lunes, enero 30, 2006

Questions and Answers About Reregulated Energy Contracting Part 4

This was my response to Joseph Somsel as a follow up to Questions and Answers About Reregulated Energy Contracting Part 3.

Dear Joseph,

I like very much your answer , because it goes deep into the systemic problems that the electricity industry faces worldwide. I love the possibility of a real dialogue, not a debate, as Bill Isaac has envisioned it. The dialogue is not about deregulation, but about electricity WPC (Without Price Control).

The United States do have strong institutions which perform well when cause and effect are close in time and space. Governor Davis term was 1999-2003, but many of the important decisions on deregulation were probably made on the term of Governor Wilson.

I like to know your answer before continuing to the following 5 questions:

1. Was Governor Davis a casualty of deregulation because earlier irreversible decisions on such a vital infrastructure landed on his watch?

2. How much did Governor Wilson contribute to that situation?

3. How much of the problem is due to FERC?

4. How much was due to the very unlikely combination of California NIMBY, hydro condition, high gas prices, etc.?

5. Why were the recommendations of Fred C. Schweppe to develop demand response before deregulating not understood as?

Regards José Antonio

Joseph Somsel wrote on EnergyPulse:

Regulators can also lose - lose their jobs. Just ask the former governor of California, Grey Davis, on the risks of having physical shortfalls of vital infrastructure on your watch.

So far, deregulation has been about profit taking via risk shifting - a shell game.

I would summarize the political decision on regulate/deregulate as buy vs.make. With a regulated utility industry, the customers and voters have management responsibility for investment decisions through their elected representatives. In a deregulated regime, customers and voters place themselves at the mercy of the markets.

Deregulation is a vote of no-confidence in our political system, really in our confidence in our ability to manage our own affairs via our political institutions and elites.