miércoles, abril 22, 2009

U.S. CONGRESS, the COMPETE Coalition and Comprehensive Energy Legislation

This is in response to Mr. BARACK OBAMA, President of the United States, Earth Day call for comprehensive Energy Legislation, which the U.S. CONGRESS, the COMPETE Coalition and the general public needs to be aware of.

The response is in a set of recent comments, questions, and answers, that aims to explain that the COMPETE Coalition should be calling for complete, fully functional, and comprehensive energy legislation based on fundamental energy reform. The source is the EWPC article A Question to the State Secretary at the Santo Domingo Digital Town Hall


--As a result of the California-Enron crisis, electricity reform underwent a push from market deregulation towards excessive regulation. --

Nonsense. Although the de-regulation process stalled, only California backtracked, and they re-instituted a formal balancing market within the past month.

--There is a need to divide the highly complex power industry emerging whole in two subsystems: 1) a regulated power transportation system and 2) an open market business system. --

??? Already done, Jose. They are called 'ISOs' and/or 'RTOs'. Several US states and Canadian provinces have implemented retail markets, too.

James Carson, http://www.risquant.com/ JBCarson@RisQuant.com

Posted By James Carson 4/21/09 6:36 AM


Hi James,

I see that you didn't answer the question on the need for fundamental energy reform in the Americas (not just the US) and the world.

Believe it, or not, there is a pressing need to complete the reform with a fully functional system that has emerged as EWPC. Today, U.S. customers are expending on the average 50 additional cents per every dollar billed by power companies to face the lack of performance of the service. I am sure that savvy utilities investors have already recognized the problem which is being solved by adding value an open market which is forbidden to them.

In fact, electricity reform stalled in many states that were in the process to deregulate which also backtracked to the highly excessive vertical integration. Most "deregulated" states continue to have excessive regulation (and vicious circles the reinforce each other, such as coupling of profits and sales or with artificial decoupling) with added capacity markets which produce excessive regulation, in addition to face the increasing unnecessary complexity of NERC mandatory rules.

I hope that the COMPETE Coalition, which advocates: "... well functioning, competitive wholesale electricity markets which enable state governments to implement retail electric service options best sited to their regional needs and which enable consumers to benefit from the best possible price and service" will review as soon as possible that message. We all know that organized wholesale markets have undergone a series of costly incremental extensions under the attraction of the old paradigm.

ISOs and RTOs are based on the incremental extensions that stated with EPAct '92 and open transmission access (which introduces more complexity than necessary), no like EWPC with open power transportation access with integrated T&D companies based on much simpler rules.

EWPC extends Schweppe's development by involving customers operating as partners of the utility to make a big difference: "Under EWPC, retail electric service is not simply enabled by wholesale electricity markets. Retail electric markets and wholesale electricity markets mutually reinforce each other to provide a fully functional [competitive] electric service. That is why EWPC is able to produce a superior solution path through innovation in retail electric service at the federal level."

That big difference results in a virtuous circle of increasing leverage between the open and the regulated markets. That is why the emergent and complex whole is divided like that, so the COMPETE Coalition can have its new message.

Posted By Jose Antonio Vanderhorst-Silverio 4/21/09 4:17 PM


--I see that you didn't answer the question on the need for fundamental energy reform in the Americas (not just the US) and the world. --

On the contrary, my point is that fundamental energy reform through implementation of electricity markets in the US has been underway for more than a decade, longer elsewhere.

--In fact, electricity reform stalled in many states that were in the process to deregulate which also backtracked to the highly excessive vertical integration. --

Name the states that have 'backtracked', and how they did so.

--Most "deregulated" states continue to have excessive regulation... --

No argument here.

If I may quote you from a different thread: "We should forget the details, and focus just on the essence." So, I conclude that you are not concerned about implementation details.

The power sector is an enormously important industry. Practically EVERY other facet of life in America depends on it on a moment to moment basis. Do you seriously expect the US to implement fundamental market reforms other than incrementally?

Posted By James Carson 4/22/09 9:05 AM


On the first and last comments:

The need for fundamental reform can not be defined incrementally (although it may be so implemented), because it involves a paradigm shift from one obsolete center of attraction - the IOUs Framework – to the emergent whole center of attraction – the EWPC Framework. That is what the administration, by focusing on the true essence of both systemic crises, has planned for both the financial and the health care systems, as can be seen from the EWPC article Reform on Obama Address: Health Care 9; Education 1; Energy 0., (to read it, please hit the hyperlink http://www.energyblogs.com/ewpc/index.cfm/2009/2/25/Reform-on-Obama-Address-Health-Care-9-Education-1-Energy-0 ) from where I extract that:

"I contend that the Fed does not want to learn anything from California energy policy, because the state developed a flawed electricity reform in order to keep an 'outdated regulatory system. It is time to put in place tough, new common-sense rules of the road so that our' energy 'market rewards drive and innovation, and punishes short-cuts and abuse.' In those two quotes, I only change what President Obama said in his address to the joint session of Congress, by introducing the word energy, instead of financial. There is an urgent need for a real reform."

I repeat that "Fundamental reform is urgently needed to balance market and regulation appropriately, to get the power industry into a higher performance plateau in the emerging digital Era."

On the second comment I quote the CEIDS Steering Committee Meeting December 2003, page C11, that says:

"Only a few years ago, it appeared that the United States was rapidly on its way to open access for power competition in those markets. The California power "crisis" of 2000 and collapse of Enron halted those efforts dramatically. While competition is functioning in some states (most notably Texas, New Jersey and Pennsylvania), most markets are seeing only limited participation or have halted open access efforts completely. The National Regulatory Research Institute, recently found that of 24 states that had announce electric retail restructuring, only 17 are continuing their original plans. Seven states have pulled back to some degree: Arkansas, California, Nevada, New Mexico, Oklahoma and Oregon."

According to the December 2008 ABBACUS report of DEFG, of those seven states, Arkanzas and New Mexico backtracked completely. At both residential and C&I retail, California is marginal, while the other four are unsatisfactory. Virginia and Michigan also backtracked as they are also unsatisfactory.

Posted By Jose Antonio Vanderhorst-Silverio 4/22/09 8:57 PM