Engineers Needed for Lower Prices

The paradigm shift from the vertically integrated utilities to the electricity without price control paradigm will leed to lower costs, lower profits and lower prices after a reasonable delay. To accomplish that engineers need to take the transpotation function that allow the market between supply and demand run efficiently.

Engineers Needed for Lower Prices

By José Antonio Vanderhorst-Silverio, Ph.D.

Systemic Consultant: Electricity

Copyright © 2007 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. Please write to javs@ieee.org to contact the author for any kind of engagement.

Jack A. Casazza has written at length on reliability.

He wrote of some basic realities that were not heard:

1) “Everyone is for reliability until it costs them money.” Reliability has two faces: system and customer. System reliability is first, economy second (R1E2) under EWPC. Customer reliability after R1E2 is one of the most important elements that 2GRs use to develop business model innovations, and as a result produce rational rationing when needed. Under the VIUs paradigm rationing is irrational.

2) "Reliability and commercial interest cannot be separated." Under EWPC they are not, as shown above for the customers. For generators, system reliability returns to be a power pool cooperative game under the leadership of the system engineer because of R1E2.

3) "Reliability problems are both institutional and technical." R1E2 sets the priorities.

4) "Technical and institutional solutions must be coordinated." There is not better coordination than R1E2.

He also wrote on existing beliefs

1) "Customers believe electricity will cost less." Yes It will, after the transition period ends, when transaction costs of new demand side electronics and information technologies go below the extra costs of coordination with excesses of the transportation and generation capacity and operation costs.

2) "Power suppliers, transmitters, distributors – all expect higher profits." Under EWPC, transportation should be less costly than under vertical integration, as central station generation and its associated transportation will be lower. With a market operated under proper prudential regulations scams will not result.

3) "Engineers tell us:"

a. "Extra transmission capacity will be needed requiring extra investment." It is actually the contrary under EWPC as it was explained in item 2.
b. "Systems will not be operated as efficiently." Also the contrary, since the integration of demand and the differentiation of customer reliability will make much more efficient than the VIUs paradigm.
c. "Risk of larger regional outages will increase." Also the contrary, as there will be just one transportation entity in charge in a given area under a federal regulatory compact.
d. "New technologies will be needed at significant additional costs." Under EWPC true competition will replace the bets made by regulators when they lose the cases to the utilities.
e. "Much additional training and software will be needed." Yes to get a much more efficient system to replace the obsolete one.

"Perpetual motion? Cost up, profit up, prices down?" Not at all. Cost down, profits down, prices down, after a systemic delay, all with respect the VIUs paradigm!

What we need is to place engineers back to the part of the industry where they belong: in the transportation companies, to plan, design, and operate the largest machine on earth running at ultraquality. Businessmen should takeover the business and innovate to give customers much better propositions.