A Suggestion to Some Global Elected Official on Bernanke's Threat From Deficits 'Real And Growing'

The October 4, 2010, story Bernanke: Threat From Deficits 'Real And Growing' distributed by The Associated Press, starts with “The economy could be hurt if Congress and the White House fail to come up with a plan to curb the nation's huge budget deficits in the coming years, Federal Reserve Chairman Ben Bernanke warned Monday.” That is a tough situation that other governments, like that of the Dominican Republic, are also facing.

The story adds that “Bernanke steered clear of making recommendations on the best way to reduce the deficits, saying those tough decisions are best left to the nation's elected officials.” Below I advice elected officials of countries with huge deficits on why the electric power industry is one of the best ways to help reduce it.

The electric power industry is ripe for a transformation that is a predetermined element of most plausible global scenarios, being a prerequisite, for example, to the White House scenario of clean energy. Such a transformation differs greatly from the ongoing reform process that is named as the Smart Grid. The difference is that the reform process has kept, through a system-of-systems architecture approach, the utility status quo practically intact, thus providing an inferior solution to customers and society in the global marketplace.

That inferior solution has its roots in the flawed restructuring process initiated in the 1990s that came no only to halt with the California crisis, which has unnecessarily extended the useful life of vertical integration in many states, but that actually became a counter reform process to the organized wholesale markets, for example, with one of the worst manifestations in the Dominican Republic. Whether under vertical integration, or under organized wholesale markets, smart meter investments are being made in the global marketplace by risk averse utilities or what I term First Generation Retailers. As a result, most of the stimulus funds are now further engrossing healthy utilities or being transfered to generators, as in the case of the Dominican Republic.

To provide the highest systemic leverage, industry has one single key facet that is explained by the post "Why the IEEE Smart Grid World Forum Requires Learning About T&D Transportation Ultraquality," which went missing in the above mentioned restructuring process. For that simple reason, the key professional of the industry are the system engineers, whose role involves system planning in addition to system operations. Those system engineers must be the leaders of the primary regulated T&D Grid system compact of the EWPC-AF to develop and execute a long run system adequacy and a short run system security strategy designed to implement the ultraquality imperative.

Similar to the tough decision made by Theodore Roosevelt during The Great Depression, elected officials need to consider the restructuring of the electric power industry in order to transform it with a superior solution for the benefit of humanity. Under the Electricity Without Price Controls Architecture Framework, smart meters investments are not be regulated, but must be done by competitive retailer’s investment in the marketplace.

As a result, Second Generation Retailers (2GRs) that lead the complementary Enterprise system of the EWPC-AF do not get a regulated rate base, as retail and wholesale markets mutually reinforce each other. 2GRs depend on their business models to recoup all their advance technology investments. Thus, 2GRs must be non risk averse.

The message to elected officials is that the transformation of the power industry only needs the incentives of an effective energy policy that promotes long run production capital private investments, instead of more short run financial government stimulus investments. That could be part of the plan to curb huge budget deficits of many nations. For more details to support that really tough decision, please take a look at the EWPC article Answering “What Energy Business Are You In?” As the Way Out of The Third Depression, whose summary says that:

During a similar time of great change, railroads and utilities have defined their business incorrectly, by ignoring several insights, like the one Theodore Levitt gave us in his 1960’s Marketing Myopia manifesto. A quote on the 1982 book Megatrends explains utility investors why the attempt to keep a monopoly on the customer relationship, with an ineffective old economy Big-Bang Advanced Metering Infrastructure will further extend the uneconomic overexpansion of the resources of the supply side. To reduce the odds of the return of the depression, we need policies for the new economy, like power industry transformation and boring banking, which mutually reinforce each other with the coming communications’ boom to enable innovative value creation and long term jobs.