The Anti-System Utility

Vertically integrated utilities don't operate as a system because of a monopoly mindset of incumbents investor owned utilities and political interference. To operate as a system a paradigm shift to EWPC is required to offer customers competitive services and to neutralize political interference.

The Anti-System Utility

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.

This introduction, and the next to last paragraph, are taken from the article link Divine Dispensation of Electric Markets is Gone:

Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.

Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.

When an organization operates as a system, the value of the whole is greater than sum of the value of its parts.

Reading carefully the article by Warren Causey, I come to the following conclusion:

The sum of the potential value of the grid plus the sum of the potential value of the enterprise is greater than the potential value of the utility, meaning that the utility instead of being organized as a system, it can be though as an anti-system.

What is the problem? Incumbent’s monopoly mindsets and political interference.

The monopoly utility operates a cash cow and so the priority is the enterprise, not the grid, nor customer service. In addition, the utility is also a political target. So grid’s investments are postponed, over and over.

What’s the solution? To restructure by a paradigm shift from VIUs to EWPC.

In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents IOUs should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.

As the grid is integrated with transmission, the resulting transportation utility budget is applied entirely to the modernization of the greater grid in a given area. As the regulated enterprise is transformed into several competing enterprises (aka Second Generation Retailers), the political target disappears, and investments, innovations, and jobs with a lot future are created.

Divine Dispensation of Electric Markets is Gone

As a result of David killing Goliath, US Congress has the great opportunity to introduce EWPC to the USA. In addition, the state of Ohio has the first opportunity to reap the benefits of retail competition, by developing 2GRs and integrating active demand to power system planning, operation and control. The Dominican Republic has one of the best positions to implement EWPC, but needs to place the Very Short Electricity Law in the waste basket.

Divine Dispensation of Electric Markets is Gone

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.

Dear Mr. Giegler,

Thank you very much for your recollection of the process, which I respect, and for giving (I think) EWPC and my humbled opinions the benefit of the doubt for the first time.

I have placed my last recollection in the link The BIG California LIE, to which I added as the leader paragraph: “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”

Although you are not interested on going to the starting point, as I explained above, state government and the CPUC were restructuring precisely because by entering long term contracts with generators, customers rates were very high in California in the first place. I am sure that customers are still paying those long term scams in the rates. To make a fair comparison, that is the point to start to do downloads, debates, and reflexive, and generative dialogues, which I considered have already been done.

Maybe state government and CUPC didn't know that they were going in the correct direction, but it seems that the guardian of the non-trivial VIUs didn't know either. What a shame! Instead of a win-win balanced approach that weighted well the truth and the service, IOUs went just for (what’s in it for me) the power and the money.

That is precisely why I responded to Joseph with the “Law of the Situation: the railroads did not understand,” (see my post of 9.11.07 above) that applies to VIUs, from which I extract, “Some people [IOUs for example] still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else [under EWPC for example]. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”

When energy costs were low, the business model of winning rate cases to the regulator didn’t bother the customers. But since the oil embargo in the 70s, customers are ever more interested in competitive prices, as free society recognized that IOUs cannot control anymore the electricity markets. I have followed Donella Meadows advise (see link Let's Get Out of Back Rooms to a Generative Dialogue) to end the divine dispensation to the IOUs. But after many things have occurred during more than 30 years, with the obsolete VIUs controlled market, customers like those of the state of Ohio want and effective and efficient re-regulation process.

Whether the judicial investigations, which I suggested, are executed or not, taking of course your recollections into account, I am very sure that Goliath is already dead. I am also sure that after reading this complete message, taking into account the whole EWPC context, you, Len, Joseph, Jeff, Fred, and anybody else, will agree that David killed Goliath, once again, even though, anyone is free to remain skeptic, which I definitely respect too.

So let me comeback to today’s reality. Looking what is happening from the EWPC paradigm shift, IOUs tried to stop progress by keeping the grid and the enterprise together (Congress should delete it from the new Energy Bill), as Warren Causey calls the two elements of the VIU in the article of the link All the issues in the same room.

Most, if not all, of the issues identified by Mr. Causey, a very objective observer of recent industry activity, are the results of maintaining the native load requirement that IOUs have imposed on the electric industry, which keep the utility grid and the enterprise under the control of VIUs. Mr. Causey calls for integrating the grid and the enterprise, which means that IOUs have not been able to integrate both dissimilar functions, so it is easier to go forward with EWPC.

In order to make the industry robust, competitive and fully functional, EWPC separates the utility grid from the enterprise, with the former integrated to transmission and the latter open to competition. When that is done, the new utility becomes the transportation grid and several 2GRs (see link Second Generation Retailer - 2GR) take over a segment of the market by adding to their part of the enterprise the non-trivial functions of competition and integration of demand to the industry. Incumbents should decide whether they select one and only one of three activities (no Chinese walls allowed) of the restructured industry: generation, transportation, and retail.

I hope you agree now that the divine dispensation that IOUs markets are theirs - and no one else’s - now and forevermore is gone.

Best regards,

José Antonio