domingo, noviembre 18, 2007

EEI California Dreamin’

The U.S. power industry is dreaming that it is safe, when in fact the leaves are brown and the sky is gray as the industry is in the NO PROFIT ZONE. To get it safe and warm into the PROFIT ZONE, EEI should lead the regulation ban, on such a winter’s day, to let the commercial market decide.

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 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.

Best regards,

José Antonio Vanderhorst-Silverio, Ph.D.

EWPC is NOT the Ontario Model Either

Just as EWPC is not the UK Model, it is not the Ontario market model either. However, probably with a hidden purpose, Mr. G keeps confusing the de-regulation market model of Ontario with the EWPC market paradigm. Is that serious behavior? It seems that although he is a very intelligent and important man, Mr. G. has a very difficult time following links.

EWPC is NOT the Ontario Model Either

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 to contact the author for any kind of engagement.

Dear Mr. Gould,

Thank you for your intelligent and important questions, which I will respond with care and diligence.

However, please don’t use phrases like “anyone can take you in any way seriously…,” as they don’t follow the “most important rule of the EnergyPulse media,” set by Mr. Y. So, don’t forget to read what Mr. Y said about Mr. G in the Conspiracy Theory Against Mr. X, particularly where is says: “It doesn't surprise me AT ALL that you didn't follow the link, you NEVER follow a link…” So once again follow the links below.

With much respect, please find my last response to Mr. Giegler, which could have been found by following the link, under the article Free Market and Central Planning, Under R1E2. The response was:

There is no need for simulation at all... The R1E2 concept makes the VIUs and the EWPC paradigms indistinct in term of the non-triviality of electric power systems, which is missing from IMEUC and all deregulation experiments. [this discovery is mentioned below] … The added efficiency of EWPC with respect to the VIUs paradigm comes from demand integration and the elimination of prices controls. Said in other words, the VIUs paradigm can't no longer maximize welfare for the future, as that process started back in the 70s.

Following Einstein’s (Mr. Y’s role model) quote “Everything should be made as simple as possible, but not one bit simpler,” the essential requirements of EWPC, that differ from existing de-regulation that you mentioned is “retail competition with active demand (UK had no active demand) and ultraquality transportation (UK has separate transmission and distribution and no ultraquality identified). That is the essence." as can be seen by following the link to the recent article EWPC is NOT the UK Model (referred, from here on, as the first article). It follows that to get ultraquality transportation, transmission and distribution should be tightly integrated.

However, the Ontario, Canada, paradigm as you explained on 11.16.07 under the article Distributed Architectural Renewable Energy Generation, has these characteristics: “The separation of distribution from generation, transmission and (retail if used) into a regulated monopoly on geographic boundaries should be considered an absolute requirement for competitive electrical systems.”

According to your opinion, under de-regulation and inactive loads, the separation of transmission and distribution is assumed as an absolute requirement. However, under EWPC with active loads the separation is a big mistake, as the optimization of the transportation system (that enables the optimization of the system as a whole under EWPC) does not result from the optimization of transmission plus the optimization of distribution by themselves.

The optimization of the system as a whole, can also be seen in the first article where “I wrote of the discovery that ‘To optimize the transportation system, it is required to consider total social (demand, transport, supply) welfare needs, and not just the optimization of transmission, distribution, or both, by themselves.’”

The discovery (not invention) mentioned above is the ultraquality imperative that the vertically integrated utilities (VIUs) paradigm and the EWPC paradigm have, but which Ontario, Canada and the UK models don’t. The whole VIU paradigm controlled market can be divided into two markets, one of which, the controlled transportation market retains the ultraquality imperative, by planning, operating and controlling the transportation system to keep the characteristics of the whole (both the controlled transportation market and the competitive commercial market).

The response to “Why would any retailer risk the financial investment to implement real demand control on their customers when the resulting benefits will accrue not to them or their customers, but to all connected customers including those of their competitive retailers?,” can be found in the comments to the article A Little Silicon is Necessary but NOT Sufficient (please hit the link and follow it to read them).

I like to add, that the qustion itself comes from a misunderstanding of the theory and practice of spot pricing of electricity, which may or may not have been implemented under de-regulation. Under EWPC, as an extension of Schweppe et al regulated energy marketplace, spot prices are not the result of real demand control, but forecasted prices resulting from security constraint unit commitment (generation and demand) simulations.

As I wrote yesterday (see above) all that is needed to develop a market with financial credibility is a professional market with high reliability and without price spikes (a fully functional market). By lacking those two elements, IMEUC needs fallback to government / rate-payer guarantees. Read the details in the whole article To EEI: “Let's Ban Regulation,” Starting in Ohio, to try to understand “The idea that regulation is the only paradigm that ensures generation investments is flawed.”

To understand the last comment of your post, readers are advised to read, as an example, A Paradigm Shift to EWPC (don’t forget to follow the link) to see my response to a similar complaint by Len that said “My problem with EWPC are myriad eg. it's precisely identical to every existing failed attempt at de-regulation in N. America. And it's promoter flatly refuses to answer any difficult questions about it. Questions which I have posed before, such as:…”

See also Len Ask: What Is Transportation?, 2nd Time: Ontario is Far From EWPC...

So the final boomerang question is: Is Mr. G serious about EWPC or just fooling around?