the free riders being subsidized by peers.’" was available, right where I said, in the link of just mentioned EWPC article.”

Good bye! See you tomorrow.

Jose Antonio's EWPC market reform proposal does not address how smart meter data can be extracted and communicated to the rest of the power system players or to consumers. Len Gould's IMEUC proposal does.

A comparison between EWPC and IMEUC is easy. Both have the respectable and desirable end goals of attaining an efficient and competitive power system to provide value for consumers. But to list and compare the strategic methods and mechanisms and financial incentives that describe how to reach those end goals, you can leave most of the entries blank for EWPC because it does not specify them. Len Gould’s IMEUC however does specify them in detail.

In order to implement changes to the power industry, technology providers and market players and regulators must be convinced that any proposal will work. Without providing the necessary details on how it would work, the EWPC proposal will certainly be viewed by everyone as nothing more than hot air originating from wishful thinking, and will not be practical.

I just got back. Somehow, all 3.25.08 posts by Ken and Len, came while I was doing my last post, so they were not considered in mine. I will respond later on today.

Your good intentions are no longer necessary. The EWPC article EWPC Leadership (w/o links) has a better approach: that of essential business requirements, as the breakthrough tipping point to promote leadership. Although they are very important, you may forget the links in my response to Len on Sept 11, 2007 to the questions he says I didn’t answer to see that he seems to enjpy discussing. Later on, many of those same questions were repeated and received other complementary answers, as you can see in many of the above posts.

Part 1 of 2

Posted on Sept 11, 2007 in A Paradigm Shift to EWPC

Thanks Len once again for asking to answer your questions. In my answer to Edward it is evident that any solution that does not pass the tough test of Todd is because it is not modeled with essential requirements, but a proposed implementation, like the SMD. I am responding not because of the good intentions of Jeff, but to get back to good terms with you and all the other brilliant commentators, as Fred called us.

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

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

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

2) How can it GUARANTEE no shortages?

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

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

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

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

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

5) Why would generation choose to sell to middle-men if they can sell directly to the customers at no additional transaction costs?

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

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

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

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

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

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

Already answered on item 7.

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

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

10) What specific provisions are made to enable / encourage small Distributed Generation / residential CHP, when that ideal future trend goes directly counter to the interests of the "Retailers" and large incumbent generation?

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

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

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

This will be the result of the detailed design of the prudential regulations, which I suggest should be negotiated at the WTO. ... "

Good luck with that initiative. Call us back when the negotiation is finished.

" 10) Under EWPC, retailers’ incentives are aligned with those of the customer. "

What specific provisions of EWPC cause for-profit 2GR retailing enterprises, apparently currently non-existent huge world-spanning conglomerates, to ignore their self-interest in favour of their customer's interests? Economics shows us this can only happen IF the market design enforces it in some way. For example, why wouldn't a 2GR decide that it makes a lot more sense economically to advertise INCREASED consumption to their customers, and skip any large investment in intelligent control systems?

Many other issues....

13) How does EWPC deal with eg. energy markets in Canada being a provincial jurisdiction under the constitution, or in USA a state jurisdiction, yet still apparently allow large conglomerate 2GR retailer (?generating?) enterprises competitive, and therefore logically interstate, access to customers?

1) Competition will all but kill the free rider issue but that can't be discussed since it will be put off until phase two.

2) Power shortages will be planned for by system planners and if that doesn't work, power will be rationed.

3) The smaller utilities will still finance large nuke-scale projects by merging with other utilities to become big enough as long as we regulate a seperation of T&D from generation.

4) Mr. Reid understands how consumers benefit from retailers so it must be too complex to put into one sentence.

5) Along with the financing resulting from #3 above's acquisitions, oligopolies will result to provide economies of scale as long as we mandate in some additional overhead based retail departments to handle larger(?) customers. ?? (little help here, someone.)

6) The market is so transparent that all consumers will easily band together and raise rates on a specific supplier because they omnipotently 'know' of all holding back of generation.

7) We should give a single organization the power of full control of all the world's largest deals in secret and trust that they best decide what info we need to see.

8) We don't need to restrict regulatory gaming because, as #7 stated, the world trade organization will show us any incriminating info we need to keep them inline.

9) Spinning reserve levels will be passed down by a higher authority (another level of regulator?) across multiple supplying generators but we still need to make the rules of how to pay them, budget their equipment and set their fuel inventory since that's now going to be the regulator's function.

10) In this system, the DG/CHP consumers will choose retailers that actually want the consumers to stop buying their product over retailers that want to stay in business.

11) Since this is no longer a monopoly, conservation will be promoted to reduce sales as in #10, by the retailers competing for business face as opposed to actual revenue. Perhaps they will take a page from the farm subsidy book and get paid to 'not grow' anything.

I'm sorry Jose Antonio, I can't see how any of these except MAYBE #4 will result in any net gain over the past. Unless you can definitively correct the above in concise form, I am ready to walk away from this endless discussion and call it for the opposing team. (disclaimer: With the minor 'real time' change I previously suggested on IMEUC.)

Toby Considine ha dejado un nuevo comentario en su entrada Missing From Gridwise (I changed it from the GMH Blog to the EWPC Blog):

Very interesting article, and filled with very interesting references.

First I would like to draw a distinction between GridWise and the GridWise Architectural Council (GWAC). GridWise is mere prices to devices, an important first step, but not the radical restructuring that energy distribution will need. The GWAC is concerned more with open markets and interoperability, and in particular the economic problem of market making. Unfortunately, I these two components often blur together in casual conversation and writing.

Many on the GridWise side start out with a control orientation, a continuation of the load limiting approaches most recently in the news in California’s short-lived thermostat proposals. As they work the problem, and become more aware of the complexity and diversity of the problem, they inevitably migrate more toward an agent-based approach. (Someone, I think it was Apperson Johnson, once said, “an agent is an object that can say no!”).

Eventually these agents have to be able to negotiate around the issues of scarcity and value; and of the desires of their owners. Such complex negotiations cannot be handled at the control level, but only at the economic level. This will push things toward the EWPC model. My view of the GWAC is that they are trying accelerate that realization and that transition.

I will expand these thoughts at NewDaedalus once I have had time to digest the references in this fine post.

This was my response:

Thanks Toby for explaining the difference of GridWise and GWAC. Thanks also for qualifying the article and the references as interesting and the post as fine. I understand that the key sentence on your post is “Such complex negotiations cannot be handled at the control level, but only at the economic level.”

Please take a look also to the most recent EWPC article EWPC Leadership (w/o links), whose summary I just updated with your input as: “This is a synthesis (without any links) of the EWPC breakthrough, which brings absolute clarity and direction to enable a cultural shift to the power industry of the third industrial revolution. Demand Integration by 2GRs result in large coordination savings for society as a whole, both in customers' multiyear investments and operation costs. Letting every customer for himself is a weakness in Gridwise Architectural Council that is filled by EWPC.”

Please advise when you post your thoughts at NewDaedalus once you have had time to digest the EWPC paradigm.

Best regards,

José Antonio

It's really a beautifully designed system that collectively handles trillions of 'transactions' per day and seems to have all players best interests at heart. With a few substitutions of variable, it could be directly applied to this scenerio.

You have missinterpreted the key message "Such complex negotiations cannot be handled at the control level, but only at the economic level.” It means that IMEUC is a "price to device" dead end. "As they work the problem, and become more aware of the complexity and diversity of the problem, they inevitably migrate more toward ... the EWPC model."

By the way, my copy of last year responses were only meant to show that Len enjoys being a discussant. So, the was no need to "further abridged" the 11 answers, but to hit the link on the EWPC article "EWPC Leadership..." that has no further links, and no need to be abridged, nor reinterpreted.

Todd uses the Internet as a perfect system example where technology allows the consumers to control commodity flow, in this case information flow, AND who they buy their internet service from. In many instances on the internet some of the commodity is not free, it is purchased, like software for example. These commodity flow controls and purchase choices by the consumer are not controlled by Internet system companies or regulators, they happen with the click of a mouse.

Since much of residential power demand is discretionary by the consumer, they will always insist on controlling how much power they use, and if they could, who to buy it from. Most will always insist too on controlling their own in-home demand responses when it benefits themselves, not necessarily because it may benefit any power system players. IMEUC realizes this capability for consumers.

My point is that the "complex negotiations" you refer to CAN be handled at a technology control level if economics are part of and designed as inputs into the controls. The key is in making the economic inputs to the controls part of a fast modern communications network that IMEUC provides for. After all, the economic inputs are just another type of data input to the system.

As usual you (deliberately?) fail to understand IMEUC. IMEUC is first and foremost a MARKET system. (Independent MARKET for Every Utility Customer) That the best and smartest way to implement the market is using intelligent control agents, is merely incidental.

IMEUC clearly wins regarding system planning at any level one may wish to consider, from daily dispatch to 20 year investment decisions.

Power system planning and operation certainly NEEDS to be effective, but it currently isn't always the case or we wouldn't be having this debate. It is simply a desirable goal.

You say these activities need "demand integration" to become effective. I say technology is the only practical hope of integrating demand with these activities. Why? Because a huge portion of total power demand is discretionary in real time from residential use, which is typically one third or more of all power used, or at least something in that ballpark. And discretionary residential power use is under constant direct control of the residential consumer, it is not something accurately predictable far into the future.

Under EWPC there is no practical way for consumers to "negotiate" with 2GRs "way ahead of time" to get the "best deal". Perhaps a reasonably good deal can be arranged but not the best possible deal. Why? Because there is no accurate way without real-time technology to precisely predict or know the combination of instantaneous power demand in the system, wholesale power prices, and consumer retail prices because they are determined by a whole host of probabilistic variables; such as consumers' real-time choice preferences, by the weather, by unforeseen generator problems, and many other things.

IMEUC is the only proposed system reform that uses technology to communicate many of these variables in real time throughout the power system. EWPC does not.

100) What exactly makes a "2GR" retailer act differently than a "1GR" retailer aside from your wishfull thinking?

I understand that the telecommunication business has a problem with the last mile. However, I have proposed elsewhere that the electricity industry has a problem with the first minutes. The problem with the first minutes results when customers are not able to respond to prices, and is resolved with demand response. It was precisely the lack of demand response that lets spot prices increase beyond reasonable values, leading to generator market power and congestion.

If I understand correctly, states now are supposed to study how useful demand response is, and the most important application is precisely to implement retail deregulation. To have a real social impact, states regulators should look deeply into liberating retail markets again.

I believe to have understood what is needed to design a true deregulation model for the electric sector. Dr. Alfred Kahn said some time ago that: "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works reasonably well." That uniqueness is associated with the non-lineal nature of the risk of system failure. Physical risk of system failure, linked to high prices in deregulated systems, used to be managed as a supply security risk under vertical integration. The apparently large costs of generation and transmission reserves required, under vertical integrated utilities from resulting risk management planning, became the target of inefficiency identified by economist and policy makers at the outset of deregulation.

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

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

DR technology can complement the mitigation of physical risk of system failure and spot price sharp increases, as a non-linear feedback mechanism to repositioned systems reserves, in time and space, much better than lumpy investments in generation, transmission, and distribution. By developing a market on customers differentiated supply security (sensitivity to shortage) requirements, an efficient rationing system can be developed. Investment on an AMI is apparently feasible just on the operational benefits to the distributor. The architecture of a "true" deregulated model is centered on independent retail-marketers, and a new value chain, whose mission is to segment customers according to electricity value added services, which customers can select. The value chain is wholesale, retail, end customer, leaving the distributor as a pure transporter charging a toll. Retail-marketers then take control of the strategic Enterprise Solutions, developing innovative business models. As each customer selects what he perceives is the maximum value addition, the economy as a whole maximizes welfare.

This is just a glimpse of my insights, design, research and, humbled observations of the past 10 years. By no means am I saying that retail markets development will be easy. No; there is a lot of work needed to make it happen. Most investment in energy efficiency needs to look to the next 5 years, away from the Continuity scenario. I will be very happy if one place in the world decides to initiate the experiments requiresd for the development of new business models on retail marketing, and I wish to be there.

Under that post, Len Gould wrote on 12.21.05

Jose: You're close, just not going quite far enough. You need to eliminate your "Retail marketers" by implementing intelligent software within the customer's meters which takes over the simple task of selecting either a lowest-cost supplier from among all available in a central electronic "marketplace", or alternatively choose to not purchase, and shut down some of the customer's less critical loads if the price exceeds customer-set limits.

I will post my response below on that same date next.

In the mean time, as seen above, I wrote “Todd, …You have missinterpreted the key message "Such complex negotiations cannot be handled at the control level, but only at the economic level.” It means that IMEUC is a "price to device" dead end. "As they work the problem, and become more aware of the complexity and diversity of the problem, they inevitably migrate more toward ... the EWPC model."

Both the above and next posts insisit on the need to be "... aware of the complexity and diversity of the problem, they inevitably migrate more toward ... the EWPC model."

In his first post under this article, Len wrote that the "Level of Reliability should be simply a market factor purchased as needed just like Level of Power etc," which the main side effect of a "prices to devices" approach.

Len, Todd and Bob and anybody else can write and write, but it is crystal clear that instead of retail marketers, Len Gould proposed a “prices to devices” approach which is a dead-end. That’s the key finding.

Thank you very much Len for the "lead" and a sharp comment.

Being conservative, I agree with you if there were only the short run market problem. However, there is also a long run problem for which retailers need to coordinate in the wholesale market. This is where I understand boom bust (long run risk management) power system behavior should be managed from the demand side by retail (and wholesale) marketers. Marketing service offerings need to be designed based on what will be coming up in the future.

In addition, while most price response marketplaces have been designed with real-time, day ahead, and hour ahead markets, I strongly believe there is an important week ahead market mainly (some industries would classify also) for the low end residential market, where retailers need to participate on the wholesale market to complete week-ahead unit commitments.

However, I don't dismiss "just not going far enough," because I am over 60 years old now, having work through design, operation, planning, management, and research of vertically integrated and (faulty) deregulated power systems, which don't let me see very well outside of the box. For those simple reasons, Len, maybe I missing something really important, so please advise!

Regards,

José Antonio

IMEUC is the only proposed system reform that requires communication technology to carry the power system's many variables IN REAL TIME throughout the power system and to consumers and their in-home technology. The variables include economic data (like prices) and instantaneous as well as past consumer demand information.

To achieve this communication is found at the heart of IMEUC - using smart meters with software as both a billing meter and a critical communication link between consumers, their in-home devices, and, most importantly the power system's companies. Without this capability there is no way power system planning and its operation can be optimized because electrical energy is an on-demand commodity available INSTANTANEOUSLY to whoever wants it.

EWPC does not propose this real-time communication capability, no matter how good its intended goals may appear to deceived readers.

I can tell you one simple fact about the power system that any electrical engineer can tell you (I am one myself and have been for over 20 years).

The electricity system's hardware and power flows are known and well understood as a system with inputs - the generators - and outputs - the consumers of power. To effectively plan and implement changes to the whole system that will optimize its economic efficiency requires that there be both economic AND parametric data fed back into the system from ALL its component stages, both for real-time and past data.

This is basic "feedback control theory" that every electrical engineer is taught in school. IMEUC, as described in my last posting, proposes precisely this. EWPC does not.

Todd is back! I though he was gone in what follows.

I suggest reading very carefully the EWPC article IMEUC False Facts, whose summary is:

"Based on the article “The Power of False Facts,” readers need to be very aware of that power while reading those False Facts to be able to rate them as false. The following False Facts need to be well understood: 1) IMEUC doesn’t need to satisfy the Ultraquality Transportation requirement. 2) EWPC has a Free Rider Problem; no answers are given in mentioned article. 3) EWPC has no answers to 11 questions. 4) IMEUC operates on the Economic Level."

I agree that the most flexible feedback control systems are the ones designed to allow the for the option of additiional inputs over time. Even more sophisticated in system design is the ability to adaptively learn from new inputs. Adaptive control theory is already a heavily studied subject in other areas of electrical engineering such as in communications filtering. There's no reason why the same philosophy couldn't be ap[plied to the power system when new inputs arise over time.

1.) "...system crashes are mitigated by a least cost mix of supply and demand risk management tools that may be applied in time and space..." and "...DR is the key to segmentation of customers supply security..." 2.)"...my assumption the default service will have essentially all the free-riders subsidized by peers..." 3.)"...essential business requirements as the breakthrough tipping point to promote leadership..." 4.)"...agents have to be able to negotiate around issues of scarcity and value..."

Please elucidate. Enquiring minds want to know why these false fact-finding precepts are not "up a gum tree".

"False Fact #1" (whatever that means) is given as being proven by the statement:

"DR is the key to the segmentation of customers [based on the Retail Competition] supply security"

which is obviously false, as it implies that customers have a single unchanging requirement for reliability for their entire consumption by which they can be grouped. The "real fact" is that every customer has a VARIETY of reliability requirements for EACH OF THEIR CONNECTED LOADS at various TIMES OF USE. For example, most times I am willing to defer operation of our dishwasher to a midnight start EXCEPT if we are hosting houseguests on a weekend and need to run a cycle after every meal in order to keep sufficient clean utensils available. For another example, for a portion of our connected loads (stairway lights, garage door operator, refrigerator) we have a very high reliability requirement, whereas for the electric water heater or A/C unit we could accept significantly less reliable service. IMEUC inherintly provides for this.

Every customer's reliability requirement will be found to vary over time and across all their connected loads and for many other reasons. From what I can find, EWPC tries to simplify this "fact" into some form of catagorization of customers into groups who can be serviced on long-term contracts by "2GR" retailers who offer varying levels of reliability for the entire service provided. Jose Antonio's argument here has no merit.

#2) Still looking forward to a response regarding free riders under EWPC.

#3) From what I can find, claims of having responded to my questions are greatly exagerated.

#4) IMEUC operates on the Economic Level. Of course it does. It is actually a MARKET system, as I've pointed out previously, and I think you'll need to get an independent economist to agree with you that market systems design is not in the realm of economics. The discussion of the implementing technology is simply to prove that the market system proposed is feasible and can be economically implemented.

The article EWPC’s Tipping Point respondes respecfully to the above inquiries and much more. Its summary states that "Aiming to be an irresistible article, it should help start a word-of-mouth epidemic of high proportions in the power industry. By respectfully exposing, and responding inquiries, the insidious power of IMEUC False Facts to obstruct progress, it is one of those little things that can make a big difference. Now all stakeholders will be able to learn how Demand Integration to power system planning, operation and control, brings the clarity and direction of the breakthough EWPC market architecture and design paradigm shift to produce large coordination savings for society as a whole. I repeat that 'California has a great opportunity to repair the damages of the BIG California LIE to the world.'"

False Fact #5. 2GRs are not needed.

False Fact #6. Default service is forever.

False Fact #7. EWPC removes all regulation.

False Fact #8. The utility enterprise and the utility grid separation will never “get ever implemented politically.”

Massive government intervention would be needed to separate the "utility enterprise" from the "utility grid" because our current utility companies OWN their grid infrastructure and also OWN large bank loans that are funding their AMI and smart grid investments. The banking industry alone would have a huge say in what happens to their investment loans because they would never allow them to be assigned to whoever you choose simply because you think EWPC is the electricity industry's savior.

You might consider setting up and moving to a full-time camp in Washington D.C. to lobby federal politicians to get your EWPC implemented, and be prepared to go begging on hands and knees to lobby them hard.

"If your retailer does not add value, then select a different retailer!" -- Jose Antonio: I invite you to come to Ontario (presently operating a market system indistinguisable from your proposed EWPC with independent private generation, regulated monopoly T&D, unregulated private retailers) and point out to me that unique retailer to whom you refer. Your "2GR" retailer hasn't happened here and won't happen anywhere else because coming future advances in electricity marketing (conservation, microCHP, gridwise PHEV's, and even demand management itself) all run counter to ANY retailer's natural financial interests (increased sales). UNLESS, as I suspect, you're hiding some unstated regulation or legistation requirement necessary to alter that FACT.

Tell all of your utility friends to read very carefully EWPC's Tipping Point, with regard to the new Law of the Situation: the utilities did not understand. First tell them to read a quote from Megatrends on the "Law of the Situation: the railroads did not understand," so that they learn where they are at this historic moment of the third industrial revolution.

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

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

( esp. for Ontario, for example, where the market has all those features, and Direct Energy is the last retailer I tried before switching to my current Hydro One. So okay, Texas still hasn't figured out they need to separate T&D from retailing but certainly it has made little discernable difference where done, Ontario, Britain, etc.)

By definition, as an "externality" to the system, demand is currently an independent parameter from the system. While I agree with this definition, to "integrate" it into the system to enhance system planning and operation economically requires that demand information must be fed back into the system to optimize its economic efficiency, including both real-time present data and past data. There is no other way to define or interpret in the context of the electricity system the English meaning of "integration".

EWPC does not in any way specify the mechanisms nor does it specify in any way how real-time and past demand information should be fed back into the system. It also does it specify how the information would be handled by the system. Your IMEUC does.

IMEUC does precisely.

You have written that idea before, but I have just grasped its valuable significance for the generative dialogue, as it helps arrive the emergent market architecture and design paradigm in the market vs. market competition.

You synthesis have clearly showed that IMEUC is a physical (originally aiming to be a monopoly) implementation, which "specify how the information would [be] handled by the system" that will preempt the competition of new innovations waiting to happen.

EWPC, on the other hand, is a technology neutral market architecture and design paradigm breakthrough. That way, competition among physical implementations will have a leveled playing field in the company vs. company competition.

Based on the converse of the “False Fact #8. The utility enterprise and the utility grid separation will never ‘get ever implemented politically,’” as Ontario and Texas are already implemented, there must be a very large discernable political difference with the breakthrough market architecture and design paradigm.

Among many other important things, EWPC repairs the 1992 Open Transportation Access mistake (that extended to the rest of the world) that left utilities vertically integrated in the local market, by introducing two mutually reinforcing robust markets (1) a (fully integrated transmission and distribution) Transportation Ultraquality in a controlled market (that takes center stage away from generation) with a responsibility to transport, and (2) a complete and fully functional open (retail and wholesale) market to level the playing field (supply side-demand side) and enable industry innovations by developing the resources of the demand side to allow Demand Integration to power system planning, operation and design, under prudential regulations.

Instead of 1GRs, like in Ontario and Texas, 2GRs compete without incumbent retailers by developing business model innovations in the company vs. company competition. Texas retailers are already trying to avoid the “Law of the Situation” that the "Canadian Pacific Railway" missed, as "Electricity retailers believe that they can make more money selling less electricity..."

2GRs don't need to emerge from 1GRs which may have very bad habits.

As Bob just showed, by clearly helping separate the market vs. market competition from the company vs. company competition, the development of business models are the key where entrepreneurs vision and courage will bridge the concepts with the implementation.

Remember what Nat wrote: "I am concerned that someone [read as Len Gould's opinion] sees no value added by a retailer. If your retailer does not add value, then select a different retailer! I am not concerned with "new layers of overhead" because these layers are thin [under EWPC the layers of overhead of both utilities and the regulator are removed]. "

"EWPC, on the other hand, is a technology neutral market architecture and design paradigm breakthrough. That way, competition among physical implementations will have a leveled playing field in the company vs. company competition".

Being "technology neutral" with physical implemtations having a "level playing field" for company-to-company competition IS ONLY POSSIBLE WHEN INDUSTRY-WIDE STANDARDS are developed and adopted for new technology. The personal computer industry and the internet are marvellous examples of this, since any company can develop products and connect to any PC and the internet, and not have to depend on any personal computer manufacturer's proprietary technology.

This is not the case in the electricity industry. Utility companies control who and whether anyone can access power demand information in the system, and smart meter manufacturer's AMI systems are all proprietary - there are no true open standards to communicate data back into the system from consumers of power.

Len's IMEUC proposes in part to implement standardized smart meters to accomplish this with a minimum functionality. EWPC does not, nor do the meter manufacturers have any desire to standardize AMI systems because they know it will foster more competition for themselves.

To achieve a level playing field demands industry-wide open standards be defined and adopted by AMI manufacturers for smart meter miminum functionality, and open industry-wide standards for communicating economic and parametric data both ways between the electricity system and the consumers of power.

Jose, the IEEE and the electronics industry have recognized this basic fact about open standards for years. Open standards is key to making technology products affordable at the mass-market consumer level. Until this happens in the electricity industry, substantial changes are wishful thinking.

Len's IMEUC is in essence an open-standards definition proposal for the electricity system's technology, and if I understand it correctly it's also one for energy markets. End of story.

You need look no further to see why few others will even respond. The only reason I still do is to counteract your constant eroneous comments about IMEUC.

I'll need to see some theoretical proof, or real-world examples. From what I'm seeing in Ontario, retailers have added a huge marketing cost overhead to the industry, witness the hordes of know-nothing salespeople knocking on my door offering to "analyse my electrical bill for me for free", or the huge promotional signs on the "Direct Energy Baseball Stadium" in downtown Toronto, or the constant television promotional campaigns. None of these activities add anything useful to the industry, IF I were allowed to shop for myself for electricity from among all the source generating entities. Retailers are definitely NOT a "thin" layer in my experience.

Here's a simple real-life example that could come true very soon of what I am talking about.

At the consumer end of the electricity system there is a pressing need for open industry-wide standards for communicating economic and parametric data both ways between the electricity system and the consumers of power. An example of this need is in the imminent introduction of Plug-in Hybrid Electric Vehicles to the consumer market.

Consider if someone visits my residence with a PHEV and doesn't have enough charge left in the vehicle's batteries to return home, and therefore must "plug-in" to one of my residence's electrical outlets for a top-up charge. Many consumers would not want to pay for the electrical energy used in the visitor's top-up charge, just like most would not want to provide a gasoline refilling station at their residences to top-up conventional vehicles.

There would have to be technology in place such that the visitor's PHEV could be billed by the consumer's utility company directly for his top-up, and not the consumer's residence. This technology, whatever form it takes, would have to be a communications technology that is affordable enough to be commercialized and deployed widespread throughout consumer markets. These energy transactions would also have to interoperate with smart grid technology within the grid system to manage power flows properly, given PHEVs could become a huge source of power demand.

The IEEE and the electronics industry have recognized the benefits of open standards for years as key to making technology products affordable at the mass-market consumer level. Until this happens in the electricity industry at the consumer end of the system, substantial industry changes are wishful thinking.

In conclusion smart grid technology standards adoption must be done in parallel iwth the need to standardize the consumer technologies at the consumer end of the system, and especially how they interface to the electricity system which includes smart meters and their interfaces. Len' IMEUC proposal deals directly with these interfaces and the energy market reforms to handle them.

By keeping yourself so deeply involved within the barriers of the Old utility paradigm, you will keep coming with conclusions such as those. You need to shift your paradigm to EWPC, which “comes from - a different place altogether - Demand Integration (which comes from Active Demand and Retail Competition) to power system planning, operation and control by 2GRs, resulting in large coordination savings for society as a whole, both in customers' multiyear investments and operation costs.”

Once you shift your paradigm, like a true entrepreneur would, all you need to start with is a physical meter standard that satisfies all the needs of the New transportation utilities. Such standard meter (one key physical interface between the controlled market and the open market) will “change” with 2GRs software and firmware downloads. Instead of utilities, as the author suggest, every 2GR “should seek out partners who will work collaboratively with them to ensure the success of the initiative. Partners should have a proven track record, be prepared to sign up for end-to-end responsibility [in the Retailers’ Enterprise Solution] and be willing to have a stake in delivering results.”

Please recall that on 3.24.08, above, I told you that “With their Retailers’ Enterprise Solutions, 2GRs will also execute those non-fat activities performed by the traditional utility enterprise that are required and the many more needed for the competitive environment included in the business model innovations that integrate in-home technology, AMI, etc. Competitive 2GRs will develop (with help from their partners) their business models to integrate demand (think that it is at the wholesale market) to power system planning, operation and control. EWPC is technology neutral, and as such can house all hardware/software/firmware propositions in a competitive environment.”

Where can I find the one physical meter standard for smart meters you are talking about. Until I see this, I refuse to believe it exists.

In England, the Energy Retail Association’s "aim was firstly to identify a technology standard for smart meters that would ensure interoperability – in other words, once you have a smart meter installed you don’t have to change it if you change suppliers [2GRs, under EWPC]."

In my IEEE Power&Energy article May/June 2006 - a Dominican strategy, I suggested “a task among developing countries to develop low-cost power devices (like cell phones in the telecommunication industry) with metering and demand-response capability to create a mass market de facto standard. With such a standard for preserving the rights of poor customers to a valued service that balances electricity costs, poor customers can choose to become active, legalized, and, thus, profitable customers. Hence, the poor can offer and benefit from DRR [Demand Response Resources] and thus lower their electricity bills without subsidies in the long run. Financing energy-efficient appliances to the poor and legalized customers could lead to social sustainability.”

You have clearly recognized that a smart meter standard would be necessary, as I have recognized this too.

BUT WHERE IS THIS SMART METER STANDARD THAT WOULD PERMIT UNIVERSAL INTEROPERABILITY ? I do not believe one has been created until you tell me where to find it. The current smart meter manufacturers surely have not adopted one because none of them have open standards for third parties to interface to them. I know this fact because I have personally dealt with them over the last several months.

Thank for all your help in unvailing the key issues on smart meter standards.

The EWPC breakthrough market architecture and design paradigm is not being practiced anywhere yet. It will certainly take time to create such a standard as EWPC is a baby that only emerged last year.

Smart meter manufacturers surely will adopt them when global EWPC standards become available. It seems that U.K. standards will be first, making what will become Old fashion ("because none of them have open standards for third parties to interface to them") Canadian and U.S smart meter standards, which with the big bets by regulators, to guarantee that utility win the rate cases, will eventually destroy a lot of value that ratepayers or taxpayers will have to absorb.

Better yet, why not take up religious preaching and air your own TV evangelist show to start a new religious cult. Disguising EWPC as a religion just might get people to believe in it, since your writings on this website sound more like a Sunday morning evangelist than a technical expert when you talk to us techies. It might be much more fun too than trying to convince us on this website, and certainly would get a bigger audience than going begging to the US government in Washington to force EWPC on the electricity industry.

Religious preachers make the best happy dreamers, and don't forget to say prayers too. EWPC will need tons of spiritual help to come true.