“Let the Market Decide” in Ohio
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
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Dear Mr. Rosenstock,
I am glad that the Edison Electric Institute (EEI) is suggesting to “Let the market decide,” with respect to the worldwide movement to ban the (light) bulbs. The reason for that move, however, has its origin in the obsolescence of the power industry market structure and design, which operates in general perverse incentives on energy efficiency. For example, to the complain of Joseph Somsel, on 11.6.07, “Instead I have to pay for … ‘efficiency’ that people have not decided to buy themselves,” I responded in the electricity without price controls (EWPC) article Let EWPC Come to Fruition, that:
I agree that by decoupling artificially sales and profits by ‘costly incremental shifts away from the VIUs [vertically integrated utilities] paradigm’ makes customers pay for “‘efficiency’ that people have not decided to buy themselves,” as I explained when I wrote The Sixth Disruptive Technology.
With respect with our strong recommendation of letting the market decide, in the EWPC article the Divine Dispensation of Electric Markets is Gone, I wrote:
When energy costs were low, the business model of [ÍOUs] winning rate cases to the regulator didn’t bother the customers. But since the oil embargo in the 70s, customers are ever more interested in competitive prices, as free society recognized that IOUs cannot control anymore the electricity markets. I have followed Donella Meadows advise (see the Let's Get Out of Back Rooms to a Generative Dialogue link please) to end the divine dispensation to the IOUs. But after many things have occurred during more than 30 years, with the obsolete VIUs controlled market, customers like those of the state of Ohio want and effective and efficient re-regulation process.
Right after reading your article, I went to the EEI website and found, in “events and meeting” of the home page, a link with the promotion of the Energy Efficiency Global Forum & Exposition (EE Global), to be celebrated next week, with the auspices of EEI.
“Let the Market Decide” in Ohio . . . continued
I browsed the EE Global website and found that “What makes EE Global stand out from other international conferences,” is that “[t]his conference is being held in Washington, D.C. to demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy. Today’s achievements in energy efficiency as well as developing plans and commitments for a sustainable energy future will be highlighted.”
“To demonstrate to policymakers that energy efficiency is the cheapest, quickest, and cleanest resource for meeting the world’s ever-increasing demand for energy” is a tall order, exactly what the late Donella Meadows suggested (hit again the link to “Let’s Get…” above) in 2001, and that have inspired (together with other insights) the breakthrough paradigm shift to EWPC market architecture and design. EWPC turns around 180 degrees the industry away from the perverse incentives against energy efficiency, by completely letting the market decide effectively. While browsing the program, I found missing the need for such paradigm shift.
In conclusion, I respectfully suggest that the EEI consider very seriously letting come to fruition (please see details above in the corresponding link) the breakthrough paradigm shift to EWPC, as it is in the best interest all the EEI membership and all other stakeholders. The best opportunity available right now for the EEI is precisely in Ohio, as explained in the EWPC article A New Mistaken Experiment, where I wrote among other things:
The public needs to be aware that the approved Ohio’s Senate Bill has a big flaw: for competition to exist, utilities as we know them would disappear. For retail competition to exist there is a need to do without incumbent retailers, as the utilities need to be transformed into integrated (transmission and distribution) transportation utilities.
The central issue, however, is that the transportation utility is not a subject of congressional debate, but the subject of engineering planning, operation and control, to satisfy an ultraquality imperative, just like nuclear power plants and space flight vehicles. As there are Only Two Stable Paradigms, the electricity-regulation bill approved by Ohio’s Senate is just a new mistaken experiment under economic first, reliability second, tinkering.
José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity