The vertically integrated utilities paradigm has been in a NO PROFIT ZONE for quite some time, letting utilities make a profit under regulation only by the “consumer having his wallet cleaned out by ever increasing power costs.” To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop.
Customer Wallet Cleaning Problem and Solution
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
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Dear Prof. Banks, Mr. Keller and Mr. Rozenman,
I agree with Mr. Rozenman that regulation not only have big flaws, but the most important thing is that it is just plain obsolete. It is for the obsolete fact that I disagree with him that the debate the debate is not yet settled, as EWPC has been available for over for a year. To understand the chaotic events that explain that the debate is settled please read the Conspiracy Theory Against Mr. X.
The decade long debate between E1R2 deregulation with vertical integration regulation was a real waste of time, as deregulation California style was a real scam that was based on The BIG California LIE, letting Prof. Banks repeats again and again his proper views of the scams. Now, the fixes to deregulation with re-regulation that, for example, include backwards incremental extensions, like capacity markets and NERC mandatory requirements, are just a return to a more costly kind of deregulation. That is what worries Prof. Banks.
In a second, and more responsive, effort on Mr. Keller question “…could one of you gentlemen offer a concrete and real world solution to the problem of the consumer having his wallet cleaned out by ever increasing power costs?”, electricity under regulation – (as another way of saying it is just plain obsolete) - has been for quite some time in a NO PROFIT ZONE (see Adrian Slywosky’s book “The Profit Zone”) with an outdated business model of price controls for the end-customer, in which two intermediaries, the regulator and the utility, misrepresent the real and differentiated needs of the customers. The utility with this NO PROFIT ZONE business model has the advantage to win rate case to the regulator, making a profit only by the “consumer having his wallet cleaned out by ever increasing power costs.”
The solution to Mr. Keller problem is the paradigm shift to EWPC. One of the key things that need to be done is to remove the “native load” barrier in the new Energy Bill and adopting EWPC. Removing the barrier will allow to open the demand side and introduce competition in retail and wholesale, so that new business model innovations can be developed.
To get the power industry in the PROFIT ZONE, there is a need to restructure with the aim to admit business model innovations to develop. In that respect, please read the article The Sense of Urgency for EWPC Restructuring or at least this part of the content:
Dear Professor Ramírez Orquín.
Your article [The Potential for an Effective and Timely Deregulatory Endeavor] is giving the proper emphasis for the sense of urgency on the right king of restructuring of the electric power industry, when you write: "Soaring prices together with the perception of a deteriorating service/product quality contribute to this notion. For the electric power system this trend is particularly worrisome given its vital implications to society."
I agree that “The current restructuring drive has not seemed, as some policy makers expected, to improve this condition and may have actually made it worse.” In 2004, The Cato Institute experts Peter Van Duren and Jerry Taylor recommended total abandonment of restructuring.
Electricity without price controls (EWPC) is a paradigm shift that makes the case for restructuring as explained in Rethinking Electricity Restructuring as EWPC. The new drive would make things better, as technological innovation are waiting to be integrated to power system planning, operation and control with at least six sets of disruptive technologies, as explained in The Sixth Disruptive Technology.
One of the main problems with restructuring was separating transmission from distribution to keep regulated retail together with distribution. In the article Give Engineers What Belongs to Engineers and its hiperlinks the “two dominant components i.e. the socio-normative and the technological ones, both…” will be “working harmonically.”
For more details see the Electricity Without Price Controls and the Grupo Millennium Hispaniola blogs.
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity