Please Blame the Deregulation and Regulation Fiascos Parte 16

Thanks Dick,

My original statement had to do with the issue that regulators are not the real winners or losers. The central idea was that we don't need them at all as intermediaries in Electricity WPC for the customer. This is what I said:

"One of the laws of the Fifth Discipline says that “cause and effect are not closed in time and space in complex systems.” That being the case, regulators are not winners and losers: agents and customers win or lose. When regulators apparently lose, it is the customers they misrepresent that become losers, with higher than necessary (supply plus shortage) costs, or with higher taxes later on. That to me is the greatest problem of having regulators as intermediaries between the market and the customers. Customers should have choice to select the retailer or wholesaler, which offers them the minimum cost plan available to them in the long run under electricity WPC."

(Out of time sequence) Later on I have updated to maximum value addition instead of minimum costs. That is where you bring a very important point common to the 3 mental models: talking of optimizing individual decisions as opposed to the average customer prices that is the central point on Prof. Banks' mental model (the regulated vertical integrated system).

(Back to time sequence) Joseph Somsel then said that: "Regulators can also lose - lose their jobs. Just ask the former governor of California, Grey Davis, on the risks of having physical shortfalls of vital infrastructure on your watch." Which I replied with a post that included: "I like very much your answer, because it goes deep into the systemic problems that the electricity industry faces worldwide...."

Peter Senge shows that: "System structure influence behavior…" He explains that: "When placed in the same system, people, however different, tend to produce similar results." I don't know how different Brazil power sector laws and contractual arrangements is nowadays to make a real difference. That is why I say that PJM business model might be fatter than it should be leading to higher costs to customers than necessary.

My point on Gov. Davis is that he was a prisoner of the system implemented earlier which he probably didn't understand. Any other governor under the same circumstances would have produce similar results. The problem was in the structure as explained by ways of thinking which are named as mental models.

In essence what I am saying instead of firing the regulators just let them work out toll prices for the transportation of electricity. What Bill Hogan's mental model does is to open the public highway system, while keeping city streets traffic under one regulated monopoly.