I completely agree with your message about the pitfalls of electricity deregulation. Here in Ontario we have a hybrid form of regulation where the wholesale prices of electricity paid to generators is deregulated, with massive price swings throughout the day as a function of aggregate demand and available generation. The retail price Ontario consumers pay however remains fully and tightly regulated, where our provincial government fine tunes the price every six months, to ensure all Ontario generators do not lose any money over the course of a year.

To further complicate the generation system in Ontario, the old crown-owned corporation Ontario Hydro (that owned all generation and long-distance transmission) was split up and partially privatized back in the 1990's. It had accumulated a massive debt load over decades to build our nuclear fleet among other things, which was really just public debt. During its split up and privatization, our provincial government of the day passed on this huge debt to be paid back by all consumers by adding a “debt-retirement” charge to our electricity bills. We are still paying it off today.

The resulting split up of Ontario Hydro created a separate transmission company, Hydro One (who also now owns the local distribution business for the city of Brampton and most rural customers), and many private generators. However a sizeable percentage of or our nuclear and hydro generation stations remained under crown ownership as a new corporation named Ontario Power Generation. During the period of 1990’s NO NEW GENERATION WAS BUILT by Ontario Hydro because it was politically unpalatable with voters to rack up further debt load. Ontario eventually lost its peak generation safety margins several years ago as total demand continued to grow. Since about 6 or 7 years ago building any new generators are paid for now by contract from our provincial government through what is called the Ontario Power Authority, using taxpayers’ money. The money is then recovered by regulated consumer rates being hiked to pay it back over a long time frame.

So you see Fred the competitive advantage Ontario lost is very much because of not wanting to spend more money on new generation, in effect to keep consumer rates low. The game Ontario is playing now is catch up, and we consumers will be paying dearly with massive rate hikes over the next many years, also in part to pay for hundreds of expensive renewables that the OPA has contracted to be built.

Ontario’s local distribution utility companies’ electricity prices charges to all customers are still fully regulated, but these companies are strapped to raise any extra money for investments in Smart Grid technology. Any technology investments must be regulator approved because they must be paid for with extra charges or rate increases to all consumers. This does not usually sit very well with voters at all, and I’m sure it is the same scenario in most places in North America.

My message is that price regulation should change so that while basic electricity rates could remain fully regulated, local distribution utility companies could sell additional optional services to customers willing to pay for them. Like Home Area Networks and messaging for in-home energy displays for example.This would allow utility companies to raise extra money from targeted customers to pay for technology investments without basic electricity rate increases for all customers, much like CATV or telephone company business models. Sadly this sort of regulatory reform is not even on governments’ or regulators’ radar screens.

I got a letter from Argentina today in which it was pointed out that electric deregulation has created all sorts of problems. Damn right it has. My wife is the social type, and she is constantly meeting people in this country who are paying fantastic amounts of money to electric firms. Unbelievable amounts.

I don't know what happened in HongKong after I did my anti-deregulation song and dance there a decade ago, but after my first performance - which wasn't so hot - I gave the audiences something to remember me by.

De-regulation as thus far implemented in Ontario is clearly a rediculous failure. But full regulation, as previously practised, was also a failure, since the government regulators simply placed rates arbitrarily low so their bosses cound get re-elected, then allowed the government owned utility to assign its resulting huge mounting debts to the government. That's dumb, sends too low a price-signal to customers, who should be properly encouraged to conserve.

The only workable solution is a) Private enterprise competitive generation and transmission b) monopoly regulated distribution c) every customer required to purchase their power on 15 minute intervals in the wholesale market.

Keeps government's grubby paws off, eliminates the completely usless retailers, provides customers the lowest prices possible.

Independent Market for Every Utility Customer - Preliminary Business Case

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

Independent Market for Every Utility Customer - Part 3 - Alternative Market Operation

I would be the first to agree that your IMEUC proposals could overcome the dismal failures of full regulation or full deregulation in past. However here in Ontario our provincial government won't even dream of changing the status quo because they can't imagine life without (their) strict control over our electricity system and all its stakeholders, even potential future stakeholders. To illustrate the latter, the latest government -led initiative came from the OPA last month when they put out a call for new project ideas for developing new and innovative Smart Grid technologies. They are budgeting $50million to pay for the ones they approve.

Clearly they realize the private sector won’t put up this sort of R&D funding for the simple reason the uncertainties and resulting risks are too great when the government, and not the marketplace, dictates all the commercialization rules. It’s almost like communism in weird sort of way, the only difference being no stakeholder or developer is forced to participate if they choose not to.

The victims of these destructive electricity prices are of course standing around with puzzled looks on their faces. They can't figure it out. Their dumb economics gurus cant figure it out either, but at least they read that passage in their economics books which asserts that more money is better than less.

I understand why consumers who are accustomed to cost-based, inexpensive power from fully depreciated nuclear and hydroelectric plants are upset with a mechanism in which the wholesale price is determined by the marginal offer price. Part of the problem could be inadequate competition in the Nordic wholesale market - I forget now who owns how much of what. In California, the oligarchs were and continue to be the investor-owned utilities, who each control as much electric generation as all of their "unregulated" competitors...combined.

Is electric deregulation a failed experiment? Perhaps, but I come down on the same side as Len. The old system was never as good or as bad as it was cracked up to be, depending on your viewpoint. Competition has forced regulated utilities to be more efficient in may of the things they do, at least in this country.

Moreover, either competition, or a mechanism like Len's IMEUC would go a long way toward making better use of expensive assets that sit idle most of the time. Show me a competitive industry where factories on average operate at less than 50% of their productive capacity and I'll show you an industry where most of the competitors are insolvent. In California alone, around 15,000 MW of peaking generation sits idle for all but about 200 hours of the year, at an annual cost of several billion dollars.

California should never have "deregulated" along the lines of the British model. "Deregulation" also largely misses the point. The power industry in California in 2000 was regulated, and the market was regulated. It was badly regulated. Illinois' massive cost increases were more a product of hedge timing than "deregulation", and when they tried to put the genie back into the bottle they couldn't. Same thing happened in BG&E. With Illinois and BG&E, the fundamental point that is often overlooked (for example by their local legislatures and PUCs) is that those hedges would not have been on except for the mandate to transition to deregulation with price caps in the interim. Thus, the price increase would have been smooth, but to the same level. I know nothing about Sweden to comment intelligently about what is happening there.

In Texas, a place where they really can't put the genie back in the bottle, people are generally happy with the state of the power market. The ERCOT market is functional and provides people with a reasonable choice of power providers. It also helps that they are religiously committed to the free market for power in Texas, which I will grant may seem a little bizarre looking from the outside. In California now there is huge demand to move away from bundled utility service and to market based service (Direct Access). This is still happening in a PUC regulated framework, and in one that is not responding to the desires of the allowed entities to move quicker.

I am generally pro-Nuclear myself, but the argument that is compelling against Nuclear is that nobody in the free world, not even the French, have built nukes on time and on budget in at least the last ten years. Can the Korean's get it done for the Arab states so desiring? Maybe, the jury is still out there. I don't see why it would make a difference what regulatory framework in which you are dealing if nobody in the world can produce an example of a nuke getting built on time and on budget. Why not build Nukes in an energy market based on a long term reserve and ICAP requirement? That can't do any worse on execution and cost escalation than any fully regulated model currently out there.

Finally to my point: I have owned about eight or nine electric utility stocks and not one was a very good investment. (Otherwise my investment record has been far better than the major averages.) So how is it that I hear so much about how utilities are overcharging the rate payers. We so often hear that we are being gouged by the fat cats, bureaucrats and politicians. Maybe so but whenever I have looked at how efficiently the plants are being run I cannot find much to criticize from an engineering standpoint – at least nothing gross, nothing that I would presume to have much effect on the dividend. And of the investor owned companies I have owned I thought these would have been the least able to screw their owners, the stockholders, or the rate payers.

This whole thread seems to be about the profound effect regulation/deregulation has on rates. Tell this naive Arkie how this can be? (I see where one Pulser said his bills have gone from $65 to $200 presumably due to regulatory changes? There was no mention of the cents/kWh.)

Where this business of nuclear is concerned, and people being unable to construct facilities on time, and all the rest of it, I am totally and completely uninterested. I know what was done in Sweden, and I don't need to know any more. 12 reactors were constructed in a little over 13 years. I also know what was done in the US during the second world war, and if you put those two things together what you end up concluding is that they could easily construct nuclear plants on time if voters and politicians were not so dummed down by their TV programs, stupid politicians and academics, etc etc. People/voters dont want nuclear because they have been lied to about wind and solar and so on, and so we cant get the kind of commitments and strategies that we had during the war, when excuses having to do with extremely important things were generally not accepted.

Let me add one thing here. Try to explain nuclear and deregulation to people with advanced degrees in e.g. economics, and those people and the mediocrities who teach them look at you as if you are talking Swahili.

We either squabble about the deregulated markets, greed and profits, boom and bust cycles of capital infusion, construction cycles, manipulation with volatile prices or we squabble about the regulated markets, politics, waste, lack of transparency with subsidized prices. Since deregulation is not working in most locations I tend to support regulated markets; 1) the devil you know should be better than the devil you don’t and 2) if done proactively and sensibly regulated markets can avoid the huge problem of private capital investment in unstable political deregulated markets. It could be neither system is better than the other over the long haul. We just started with regulation and it's very fragile to change over.

With a switch to partial deregulation, change is accomplished. Change creates opportunity and ensures the movement of money, a fundamental driver in any economy, is it not? Change also gave our government a gift wrapped chance to recover a huge debt through the taxpayer as a result of the follies of countless informed well paid Hydro executives in a more politically pleasing manner. Side point: the debt reduction charge should be paid off by now but it is not. Why not. We all should be going ballistic against the reasons for this but we don't!

Over many decades and many regulatory changes the dividends paid to me (as an investor/owner) turned out to be less than I could get elsewhere. (And the much touted safety of REGULATED utilities was often given the lie.) While I would be hoping for regulators to approve rate increases people such as I were being vilified by politicians and the media as being those nasty villains gouging the public.

Consider the theory: Monopolies, or strong oligopolies, and marginal cost pricing means that with electric deregulation fools can be made of the voters, while somebody is given the opportunity to make millions or tens of millions. It doesn't happen everywhere, but it happens almost everywhere. You see, the main problem is that your economics teacher was too lazy to read and think about the last chapters in the econ book, where all of this is explained. When I worked in Hong Kong though, I didn't have to read any part of my econ book: everything that I needed to know was in a couple of issues of Fortune and Forbes, where they also spelled out the lies of Enron - lies about electric pricing falling at least twenty percent with deregulation..

Electric deregulation was a terrible idea, and in a country like Italy, where natural gas deregulation is in swing, that deregulation is worlse than terrible. Why not face the fact instead of making something that is very simple very complicated.

Qunishan Startup Picture

Nuclear Canada Canadian Nuclear Association Electronic Newsletter VOLUME V MAY 14, 2004 NUMBER 17

"Mr. Policyn said AECL anticipates having standardized piping, valves and components throughout the plant, not just the nuclear reactor, to simplify spare parts and inventories. He indicated that the first unit would cost $1255 U.S./kW and a final cost of $1055 to $1075/kW for follow-on units. The first unit would take 44 months to build, with subsequent units taking 36 months to complete. Mr. Policyn said AECL would offer fixed price contracts to prospective buyers, based on the company's success in delivering projects on or ahead of schedule with its CANDU 6 program in China, Romania and South Korea."

I don’t know what bad things you are referring to. I owned Commonwealth Edison and Illinois Electric Power. This goes back many decades and I remember Illinois regulators repeatedly denying rate increases for Commonwealth Edison that I very much wanted.

I eventually sold Commonwealth Edison as it was not yielding enough on my investment. Illinois Power was bought/merged into Dynegy which was then victim to the Enron fiasco.

Judging by your wording which implied there was some hanky-panky evolved. Other than stock holders getting screwed by politicians (via their agents the regulators) I was not aware of a basis for your comment. What did I miss?

The California and Illinois stories seem to be the case just about everywhere. I talked to an American at a conference in Brussels and he had a roster of deregulation failures - or successes as they are sometimes called. It was pretty long. I suppose if you asked around you could hear some gruesome stories about electric price rises, but I have yet to hear anything that beats Sweden. Thank goodness my wife does not listen to me when it comes to buying electricity.

From what I understand, there would be a lot of merit to the CANDU design being permitted in the US, however that is a long and painful process that nobody has yet undertaken.

Fred - You don't have a solution until you find a way to pay back the capital in the modern world, regulated or not. Therefore, what was done historically in Sweden is basically irrelevant.

I actually find interesting and agree with a lot of the content you post to this website, but you don't have a viable case when you aren't dealing with the world as is.

The bottom line where this subject is concerned is the cost of electricity. Notice, I said the cost, and not the price. I can of course elaborate on that, although I dont think that I will until I am told that I dont know what is going on in one of the languages I read, prefereably English.

But I will give you a hint Mr Barge. The 12 Swedish reactors were constructed in 13 years, and once they were tuned up they produced the lowest cost electricity in the world. Note, lower even - on average - than the hydropower in Norway, because nuclear is not dependent on the availability of water. Now, the lowest cost can be turned into the lowest priced if the politicians in a country do not have an attack of the stupids, but in the case of Sweden, they had an attack of the stupids that several members of the academic elite - to include the president of the Stockholm School of Economics - called genius.

Let me conclude by saying that I will give you the same offer that I have given several persons over the last few years. Contact the ignoramus who is in charge of the department of economics at Uppsala University, and inform him that you want to set Mr Banks straight on the matter of electric deregulation, and could he arrange a seminar for your good self. Then we'll see whether YOU can deal with the world as it is, because according to a recent poll, the people in this country put the price of electricity ahead of unemployment as their main worry.

Of course your heavy emphasis on "free world" is clearly a reference to the other advantage in China, where they aren't stupid enough to allow lawyers to waste half the budget on fignting absolutely pointless court cases, and construction interest costs due to legal gamesmanship. I personally think we too could achieve such a logical condition simply by declaring that "Once the decision is made by a democratic government to allow construction of a given facility, courts may not then be used to further hamper the process". Such freedom is only to be dreamed of though, I suppose.

The reasons are numerous. Some are technical, some are project management related and some are due to the activities of those that just don't like nuclear whatever the arguments in their favour (which are many). But the finger cannot be pointed in any one direction.

The fundamental cause is simple. The design needs to be fixed and then the whole assembly subjected to mass production technology. if you keep building one-offs (bigger, better more things to go wrong - like the Finnish Areva experience) then you are doomed to repeat history. Nuclear appears to have not learnt a single thing from Henry Ford. Ford does not make any money designing and building a vehicle if only ONE is made. They make money by building many of exactly the same design. Why does any economist or engineer believe that the laws of mass production do not apply equally well to nuclear power plants as they do to cars or milk containers or chewing gum or boxes of Kraft dinner - the more you make the cheaper they are to make. A simple fact but entirely and utterly lost on the nuclear industry.

However - despite the myriad of monumental screw ups that have been made the great achievement is that price of nuclear generated electricity is STILL far less than any other. In France the massive investment has paid off handsomely and almost all French plants are paid off and generating a lot of money for the French Government. The investment is far less than the money the French would have spent on oil or coal (which they do not have any of and would have to import)

So while I agree with the criticism that the industry in general appears utterly incapable of building anything on time and on budget it is still the cheapest and most reliable method of generating electricity. Compared to wind at 14c/kW-h and solar at 80c/kW-h (Ontario purchase rates) 5c/kW-h from nuclear is a bargain.

The REAL question that must be answered is if we can produce for these low rates taking into account all the myriad of failures - how much cheaper COULD we produce it for if we get it right and apply mass production to the job. In Ontario an attempt was made at standardisation by building "4-packs" that is 4 reactors of the same design. The problem was that they were largely site constructed and assembled and did not benefit from mass production techniques. Plus each pack of four is completely different from every other pack of four so maintenance commonalities are virtually non existent.

So in closing there should be no single or pairs of orders for nuclear plant. They must be ordered and built in blocks of 10 and mass produced in factories to bring the unit price down to manageable numbers and minimise site assembly and construction.

Anything else is simply asking for more of the same. The Chinese will mass produce theirs and export them to countries without the technology. They will gain from the opportunity every nuclear nation in the west has completely failed to capitalize on.

Malcolm

Mass factory production was adopted for very large natural gas turbine generators that are rated at hundreds of Megawatts, so why not nuclear too.

Ontario is facing massive electricity bill increases over the next fifteen or more years in part to pay for expensive solar and wind farms, and also because Ontario has recently delayed their plans to build more nuclear. The most recent bids for nuclear plants in Ontario were too expensive, so I suppose our provincial government now believes if they just wait long enough, the cost to build them will drop substantially when eventually they can simply order them from China off-the-shelf. If this is right, you can say goodbye to AECL Malcolm, they probably won’t stand a chance competing especially if they become privatized as the feds were planning.

Go back in time and look carefully at California’s “deregulation”. It was really nothing more than deeply flawed “re-regulation” by a bunch of socialists and politicians believing they could emulate the market place through manipulation. Utilities were forced to sell off generating assets. How that could possibly yield lower costs? Debt was incurred to buy the generating assets and that unquestionably leads to higher costs. Further, utilities were forced to borrow money so rates would not be raised. Pure idiocy.

I suspect the basic problem is that there can only be one set of power lines going into your house or business. While the Texas model may have merit, I believe municipal power may a more effective approach. Costs are inevitable lower (no profit) and the municipal is directly accountable to the local folks, as opposed to big utility executives who can not be dropped kicked over the side in the next election.

As to nuclear, just too dam expensive. Ditto for dim witted attempts to force “green energy” on the power generating business (which I strongly suspect is a major reason for rising utility bills).

It doesn't agree well with your opening remarks about government, either.

I also don't see where you get the "inevitable" lower costs from. No profit doesn't necessarily mean lower cost. I suspect you're just expressing your anti-corporation feeling in the context of power generation, which also probably explains why you can't divide by the power output of an big power plant to see that an expensive plant can sometimes produce relatively cheap electricity.

And what happened in Sweden was that once they deregulated, the largest power seller didn't protest the insane decision to close the two nuclear reactors. Some of the components of deregulation in California were absolutely and totally crazy, but as Jule Style said in 'The Man that got away1, "FOOLS WILL BE FOOLED," which applied to a lot of places and not just with electricity. Natural gas in Italy too.

I have tried to convince as many people as possible, starting with my own kids (now all young adults), that any person or corporation preaching or demanding "deregulation" is essentially asking for permission to do one or more of the following:

rape the environment raise consumer prices without justification absolve themselves from any form of socially responsible behavior avoid paying the true costs associated with their actions

All this in the name of "free market competition"...

Competition is not a bad thing, when confined to its milder forms. But just as in a simplistic analogy of sports, for every championship team (i.e. winner) there are dozens of also-rans (i.e. losers). If the (temporary) winner is an Enron or similar entity, designed to "game the system" that they helped to create, we all are the losers. The deregulation fallacy that was sold to Congress by the Skilling-led criminals will be with us forever, most likely, unless there is some incredible turnaround in the sound-byte thinking of the public which would demand a return to reason and regulation. What kind of event, or series of events would make that happen? Only apocalyptic ones, I am afraid...

RWvesel

If you make the argument that regulation yields lowest cost because the government is in charge, then the door is open for exploring betters mechanisms for generating and distributing power thru some form of quasi-government entity. Municipal power corporations are just such a mechanism and these entities do, in fact, represent competition to private power. Further, the municipal operations are not subject to the full burdens imposed by the government regulators and are thus more directly responsive to their customers.

If you folks would do a little research, you'll find municipal power outfits in California that own their own generation do, in fact, have lower rates than their private counterparts.

Under the cover of regulation, Utilities are gobbling up their competition. For instance First Energy in Ohio, Pennsylvania, New Jersey. That leads to virtually no competition at all, except for a few municipal power companies. I am highly skeptical that the consumer is ultimately better off.

In my opinion, the idea of competition remains the best approach, with regulation an unfortunate band-aid remedy in the absence of a means to reasonably achieve a market based solution. However, I think Len Gould is on the right track in the sense that technology can ultimately cause energy to be obtained thru any of a number of competitive generators free to sell power into the marketplace. I would not, however, force the consumer to be subjected to the full brunt of the instantaneous market price of power generation. Rather, a composite average would seem fairer in the absence of the ability of the consumer select the lowest cost power distribution company.

Everywhere, in every part of the world, electric deregulation has turned out to be a curse, though I am sure that there are some who escaped it. Sweden and Norway are rich countries, but even so people are/were being ruined by electric prices that should never come about. Of course, maybe they deserve it. After all, the two stupid wars that George Bush left for the present incompetent president could have been mitigated if the American voters had done what they should have done when Bush ran for reelection.

The primary involvement of Enron founders Lay and Skilling, in the lobbying of George W. Bush, in Texas, and in the US Congress, is a matter of public record.

http://www.nytimes.com/2002/02/16/business/enron-s-many-strands-correspondence-letters-show-bush-and-lay-shared-much.html

http://www.prwatch.org/prwissues/2003Q3/dereg.html

PLEASE get real, and understand that money talks, in Washington, and in every State Legislature. In the energy game, there are ENORMOUS sums of money at stake, and the people who stand to gain the most from a particular form of deregulation will be putting the most expensive lipstick on the pig that they can.

I have a first hand recounting from a gentleman who testified before Congress in this matter of electric deregulation, when it was happening. A Congressman who was understood what was REALLY going on, and REALLY at stake, begged my acquaintance to put the consequences of deregulation in the plainest and strongest of terms, in order to try to get his colleagues to understand what they were about to do. Sadly, that message did not get past the lipstick...the pig looked too attractive, and they bought it.

Regards, RWVesel