Dick,
I agree that Banks' mental model is cost of service regulation.
Schweppe's mental model is best explained by the post Some Friendly Comments on True Electric Deregulation Part 4 on the GMH blog (the original comment is under the EnergyPulse article A Few More Unfriendly Comments on Electric Deregulation by Prof. Banks ).
In the post, both Enron's and Hogan's mental models are represented in Space B, where price spikes larger than necessary are expected when the system operates close to capacity. The "system" in Space A was in fact several area systems (not necessarily control areas) interconnected by tie-lines, which in Space B become congested very easily. The shift from Space A to Space C can be centered in the many area systems avoiding the congestion of tie lines.
I am copying part of the above post that says: " ‘…A spot price based energy marketplace is a win-win situation for both the regulated utility and its customers. The customer's lifestyles improve because the customers are receiving more service from the use of electric energy per dollar spent. The utility has a more controllable, less uncertain world in which to operate.’ That is exactly the opposite of what has been happening, by leaving the customer out in the re-regulation efforts. Demand response will change that."
So, what I am saying is that Schweppe's extended mental model it is NOT what most of those commenting in this thread were agreeing is desirable from the beggining. It is much different than just simple retail. It is a win-win mental model with lower price volatility, where the end-customer is not an afterthought.
I accept that the details about the difference between Hogan's model and Enron's model might not be substantial. My point is that Hogan himself was against the final Enron’s mental model. In addition, I agree that Hogan's mental model was being pushed closer to vertical integration before accepting to include demand responsiveness.
Regards,
José Antonio
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