Retail Market Deregulation Dialogue on EnergyPulse Part 4

I have made an updated remmark to Mr. Jack Ellis comments to Free All Wisconsin Utilities to Make Money Helping Customer's Save Energy.

A couple of thoughts regarding this article and the comments that followed:

First, I think it's fine for both utilities and third parties to be allowed to provide energy efficiency and demand response services.

However, there ought to be a level playing field. Utilities should not be guaranteed a return on their investments. Instead, they should be required to recover any investments they make in the same way an unregulated firm would. Competition among a mix of unregulated suppliers and regulated utilities will ensure a continual flow of new ideas and technologies, whereas granting utilities yet another de-facto monopoly will stifle innovation and slow the pace of advances in this area.

I normally dislike subsidies, especially when they are disguised as "incentives". However, until retail customers are exposed to wholesale prices in ways that provide the market-based signals many of us advocate, modest subsidies that help focus customers on reducing consumption when prices indicate an impending short-term supply shortage are appropriate.

Wholesale market prices need to reflect all costs associated with supply. In some RTOs, most notably PJM, generators receive hundreds of millions of dollars in payments outside the formal auction mechanism to compensate them for startup, no-load, lost opportunity and other, similar costs. These need to be incorporated in generator bids rather than being paid "under the table".

Finally, I respectfully demand to have the last word on this subject :)

I disagree with Jack on letting a combination of regulated utilities (monopolies) and third parties (competitive) to provide energy efficiency (EE) and demand response (DR) services. Those EE and DR services are random and require a long term commitment on the part of competitive service providers. There are boom years where those services will not be needed, making it very unfair competition for third parties. Very bad experience in other countries where incumbent utilities or their "deregulated" arms, "competed" with third parties have been very negative for third parties.

I suggest that since you dislike subsidies, as I also do, to eliminate alltogether price controls, leading to true deregulation of the electric market. In that sense, please take a look at the new comments I made on true deregulation to the article A Few More Unfriendly Comments on Electric Deregulation, in response to Mr. Martin-Giraldo remmarks.

José Antonio Vanderhorst-Silverio, PhD
Interdependent Consultant on Electricity
Grupo Millennium Hispaniola
Dominican Republic