EEI California Dreamin’
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to firstname.lastname@example.org to contact the author for any kind of engagement.
All the leaves are brown … And the sky is grey … I've been for a walk … On a winter's day … I'd be safe and warm … If i was in l.a … California dreamin' … On such a winter's day …
Dear Mr. Rosenstock
Albeit minimizing the importance of a well documented proposed “ban of regulation [except on transportation]” (see To EEI: “Let's Ban Regulation,” Starting in Ohio) to “let the [commercial] market decide” (see “Let the Market Decide” in Ohio), thank you very much for at least acknowledging the ban. I think it is a defensive, but nonetheless, good start.
Highlighting the positive, the ban’s objective, and to let the market decide, is to “…provide the potential for modernizing the whole productive structure and for raising the general level of productivity and quality to a higher plateau,” of the power industry. In other words, the goal is to shift the industry from the NO PROFIT ZONE to the PROFIT ZONE, so that the EEI membership avoids what the railroads, the nuke industry, and Detroit, went through or are going through.
The need for the shift is in the EWPC article Customer Wallet Cleaning Problem and Solution, where you can “… learn that 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.”
Going back to the beginning, in the Executive Summary of the full paper, Van Doren and Taylor write: “Electricity restructuring was initiated in the 1990s to remedy the problem of relatively high electricity costs in the Northeast and California... Economist wanted reform to eliminate regulatory incentives to overbuild generating capacity and spur the introduction of real time prices."
What happen after that is partially (more below) documented in the EWPC article The BIG California LIE, which in brief says: “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
That explains why you “don’t know any regulators who would really like that idea.” We all should questioned if behind the irresponsibility there was a conspiracy that seems to have been “successful” so far. Please read the EWPC article A Vertical Integration Conspiracy Theory for the US Judiciary to learn about it.
You are right, “there are many politicians who seem to want more price controls and regulation on electricity,” because they are unaware of both the BIG LIE and the potential conspiracy, while also unaware of the recent emergence of EWPC.
To learn more about what happen in California, please read the following EWPC articles (excerpts are included below each title):
Divine Dispensation of Electric Markets is Gone
… the “Law of the Situation: the railroads did not understand,” (see my post of 9.11.07 above) that applies to VIUs, from which I extract, “Some people [IOUs for example] still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else [under EWPC for example]. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”
When energy costs were low, the business model of 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 link Let's Get Out of Back Rooms to a Generative Dialogue) 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.
The Sixth Disruptive Technology
The above difficulties are also explained in a different way by Jack A. Casazza, as the scrambled egg, that can’t be unscrambled. That would mean that The BIG California LIE was supposed to get away with a much larger scam than the Enron’s scam, as vested interests extended the obsolete VIUs paradigm well beyond its useful life, by tilting the competitive balance in an equilibria away from the best economic outcome for society. That is what is fueling a backward movement away from real retail liberation in Europe now. It is to the best equilibria that EWPC is concerned. As Einstein said; "We can't solve problems by using the same kind of thinking we used when we created them."
Let EWPC Come to Fruition
Just like you [another person], I am also a long time critic of deregulation that agrees with many of the professor’s points. However, instead on placing myself on the problem side, as a power engineer I have been, since 1995, concentrated on the solution side. By “Working on ideas outside” engineering, I “can enjoy the enthusiasm built on partial ignorance,” as my hero and role model Uno Lamm suggested. Please refer to “Uno Lamm: Inventor and Activist,” by Catherine Wollard, published in March 1988 on the IEEE Spectrum, here and below.
It is such a solution that evolved into EWPC, which makes the deregulation debate totally unnecessary. In fact, such debate was a completely waste of time, which could had been avoided if The BIG California LIE (hit link to read the article about that LIE) had not been enabled, as retail competition “is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
In addition, in the BIG LIE article I repeated that there is a great need to consider A Vertical Integration Conspiracy Theory for the US Judiciary (please hit link also) to provide an ordered framework with which to understand that chaotic event and process.
Finally, unlike the case the HVDC Pacific Intertie, in which “it was estimated that the people in Los Angeles saved $600,000 a day when Columbia River power began to flow south,” the same California IOUs were unable to come up with their BIG LIE. Like Uno Lamm, I understand that “’Among Americans, when the heat of combat is over, and a decision has been reached,’ he says, ‘all the bitterness disappears, and people work hard to bring the final decision to fruition in the best possible way.” That has been a central tenet in my work on the development of EWPC.
José Antonio Vanderhorst-Silverio, Ph.D.