The Good, the Bad and the Ugly

The California commissioners need to shift their mindsets “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.” That is the EWPC story that emerged from a generative dialogue, enriching the debate between the story of incumbent utilities and the story of the coalition.

The Good, the Bad and the Ugly

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on March 13th, 2008.

Copyright © 2008 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. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

The summary of the EWPC article The BIG California LIE says “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-costumers, 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.”

As I said in the EWPC article High Leverage Shake-Up in California, to which this article is a follow up, I am changing the opinion of “Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-costumers, acted very irresponsibly,” since the utilities were not alone, but were also prisoners of the system like FERC and the PUC.

The good news is that the PUC is trying to amend the BIG LIE, by working hard to show the whole world that retail competition is possible. But to show it, the powerful commissioners will need to change their mindsets with a paradigm shift to EWPC.

So, I agree everyone should get both sides of the story. But there are not only an advocate and an opponent, as it was to be. To make things simple, I will say that there are only three sides to the story, the Good, the Bad and the Ugly.

The EWPC’s System: the Good System emerged as a Simple System.

This is an emergent story. The aim is a high leverage systemic transformation to insert the power industry in the third industrial revolution. The leverage is to come from the development of business model innovations, including the smart grid, that mutually reinforce themselves.

The Simple System leaves the transportation grid – a natural monopoly – as the integrated transportation only utility, that takes the central stage from generation by fulfilling an ultraquality imperative. Ultraquality transportation is a characteristic of the system for high power quality and system reliability, and not a characteristic of the unreliable parts like the generating units.

The smart grid transportation utility will provide for the long-term stability needed for investments in the power system, eliminate cross-subsidies and avoid unintended consequences, by providing a fundamental systemic solution to the worldwide electric industry systemic crisis. Generation and retail become fully competitive activities in the open market. No customer gets discriminated.

My story: “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.”

The incumbent’s System: the Bad System is an evolution of the Old System.

This story is lead by the three California utilities, which have a lot of power and have the California legislators - the status quo - in their side. The Bad System has large power customers who had already signed direct access contracts, but discriminates everybody else to remain as utility customers.

The incumbent utilities’ story: “… expanded direct access could undermine the long-term stability needed for investments in the power system, shift costs from one group of customers to another and produce unintended consequences such as the failed deregulation." I agree that it is to be expected with a symptomatic solution of the systemic crisis, resulting by remaining imprison by the generation centered stage utility system.

The Coalition System: the Ugly System is a very Complex System.

This story is led by a coalition of power companies and government agencies that now wants to revive the “direct access” part of the failed deregulation experiment. The CPUC is looking for a symptomatic solution within the boundaries of the present imprisoning system.

Competition was closed in California until 2017 when the long term contracts between the California Department of Water Resources expire. But the PUC decided to look at whether the contracts could be assigned to someone else, such as the utilities. Such symptomatic solution is bound to be a low leverage system intervention, that increases even more the complexity of the existing system.

The coalition story: “…direct access allows customers to choose rates and services that help them compete and manage risks while developing a broad power market that can provide more options and lower prices for customers.” This is not possible with structural separation as the Carnegie Mellon Electricity Industry Center working paper showed. To make it possible a paradigm shift to EWPC is needed.