lunes, septiembre 03, 2007

A Vertical Integration Conspiracy Theory for the US Judiciary

Reference and context: Economic Theory and an Unsociable Review of Some Aspects of the Global Warming Discussion - Part 2, by Ferdinand E. Banks, Professor

To all readers,

While Fred and Joseph worship the obsolete vertical integration, their observations have some merits.

Yes Fred, deregulation is a [global] catastrophe.

No Joseph, as can be seen by any impartial observer, I don't tout the Texas market at all. You are most probably right about a Texas scam, but you are completely wrong about retail competition, as it is the key to make demand elastic at lower costs, which is what you should be most concerned about for the customers you now missrepresent.

No Fred, your rhetoric won't erase "a more down to earth response is that it is evident that tinkering is not a serious way to go about anything. This means that any fool could have written that. So, Fred you were not smart enough, have flunked the test, and are losing the case."

Fred: my goal seems quixotic to a casual observer. Time will tell. I found my purpose on what has now become the emerging EWPC. I started in 1996 telling others the aim to place the Dominican Republic in the electricity map. However, from 2003 on, I found that there was a conspiracy, not to extend the deregulation scam worldwide, which occurred, but to stop competition altogether to extend the useful life of the inefficient vertical integrated utility, which both of you defend for some unknown reasons.

The whole debate - an uneven match of two evils - was limited on purpose between deregulation and vertical integration. A superior third way has been emerging since the 80s, which with my effort now makes the debate a waste of time and a value destruction of large worldwide proportions.

Joseph, I agree: the ABACUS system was designed to show progress in competition, not to show lower prices. So, even though vertical integrated systems are not competitive, they are much better deals than the deregulated scams. California IOUs were the mastermind of the failure of deregulation as they designed it. Enron’s greed just made the job easier. A well designed and perfectly executed, public relations campaign destroyed deregulation forever. Now I am in the job of destroying vertical integration as David, beat Golliath. A hint: the judicial system of the US should look very closely at the issues.

When Jim Bayer wrote his hint on 8.28.07 ”THERE ARE NO CONSPIRACIES” and Malcolm agree, they missed a great opportunity to understand what is really going on. As can be seen from the post A Generative Dialogue Without Illusions Part 5, “According to Eamonn Kelly in his book “Powerful Times: Rising to the Challenge of our Uncertain World,” page 35, Winston Churchill said: “A lie gets halfway around the world before the truth has a chance to get its coat on.” On page 36, Kelly says that “Conspiracy theories can, ironically, provide an ordered framework with which to understand chaotic events.”…

Picture yourself in the year 2000, and as a practical analyst that knew about the protection inherent in utility regulation and also knew what had happen in the US Midwest in the summers of 1998 and 1999. … “The debate in California has changed remarkably over the past year or two. Discussion now focuses not on whether retail competition or direct access is possible, but on how to make it happen. The three California investor-owned utilities affected by the commission's decision convened an industry working group, called the Western Power Exchange (Wepex) to address the issues related to implementing the new competitive retail market.” Please answer, to the best of your knowledge, if there might be some ground for a complot theory on which Enron was a just a casualty.

Now, to show that I don’t tout the Texas Market, in the link it is very clear that while the authors ABACUS system shows Texas in the “first place,” it lack all of the essential elements of EWPC as is found in the synthesis post Solving the Tough Electric Power Market Problem.” See now selected paragraphs:

On March 13th, 2007, at the Third Annual Carnegie Mellon Conference on the Electricity Industry, I presented A Generative Dialogue to Reach the End-State of The Electricity Industry. In my comments to your article, the slides mentioned are those of that presentation, which I believe is a good companion to your paper and the report.

I strongly agree with your statement that regulated pricing (also for Len) is a key barrier to retail electricity choice. This is phrased on slides 14, 16 and 43 as the “native load” barrier.

The dawn of electricity competition in Texas is about eliminating price controls on competitive activities. Difficulties experienced last year, because of lack of demand response, meant that there is not enough integration between retail and wholesale electricity markets. The Texas market is just immature.

The issue of integration of retail and wholesale markets was explained in the paper An Alternative Business Case for Demand Response, which was published as a rebuttal (I mentioned the End-State then) to your DEFG partners, Brunetto and Wimberly, article The Business Case for Demand Response (please see the comments interchange with Thomas under the article).

Texas is not a Pure-Disco state either – competitive retailers should be able to replace 100% of the old monolithic regulated incumbent’s retailers [of Texas] to reach 0% overhead -, so there is a space available to reach the End-State. No nonsense competitive retailers (also for Len) business model innovations [just in EWPC] are at the center of market development (slide 21).

… The generative dialogue should approach altogether the difficulties in the interaction between regulated and competitive affiliates to get to wires-only (pure-disco). There is another argument under EWPC to support a pure-disco arrangement: transportation (transmission and distribution) should be kept whole (integrated) to manage efficiently and effectively short and long run systemic risk (slide 17).

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