Playing With Fire and Collapse Part 16

Reference: Playing With Fire and Collapse Part 15

Part 2 of 2.

Len - 1.12.06 – On Independent Market for Every Utility Customer Part 2 - Market Operation

The Market Manager uses a public tender process to add to this baseload contract supply as load increases within their market territory. Ideally they never get themselves into a position of having to pay for more production than customers purchase, but in the event that happens they are still responsible for paying the contract, so must try to re-sell the excess into other neighboring markets. Failing that, the Market Manager must add a levy onto all market transactions to collect the amount necessary to cover the shortfall amount owed the provider above the amount collected by sales…

Vanderhorst-Silverio: After reading the article suggested and its follow up, I find that after looking closely IMEUC does not corresponds to the new integral reform paradigm. IMEUC is based on mechanistic thinking about fundamental electricity economics, as can be found under the heading “Metrics” a statement that says: “[E]very consumer of utilities will benefit from a system such as this in three ways: first…every entity at every stage in the supply chain will be constrained to making their own good investment and operating decisions or be out-competed by a more efficient operator.”

As the result of efficiency on every stage of the supply chain, any competent electric power system planner would see a repetition of the fault found in the deregulation experiments of the last decade: the system is also fractured. Hence IMEUC does not lead to the maximum value expected by society as is EWPC where the system architecture is modularized at the proper interfaces on the value chain. For example, retail marketing is an essential service for the development of the resources of the demand side that is disintegrated in the IMEUC. A fault on market architecture is evident on IMEUC that becomes a barrier to emerging retail marketing business model innovations under competition.

It was to the innovation concept that Mr. Wimberly responded to my conclusion that “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 of electric markets.”

While under EWPC obsolescence risk of customer interfaces are taken by retail marketers, under IMEUC monopoly regime the bets of the Market Manager on the customer interface (including metering) are transferred to the rate payers. As customers needs evolve, retail competition should be centered on business model innovations for the different market segments. One size fit all system is also big bet.

In addition, under IMEUC the Market Manager remains as an intermediary for base load generation based on very risky forecasting. Forecasting great weaknesses that leads to playing with fire have already been delved at length earlier on under this article. The resulting market design is no robust enough, leading to either excessive costs of over-capacity or under-capacity by missing proper whole system long run risk management. A market design error has been made, as an improper market signal may lead to large levies imposed on customers when there is a large forecasting error.