The Future of the Power Industry in 2006 Part 2

On December 27th, 2005, under the article A Few More Unfriendly Comments on Electric Deregulation, I quoted Fred C Schweppe el al (Spot Pricing of Electricity, Kluwer Academic Publishers, 1988) saying:

New directions for the utility industry are being sought by many interested parties in the government, the private sector, and the universities. One such direction has been widespread interest in utility-customer cooperation through innovative rates characterized by broader options and better use of information on utility costs and customer needs. The goal of this book is to provide a theoretically sound, yet practical foundation for the implementation of utility-customer transactions based on today's needs. Our goal is to meet four criteria:

1) Freedom of Choice: provide customers with options on the cost and reliability of supply and how they choose to use electric energy.
2) Economic Efficiency: Motivate customers to adjust their own electric energy usage patterns to match utility marginal costs.
3) Equity: Reduce customer cross-subsidies…
4) Utility Control, Operation and planning: Consider the engineering requirements for controlling, operating and planning an electric power system.

"Restructuring Debate Still Rages," December 11, 2006, by Ken Silverstein, EnergyBiz Insider, Editor-in-Chief, starts out with a dilemma as follows: "The discussion over whether electricity can be made into a competitive enterprise or whether it is an uncommon commodity that should be tightly regulated still rages more than a decade after the concept of restructuring was first envisioned."

Missing in the decade old debate was a third way: the natural and simple way. The way to do it: the wires are natural monopolies to be kept integrated and tightly regulated to meet Schweppe’s 4th criteria – “consider the engineering requirements for controlling, operating and planning an electric power system.” The mistake: open transmission access, which also violated the other three criteria for the end-customers. My research shows that the separation of transmission and distribution is not done at a modular interface from the operation standpoint. Generation and retail marketing are natural competitive enterprises.

"Time To Innovate - Energy Utilities Face Unprecedented Challenge,Opportunity [PDF]," EnergyBiz magazine, November/December 2006, is about an emerging third way. EWPC: electricity without price controls the extension of Schweppe’s model is just one potential emerging candidate industry scenario.

© 2006. José Antonio Vanderhorst-Silverio, PhD.