To all readers that want to learn about the third way of deregulation
Jack Casazza, Frank Delea and George Loehr, of “Power Engineers Supporting Truth (PEST),” have written the article “Electrons Versus People: Which group is smarter?”, for the January-February 2007 issue, of the IEEE Power & Energy Magazine, “In my View” column.
While I strongly recommend reading and “listening openly” to what the authors say, I only quote incompletely the beginning and last paragraphs. The authors start by saying that: “Deregulation and the concomitant restructuring of the electric power industry in the United States have resulted in a decline in the reliability of North American bulk power systems and constitute the ultimate root cause of the California meltdown, Enron's depredations, and the 14 August 2003 blackout.”
As part of the decade old debate, done with faulty deregulation and restructuring, the authors conclude that “An independent investigation is needed of all the issues raised by the blackout and other reliability problems to ascertain that all necessary remedial actions have been taken.”
As can be seen in the book “Powerful Times: Rising to the Challenge of our Uncertain World,” written by Eamonn Kelly, CEO of Global Business Network, a renown futures network and scenario strategy consultant, there is a need to consider an emergent paradigm and creative destruction of the power industry.
The independent investigation should consider fully both the institutional memory and the sound research done by Fred C. Schweppe and colleagues, from 1978-1988, not in a debate, but in a generative dialogue, to resolve most of the flaws identified by Casazza, Delea and Loehr, and also to break the barriers to the emergent innovations flowing into the industry.
In one promising third way of deregulation mixed market architecture and design, centered on Electricity Without Price Controls (EWPC), NERC reliability activities are merged into the system engineer institution, which is in charge of managing short run and long run systemic risk, with both supply side and demand side resources. That center stage controlled market institution assures that electrons and people have the same purpose. Transportation (T&D) of electricity is an integrated monopoly responding to the system engineer institution and under a traditional regulator.
The free market, non real-time activities, restricted to the supply side resources (central watts and vars generation and storage, FACTS, etc.) and demand side resources (AMI, CIS, energy efficiency, demand response, distributed watts and vars generation and storage, etc.), also respond to the system engineer institution on matters of control, operations and planning, and to a prudential regulator on conduct of business, such as competition, market power, consumer protection, asset quality, etc.
As the readers of the comments under this article may recall, at the center of the suggested generative dialogue we have pending the following statement:
IRRESPECTIVE OF LOCATION, THE BEST INVESTMENT STRATEGY FOR AN ELECTRIC POWER SYSTEM WITH THE APPROPIATE MARKET RCHITECTURE AND DESIGN IS A MIX OF INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE DEMAND SIDE AND INVESTMENTS ON THE DEVELOPMENT OF THE RESOURCES OF THE SUPPLY SIDE THAT REDUCES SHORT RUN AND LONG RUN SYSTEMIC RISK WHILE SOCIETY RECEIVES THE MAXIMUM VALUE FROM ELECTRICITY.
© 2006. José Antonio Vanderhorst-Silverio, PhD.