martes, abril 29, 2008

EWPC Can’t Be a Market Winner

2GRs want to compete to develop market business model innovations for global retail market segments. On a given market segment, the market winner of the market vs. market competition can only be enabled after the EWPC EPAct is enacted. The EWPC EPAct should forbid state regulators from letting utilities win rate cases that involve Intelligent Utility Enterprise and Smart Grid investments, because of the high risks of failure involved.

EWPC Can’t Be a Market Winner

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on April 29th, 2008.

Copyright © 2008 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.

This is another attempt to have a mature level 3, win/win communications mode. Level 3 win-win communications mode is nothing more than a generative dialogue. I am not my opinion, is a generative dialogue key principle that allows the separation of our opinions from us.

I have invested many posts trying to patiently explain myself as have many other persons that have responded. I have been writing about market architecture and design, and getting technologies responses that have slowly help the truth arise. I changed my opinion to accept a comparison between EWPC and IMEUC, because they are not at all comparable. EWPC is about market structures and rules. EWPC development is about consulting work, not about technology design of market business models.

Based on the above, I can also say that EWPC is not the winner of the market vs. market competition as it was suggested by Geoffrey Moore. In fact, EWPC was not supposed to be in the market vs. market competition in the first place. Once again, EWPC is just a market architecture and design paradigm that emerged to enable open retail competition on the U.S. federal level and at the global level.

In fact, Warren Causey wrote (see his complete comment in the EWPC article Breakthrough Suggestions for Today's Utilities Environments) : “In order to adopt EWPC, public utility commissions would have to let go of their authority to regulate rates at the retail level. This is a political issue. PUCs are political entities. Commissioners pretend to believe they are "serving the public interest" by protecting the public from nasty old utilities.” EWPC should be compared with price controls that regulators have.

That comparison is precisely the reason that I am assuming that a shift from today’s regulated markets (where utilities win rate cases to the regulators) to competitive markets is bound to occur at the global level. The market bridge between supply and demand on any given market segment can filled up by one of many market business models. That is part of the EWPC architecture. As simple as that!

In addition to the Intelligent Utility Enterprise and Smart Grid (IUE/SG) that Warren Causey reports (see please EWPC article Leadership Answers What to do First), another of many potential market bridges (a market switchboard business model) is IMEUC, which needs to have all customers on board. But the only way IMEUC can be adopted is when a regulator makes the same highly risky bet of utilities IUE/SG to select it.

There are also switchboards that don’t need to have all customers on board. In that case what’s needed is a market design that doesn’t allow free riders, as they will be poorly designed market rules if the allow free riders. The resulting market rules are very important for the required transition period to competition, where some customers remain under the old rules modified to eliminate cross-subsidies.

The particular example of how to avoid free riders in a transition, especially to open retail markets at the federal and global levels, was given by Nat Treadway, in his article The Dawn of Electricity Competition: Efficient Prices and Efficient Choices. Treadway explains that, “The design of default service (also called basic or standard service or provider of last resort) was identified as the most significant determinant of the success of retail electricity choice. A poorly designed default service undermines competition. If default service is designed to satisfy all residential consumers’ needs, or if it bundles and spreads risks among all consumers, or if it is priced below market, then it is unlikely that new retail electricity providers will enter the market. With few choices, consumers are left with only the poorly designed default service, and with limited benefit.”

There are many other potential alternative market business models that retailers can develop to bridge supply and demand and which customers have choice to select. I contend that today’s 1GRs will be replaced by 2GRs that operate at the Control Level and the Economic Level to integrate demand to power system planning, operation, and control. That I said is the market breakthrough, not a technology breakthrough. But, the real proof will be left to market vs. market competition, which will be ready to start as soon as the EWPC EPAct suggested in the above mentioned EWPC article Leadership Answers What to do First is enacted.

Under the EWPC EPAct, regulators will no longer be making the large bets on markets business model (Intelligent Utility Enterprise and Smart Grid investments), that like those 75% of projects that end-up in failure in the reengineering revolution.