The Answer to Jamie’s Tectonic Plates

Utilities price control business business model is that something that is going to have to give to avoid the consumer revolt earthquake induced by the tectonic plates.

The Answer to Jamie’s Tectonic Plates

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

First posted in the GMH Blog, on November 20th, 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.

I like Jamie Winberly’s excellent analogy of the three tectonic plates that are moving under the power industry, as told by Warren Causey in his post The utility industry and tectonic plates. The analogy is a nice way of explaining the systemic crisis (without the disconnects of mechanical thinking) the industry is in.

In the post, Warren tells about an interesting conversation with Jamie in which “We also found we agreed on quite a few others issues, as well. The primary agreement is that something is going to have to give. The utility industry cannot deal with all three of these plates without massive infusions of capital and O&M resources, which would drive residential and commercial rates for electricity skyward.”

To avoid the "consumer revolt... earthquake" Jamie identifies, the “something that is going to give" has been found to be the price control business model, as explained in the most read and highly commented EWPC article Can the Power Industry Eliminate its Price Controls to the End Customer?, whose summary states:

The dead-end of regulator’s capacity for price controls shows up once again, while modeling the Smart Grid business case. Under today’s EPAct, price controls are designed for simple problems, when we are facing a very tough systemic crisis. A systemic solution requires a EWPC re-regulation EPAct that deregulates wholesale and retail commercial energy transactions, while keeping regulated the Smart Grid reliable transport.