Some Friendly Comments on True Electric Deregulation Part 5

I posted a new comment to Prof. Banks article. Please refer to: Some Friendly Comments on True Electric Deregulation Part 4.

I find Patrick O'Rourke EnergyPulse Command and Control Markets still very timely. The next frontier in electricity is to make use of new technologies, like AMI, and demand response, which need to be "crossing the chasm." Patrick's comment need to be read as a great example of what price controlling agencies are "hard-wired" to do to keep vertical integration alive.

Maybe we need a new expression different from "true" deregulation to convince experts that non-market solutions to electricity industry are (or will soon be) innefficient. Neither utilities, nor regulators, are prepared to cross the chasm. We need competitors to cross the chasm, and so far I have received no acceptable arguments from the expert quoted by Prof. Banks. A simple (but not simplistic) architecture centered on retailers, while keeping the vertical control supply chain structure based on demand response, is worth a try.

Professor Banks decided not to answer my questions and refer them to experts and to a widespread audience, which I am glad that he did. I think he saved face while giving me the benefit of the doubt, which I had documented earlier on my blog . As far I humbly learn, non of the experts had anything substantial against my propossal of true deregulation yet.

While not claiming to be an expert on Sweeden, the problem experimented with price spikes and insufficient reserves, due to faulty deregulation, can be mitigated (unless they are of the wierd sort) by completing the market so that customers become part of the system. A hint to that effect is to ensure that electricity sold Germany is priced on short run marginal costs of energy and supply security. However, that proposition depends on answering apparently tough questions, like my earlier cuestions, for which I want feedback. I repeat them again in a readable format:

1. Do you think that Jack’s comment “The changes resulting in these massive errors were a reaction to many years of unfair regulation by often-incompetent regulators, many of whom were concerned with their political and professional futures rather than protection of the consumers” is going to go away anytime soon? It seems that Southern Company isn’t the rule. I prefer to do without with utilities winning cases to regulators under vertical integration, and limiting it only to the wires investments monopoly regulation.

2. Do you see the possibility to organize true retail competition (no price controls) under prudential regulation, even when there are generating oligopolies?

3. What do you see lacking in the approach I suggest?

4. As some retail marketers will become global companies that compete in several local markets, can they become the target for fusions and acquisitions to develop oligopolies? Do you anticipate how to mitigate it?

5. I see retail marketers’ economies of scope, by taking charge of other services, like telephone, gas, water, and even insurance. Can this be a means for mitigation under question 4?

6. Knowing that value added electricity will come from knowledge intensive coordination of highly distributed activities (some optimal percentage of demand side risk management), instead of physical investment on peaking reserves to be used just a few hours a year (100% supply side risk management). Do you still think that vertical integration is a real vision for the future?

Finally, unless we find a new name for "true" deregulation, I wish Prof. Banks would change his article to A Few More Unfriendly Comments on "Faulty" Electric Deregulation. I undestand that the EU is now questioning competition in electricity and gas, and I humbly think it is the right moment for Sweden to get a better deal. Finally I hope Prof. Banks NIMBY refers only to faulty deregulation.