sábado, agosto 11, 2007

An Attempt to Stop Progress in Electricity

I posted the following comment under the article Do You Want to Increase Your Utility's Demand Response and Consider it as a Bigger Player in Resource Planning? - Part 1, by Michael O'Sheasy, Vice President, Retail Pricing and Solutions, Christensen Associates.

Dear Michael,

I read a draft that was posted in energypulse.net of your proposals about the Standard Rate Rewards Program (SRRP) and Fixed Bill Rewards Program (FBRP) to make CPP and FB, respectively, customer friendly. I may agree with the logic of your explanations, but have large reservations on the underlying assumptions.

Both parts of the article seem to be written under the assumption that retail competition is unnecessary for the power industry. Behind the words is a utility whose business model is to win rate cases from the regulator. The results will continue to be at the same time to avoid innovation and competition. The customer still has two monopoly intermediaries: the utility and the regulator negotiating under price controls.

I understand they are a way to stop progress in the power industry. For example, if FBs were to be developed under competition among Second Generation Retailers (2GRs), the resulting basic FB would be much more competitive than with monopoly service. In addition, utilities business models will not be transformed to customer friendly ones, as old dogs don’t learn new tricks. Customers will be missing other retail service innovations which will be made by competitive 2GRs business models with an integral customer orientation.

In the post EWPC is Pragmatics' Winning Market Architecture and Design, a synthetic one page explanation on the need of retail competition restructuring is given. The post was written in response to an energypulse.net article by Dave Turner (see it in the post), who questioned why utilities were not investing in AMI and wondered “… how separate organizations will do their part to facilitate the process is still under debate throughout the industry.” With EWPC the debate is over.

The approach to SRRP and FBRP is a piecemeal one and does not respond to a fundamental system solution. A little longer explanation was given earlier in the post On the End-State of the Power Industry.