Giving Thanks to Ken Silverstein

Thanks to Ken Silverstein, EnergyBiz Insider Editor-in Chief, California like problems disappear, as transmission tightly integrated with physical distribution becomes transportation that gets help from rational rationing when supplies are short to produce ultraquality power system service. The jury has made the final decision, “retail competition got its legs,” as electricity is: 1) it is a truly tradable commodity on the value chain generation, retail and customer; and 2) it is also a natural monopoly for the transportation (integrated T&D) of the commodity under a regulatory compact with a responsibility to transport.

Giving Thanks to Ken Silverstein

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

First posted in the GMH Blog, on April 14th, 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.

Ken Silverstein concluded his April 3rd, 2008, post on EnergyBlogs.com as follows: “To be sure, the columns both deserve and need to be critiqued. They are read by a wide swath of interests and let me assure you that I remain steadfastly independent – otherwise the whole concept underlying our efforts would be meaningless. Obviously there are constraints with respect to time and space. As such, the analyses may be incomplete, have voids and even errors. But that’s why we give the readers their forum, as well to provide an outlet to have a respectful, stimulating discussion.”

In response, I started what I perceived as a respectful, stimulating discussion, by writing the GMH article Asking Ken Silverstein for Help, whose first paragraph says: “Your post The Mission Statement is very objective, interesting and useful. All of your posts have enlightened my curiosity on good journalism. I think that my humble work on electricity without price controls (EWPC) deserves your help to be “read by a wide swath of interests.” To get a quick idea, please consider the GMH essay Electricity for the New Millennium.”

Ken response was very timely with a private email. Ken wrote first “I’m not sure I understand what you might be asking. But, pls explain the best you can.” Then after I explained, he wrote “Jose, I’ve written a number of stories on deregulation and restructured energy markets both in the retail and wholesale realm. I’m not sure I have anything new to add to the discussion. Ken.” As readers will see below, his lack of response turned out very helpful, when I ask for his best article on the debate.

But, it is fair to say that in the GMH article I had a different in perspective from Ken’s approach as he stated very clearly that “I’m not trying to appeal to or anger any one constituency.” My reaction was “I don’t understand it because, to me, it contradicts what you affirmed about dialogues in your post Journalism 101: “… it is my most sincere intention to be able to reach readers and to make them thirst for more information -- to, in essence, be a catalyst for more dialogue.” My point is that now people can learn from the emergent future [using unconventional wisdom], via generative dialogues that expose very rich conflicts, that might anger [non authentic leadership] constituencies, such as can be seen in the EWPC article The Good, the Bad and the Ugly.”

In fact, what Ken wrote on December 11, 2006 in the energybiz insider™ article “Restructuring Debate Still Rages,” is a very helpful lead that confirms what he said in his second message (I hope that those are still his perceptions): "Critics question... whether there can ever truly be a free market in electricity trading. They argue that the transmission system is simply too constrained, which provides opportunities for market manipulation. When supplies are short, producers can exert too much influence and drive up prices - like they did in California in 2000-2001. They reason that the jury is still out as to whether electricity is truly a tradable commodity, or a natural monopoly.”

As EWPC emerged at the beginning of last year, the jury has made the final decision, “retail competition got its legs,” as electricity is both: 1) it is a truly tradable commodity on the value chain generation, retail and customer; and 2) it is also a natural monopoly for the transportation (integrated T&D) of the commodity under a regulatory compact with a responsibility to transport. As a result, California like problems disappear, as transmission tightly integrated with physical distribution becomes transportation that gets help from rational rationing when supplies are short to produce ultraquality power system service.

Ken adds: "Despite strong sentiments on both sides of the debate (EWPC is a third side that was not considered), it is [not] too late to reverse directions in the wholesale [and retail] market [under EWPC T&D integration is a reverse move for one side of the old debate, and is a forward move in the open market EWPC - see below - in both sides of the old debate that is heading into a very costly dead-end] given the existing investments in unregulated generation and the sales efforts built on that. The goal is then to create a fair market that enforces equal access to the grid and allows big [and small] buyers a choice of supplier. RTO [T means transportation] are one mechanism by which to achieve that goal while enforcing existing [ much less complex] laws [and regulations] that ensures grid access is another."

The EWPC article The Electricity Revolution summary says that "Warren Causey is reporting a technological revolution in the power industry, which is ahead of legislative and regulatory uncertainty and is heading for a very costly dead-end. Utilities in the US and Europe are trying to extend their obsolete business model of winning rate case to the regulators. Customers and society should not have to pay for such large value destruction, by adopting the EWPC market architecture and design paradigm that removes the uncertainty."

Such a revolution is based on a breakthrough that will help us shift our paradigms permanently, which was not considered in the old debate: demand integration to power system planning, operation and control. Such demand integration will be enabled by a least cost expansion planning of the integrated transportation system and by letting every customer purchase service plans of the electrical commodity in the open market that best fits (higher value and/or lower costs) their investments (for demand response, energy efficiency, etc.), making electricity development the largest social welfare possible.