Please Blame the Deregulation and Regulation Fiascos Parte 14

Prof. Banks and other Gentlemen,

Ferdinand is correct about riots in the Dominican Republic. The riots came by a big misunderstanding of consultants and multilateral organizations about the impact of irrational rationing. My work has been to suggest a rational way of rationing.

The expert Vivianne Blanlot of Chile was retained by the World Bank to suggest a solution to the financial crisis of our electric sector. She proposed to manage demand starting at a level 70 to 75% of load average. Such commitment was written into an agreement with the International Monetary Fund.

The approach was to divide circuits in 4 groups in accordance with the level of cash recuperation. The source of the riots was customers with lowest level of cash recuperation were having less than 12 hours of service a day.

Underneath the approach is a misunderstanding of the value of electricity to the customers. Most of the rioting customers were getting apparently free electricity that instead of adding value was actually destroying value.

In general, the electric sector of the Dominican Republic is a textbook example of a systemic crisis. Last year I posted Getting the Power Sector out of Systemic Collapse which explains what I understand is happening in my country. System thinking is a tool that helps confront the complexity of the collapse.

For a discussion of Dominican, Brazilian and California deregulation, I suggest to look at the articles (and my comments) of Rafael Herzberg 2006: New Challenges and Opportunities in the Brazilian Electric Energy Arena and Like It or Not, Deregulated Energy Contracting Is Here to Stay. In the first one I wrote that: “We have the best example of a failed “deregulation” effort in the Dominican Republic, which I have recently characterized as a black hole. Investors came to the Dominican Republic, and in their due diligences didn’t see that a disruptive technology (on-site generation) was making an inroad. A systemic process called “the boiling frog” was at play, resulting in an exponential growth of individual solutions. However, that big problem is giving us great opportunities, as demand response can be developed to transform a very unreliable, disintegrated, and unarticulated system, into the opposite.”

I agree that Electricity WPC is a difficult sale, based on the open wounds. It is still more difficult for me to convince other Dominicans. That is the main reason why I am using EnergyPulse as a vehicle to test my findings. The taste of deregulation in the Dominican Republic is awful. The law, however, is being partially applied. The government mental model is about average prices. However, the system operator is executing monthly transactions based on a marginal wholesale market reality.

Thank you,

José Antonio

Please Blame the Deregulation and Regulation Fiascos Parte 13

Ferdinand E. Banks added another comment to EnergyPulse on this series,

Jose, do you know the song 'I hear you knocking but you can't come in? ' Well, we've almost got the same problem here, except that although the door is open and the invitation mat is out, only people like Mr Maclay and MrGolden are anxious to enter.

It will take a few years before the taste of failed deregulation is out of the mouths of rate-payers in California, Sweden, Norway, Brazil, Ontario and Alberta, South Australia, etc who have, are, and will be burned. But I wouldn't worry if I were you: if enough untruths and misunderstandings about electric deregulation are published, it should eventually be possible to get the deregulation swindle back on the road again.

Please Blame the Deregulation and Regulation Fiascos Parte 12

Another article can be written with the title of Avoiding the Separation Fallacy, to show that the extension of Schweppe's mental model might be the winning form of restructuring. Most of the arguments are dispersed in EnergyPulse and the Grupo Millennium Hispaniola blog.

The hypothesis of the article could be what I said earlier in my last comment to the article The Gap Between Demand Response Potential and Demand Response Reality: “I repeat a restructuring mistake was made to justify open transmission access without understanding that Spot Pricing of Electricity marketplace required non monopsonistic demand responsiveness and engineering requirements for controlling, operating and planning a reliable electric power system. Instead of a stakeholder arrangement for reliability, the power system needs to be designed with ultra-quality, just as nuclear power systems are designed and operated.”

However, the extension to Schweppe’s mental model focuses also on mitigation of external shocks, like fuel volatility, and as such does not support well arguments on paragraph 5 and 6 very well. Instead, it helps generating and T&D investments financing by increasing plant factors, emulating take or pay actions without contractual arrangements. Please recall my comment of April 6, that start with “Well said Mr. Maclay!”, to the article The Gap Between Demand Response Potential and Demand Response Reality.

I repeat once again that the above is not a final word, but an architecture design work in progress.

© José Antonio Vanderhorst-Silverio, PhD. 2006.

Please Blame the Deregulation and Regulation Fiascos Parte 11

Mr. Maclay and other Gentlemen,

Thanks Dick for your comment. I like very much the qualifying insights to my humble posts. My response has two parts. In this one I address paragraphs 2, 3, and 4. In the second I will write about the separation fallacy of transmission and distribution and address paragraphs 5, and 6.

That Enron's mental model is different from Hogan's mental model can be traced to the following quote:

"The debate in California has changed remarkably over the past year or two. Discussion now focuses not on whether retail competition or direct access is possible, but on how to make it happen. The three California investor-owned utilities affected by the commission's decision convened an industry working group, called the Western Power Exchange (Wepex) to address the issues related to implementing the new competitive retail market. Its responsibility has included making three filings to FERC by the end of April 1996, seekiing:

• Approval to create a new institution - the ISO - that will provide comparable open access for wholesale and retail use of the transmission system, plus approval to transfer the control operation and control over a large share of utility transmission facilities to the ISO.

• Approval to create the PX to run a California spot market for power, plus approval for the utilities to sell into the PX at market based prices.

• A determination of the dividing line between transmission, over which the FERC has jurisdiction, and distribution, whose regulation is expected to be left to the states [1]."

The first and second bullets were opposed by Bill Hogan, as the following quote says: "For a different perspective on whether the system operator and the power exchange need to be separated, see "Avoiding the Separation Fallacy," by William Hogan, Electricity Journal, December 1995, pp. 26/37 [2]"

The last bullet is common to Enron's and Hogan's mental models. The origin can be traced to Bill Hogan, as can be seen from my post "Retail Access is Easy" above. As can be seen, Bill Hogan is the most influential person of deregulation.

© José Antonio Vanderhorst-Silverio, PhD. 2006.

Interdepedent Consultant on Electricity

Dominican Republic

[1] Barbara R. Barkovich & Dianne V. Hawk, "Charting a new course in California," IEEE Spectrum, July 1996, pp. 28-29.

[2] Ibid, pp 31.

Please Blame the Deregulation and Regulation Fiascos Parte 10

Gentlemen,

I forgot to acknowledge that my previous message was also intended to Mr. Casten, Mr. Swinand, Mr. Malinowski, Mr. Pflaum, and Mr. Tanton.

Today I am very busy, but to keep the ball roling I will answer Steve, and partially answer Ferdinand.

Steve,

Thanks for your comment. I have some answers, but not all the answers. However, as you acknowledge, I try very hard to be consistent.

"Spot Pricing of Electricity" is a seminal book about how electricity prices vary in time and space, with transactions where customers buy from and/or sell to the utility. In some days, wholesale prices vary widely when system is close to capacity unless customers respond. Those events occur randomly, when reserves become insufficient to assure an acceptable expected risk of system failures. That leads me to the next comment regarding complexity.

Ferdinand,

Thanks for your comment. I accept the remark you make to your finance students. Marketers do it even simpler. Renowned marketer guru, Jack Trout, the author of “The Power Simplicity,” entitled the first chapter of that book "Simplicity: Why people fear it so much." He concludes the chapter with the message: "Complexity is not to be admired. It is to be avoided."

However, before ending chapter 1, when developing an outstanding simple solution, Jack says: "This solution to the problem was simple, though implementing it was a complex process." Let engineers make it easy for the customers by developing the require software based on solid theory and practice, just as nukes are designed and operated. The main problem of deregulation was that economists implemented a simplistic solution - not a simple solution - to electricity deregulation.

Regards,

José Antonio

Please Blame the Deregulation and Regulation Fiascos Parte 9

Ferdinand E. Banks has posted another comment:

The consumers and legislators who bought the deregulation scam bought it because they were told that electricity prices would be lower. Like me, the average rate payer doesn't care about consumer sovereignty, pressing buttons, checking dials and pulling levers. They just want lower electricity prices. And Jose, didn't they have some riots in your country over electricity prices: please don't tell me that the riots were about the absence of consumer sovereignty.

In Sweden, and probably elsewhere, dumb academics accepted deregulation because it meant research money and plane tickets. On the other hand, you mentioned Bill Hogan. Hogan is a very very smart man, and IF he wanted retail markets separated from wholesale in the way that you say or think, it's because he figured out what could happen if it wasn't. Not what WOULD happen, but what COULD happen. The Enron bosses were also very smart. They just didn't go far enough into mainstream economic theory to get the entire picture.

This concentration on the so-called drought in California is pitiful. Laughable, actually. In Brazil the government asked people to pray for rain, but as the directors of the main generating companies in that country made it clear, the problem was deregulation, reinforced by a crazy belief on the part of the deregulation booster club that if electricity prices fell, there would still be sufficient physical investment. Whether you know it or not, they had the same nutty idea in California, only worse insofar as the details were concerned.

I told my finance students the following: in finance, history, intermediate economic theory and (fairly) elementary math is the way to go. All of them didn't believe me of course, but they still followed my instructions, because they knew that if they didn't, I would fail them with a smile on my face. We have the same problem here: you've taken simple economics and made it complex, and even worse you've gotten the facts wrong. But cheer up gentlemen: five more years and those sensual Californians will have forgotten all about the meltdown, and then you can foist another deregulation swindle on them.

Please Blame the Deregulation and Regulation Fiascos Parte 8

Dick Maclay is suggesting that my insights be considered in the following quote:

Len, Southwest was profitable for years offering lower fares than American, while American lost money. That speaks to overall efficiency. If American beats Southwest on one measure AFTER imitating Southwest that is amusing, but not important to the discussion. The description of how Southwest differs from the pre-deregulation airline model has been written many times, and it is too long to retell here. But if you want to understand how competition upsets inefficient old cartels, do take the time to read about Southwest. Ferdinand, the point is that when customers are no longer denied the full range of choices they choose low cost options, not high cost options.

I bet the failure to deregulate would fail. I would never bet against actual deregulation. You are welcome to your opinion about deregulation, but consider Dr. Vanderhorst-Silverio’s insights.

The great failure in California was that insulating retail customers from wholesale prices was a perfect barrier to a functioning market. When the shortage occurred there was no price signal to reduce consumption. Some described the result as giving everyone market power. It did create an opportunity for everyone to raise their prices, but that is nothing like the economic or legal definition of market power. It was a marvelous demonstration of the basic fallacy of attempting to have half a market.

Dr. Hogan was very influential in the early development of California’s restructuring, and the restructuring did follow the mental of model of isolating wholesale from retail that Dr. Dr. Hogan appears to persist in pushing. I did not locate the description of the Enron model, so I have no way of knowing how it may differ from the Hogan model.

Our modeling of the western interconnect in the mid 1990s forecast prices over $300 /MWh in the 6*16 market if there was a major draught on the Columbia River before 2003, and wholesale markets were isolated from retail customers. Unfortunately, the draught occurred and prices were as forecast. When the generally accepted short-term price elasticity of -.02 was introduced in our model, prices topped out at about $100. Too bad California did not use something along the lines of the Schweppe model.

Even $100 per MWH is high for 6*16, but high prices are part of a major shortage period. Spot prices in all years except 2000 and 2001 have been unsustainably low; too low to justify building new power plants. Some periods with high prices are needed. In context $100 is not bad. The good thing about large variations in prices is that it guides customers away from high cost periods, towards lower cost periods. That is how deregulation resturctures an industry, reducing costs and prices.

Please Blame the Deregulation and Regulation Fiascos Parte 7

Steve Rosenman responded positively to my post on EnergyPulse as follows:

Jose Antonio

I read your recent comments in the above reference. You definitely present a consistent and rational view on the prospect of successfull Deregulation. Digital metering is necessary but not sufficient. What is needed is a digital feedback to the customer of hourly price of electricity. Customer awareness and concern for cost may lead to some feedback control of consumption with set points based on hourly price of electricity

Please Blame the Deregulation and Regulation Fiascos Parte 6

Ref: Please Blame the Deregulation and Regulation Fiascos Parte 5

To Mr. Golden, Mr. Prof. Banks, Mr. Maclay, Mr. Gould, Mr. Rosenman, and Mr. Olivier.

I suggest that the article thesis is mistaken by being based on Hogan's mental model that links higher than necesary prices with deregulation. Please read Please Blame the Deregulation and Regulation Fiascos Parte 5 to find out why Electricity WPC removes rules that deny customer choices and give them low prices after all cross-subsisidies (including supply security cros-subsidies) are eliminated. If going from Hogan's mental model to the extension of Schweppe's mental model does not involves stranded costs, customers will be able to get the expected low prices.

Regards,

José Antonio

Please Blame the Deregulation and Regulation Fiascos Parte 5

© 2006. José Antonio Vanderhorst-Silverio, PhD
Interdepedent Consultant on Electricity

There are 3 mental models behind restructuring: Enron's, Bill Hogan's and the one that I am proposing as an extension of Schweppe's mental model. Enron's mental model lost its case in California, so we are left with the remaining 2.

Bill Hogan's mental model is based on 4 stages, where first (stage 3) you concentrate on the wholesale market and later (stage 4) you work with the retail market. That trajectory leads to generator market power and/or excessive transmission requirement. PJM is the child of this mental model, which has maintained huge generation reserves and corresponding capacity payments.

A few days ago, PJM management announced that: "For the first time, demand response can fully compete with generation to provide ancillary services in an organized wholesale electricity market. PJM Interconnection today opened its synchronized reserves and regulation markets to demand response providers." It is very interesting to understand that those providers follow states rules, but will be operating in interstate commerce. Should they be under FERC?

Schweppe's extension mental model considers the natural transport (transmission and distribution) monopoly completely coordinated in the short and long run. It starts with both the retail and wholesale markets to create a market that has no monopsonistic behavior on the demand side, because the number of responsive customers ranges from thousands to millions.

Schweppe had envisioned such a market in 1978 for the beginning of 2000. He new, that what we call today demand response, was to be developed to make it a reality. Hunt and Shuttleworth of NERA wrote 10 years ago that "...there is a major obstacle: the high cost of installing digital meters at the residential level to provide the basic infrastructure for wide consumer choice. Consequently, universal retail wheeling probably will be delayed for many years, especially where prices are already low [1]." Electricity WPC is based on this paradigm, where alternative business models will eventually arrive.

As a conclusion: Business model based on Bill Hogan's mental model may have a need for reengineering to become the Standard Market Design that it intended. States that are considering restructuring better start with a clean slate. New technology for Customer Information Systems (CIS) and Automated Metering Infrastructure must be waiting for the opportunity.

[1] Sally Hunt and Graham Shuttleworth,”Unlocking the GRID,” IEEE Spectrum, July 1996, page 25.

Muy Bueno y Claro Parte 2

Ref: Muy Bueno y Claro

Estimado Bernardo,

Para realizar mejores comparaciones de precios de electricidad aquí, en Chile y en Panamá, hace varios meses que te sugerí emplear una orientación al cliente en la comparación de las tarifas. Hay varias notas entrelazadas que abordan ese tema, especialmente la que le envié a un consultor hace un año y que se se encuentran en Elemento de una Visión Compartida: La Dificultad para Comparar las ...20 Nov 2005.

Con toda humildad, espero que te puedan servir para hacer una comparación de precios más equilibrada en la próxima ocasión.

Saludos,

José Antonio

Reactivemos el Sector Eléctrico y Apoyemos las Exportaciones a Mediano Plazo

Re: Muy Bueno y Claro

Estimados Bernardo y Luis,

1) Si bien entiendo las conclusiones, los precios de generación no están tan mal para la coyuntura. No es posible bajar 30% como dice la CDEEE a los precios de generación. El verdadero problema es de comercialización. Lamentablemente, se dejó de tomar en cuenta el costo de desasbatecimiento que imponen los apagones a los clientes (especialmente a la industria y el comercio) en la comparación de precios. Si me perdí algo, favor aclárenme.

2) Mi propuesta es que debemos pensar en la coyuntura y también en los próximos 5 años en que el RD-CAFTA habrá desarmado las empresas no competitivas de RD. Las empresas pueden ser competitivas a base de reducción de costos de sus productos y servicios por debajo de los de la competencia o a base de aumentarles el valor a los mismos por encima de los de la competencia.

3) Los Estados Unidos tienen un segmento de 70% para compras a bajo costo donde se debe competir principalmente con los chinos y otro 30% para compras de valor agregado en que las empresas dominicanas pueden aprovechar la cercanía con USA para desarrollar ventajas competitivas. El consultor OTF dice que es en alto valor agregado donde podemos competir.

4) Por más que se bajen los costos de electricidad y se logre que todo los clientes la paguen, no hay forma humana de que la gran mayoría de las empresas dominicanas exportadoras estén en capacidad de competir a base de bajo costos en el mercado global. Pero peor aún, la reducción de costos de abastecimiento de electricidad podría ser negada por el aumento de costos de desabastecimiento de electricidad, especialmente por la dependencia de nuevas tecnologías.

5) Para desarrollar el mercado de aumentar valor la inversión en tecnologías de información es tan imprescindible como encontrar nichos de alto valor agregado donde lograr una separación grande de la competencia global hacia los Estados Unidos. Por demás está decir que las empresas que no exportan y se concentrar en el mercado local de bajo costo podrán "vender" seguridad de suministro al sistema interconectado si sus unidades de emergencia son relativamente eficientes.

6) La Electricidad SCP sería un gran aporte logístico a las empresas que encuentren esos nichos. La Electricidad SCP permitiría reducir al mínimo posible el costo de desabastecimiento a la economía acelerando la reducción de los escapes en la comercialización y creando los incentivos correctos para la inversión en eficiencia energética y respuesta de la demanda antes de que pasen 5 años.

7) Las inversiones mínimas en sistemas de medición para conjurar los problemas de comercialización cierran el paso a los beneficios de la respuesta de la demanda y con ello a la Electricidad SCP. Los beneficios que ofrecen inversiones en una infraestructura automatizada de medición, aunque es más costosa, se pagan a sí mismas aún sin incluir los grandes beneficios de la Electricidad SCP.

8) La Electricidad SCP enfrenta la gran inercia del sector eléctrico haciendo que en el menor plazo se respeten los derechos de los consumidores y no tan solo los derechos de los suplidores. Al enfrentar la inercia se aumenta grandemente la oferta de empleo digno en el sector, al tiempo que se reducen las decisiones centralizadas. La eliminación paulatina del control de precios debe iniciarse con la introducción de los cambios de normativa que permitan a la mayor brevedad que se liberen a los clientes de 200 kW en adelante como lo indica la Ley 125-01.

9) Mientras mayores exportaciones logran las empresas dominicanas mayor es el empleo digno y mayor la capacidad para pagar la electricidad con la calidad y confiabilidad que cada cual necesite. Eliminemos la inercia y reactivemos el sector eléctrico con la Electridad SCP y con ello a la economía antes de que el DR-CAFTA nos arrope.

10) La estrategia de bajo costo es una estrategia suma cero que a la larga resulta miserable, mientras que la estrategia de alto valor se nutre de la abundancia y en el aumento del pastel económico de la República Dominicana.

Ese es tan solo un humilde decálogo en este Día de los Trabajadores.

Saludos,

José Antonio

Muy Bueno y Claro

Luis

Gracias Siempre hemos estado conscientes de que el problema son los cobroos Los de las plantas con menor costo de generacion siempre ha sido una vision a mediano y largo plazo

Naturalmentre, luego de tantas horas en reuniones, debates que obligan a uno a investigar y profundizar mas sobre el tema, al final como dice el refran "todos los caminos conducen a Roma" y en este caso Ronma es y siempre ha sido las altas perdidas en la comercializacion

En este proceso de reflexion, los analisis yu discusiones han permitido ir despejando mejor el fruto de la maleza, la verdad de la mentira y creo que el diagnostico y solucion es claro Hay que cobrar y eliminar las distorsiones que hoy presenta el mercado electrico inducido por las restricci0nes en la demanda

Nos vemos pronto y un abrazo a todos

Saludos

Bernardo

Luis H. Arthur escribió:

Bernardo, muy bueno. Después de tantos meses analizando, llegamos a la misma conclusión que Armando presento en nuestra primera reunión. La diferencia es que lo parimos nosotros con muchas horas de esfuerzo y somos más totalmente concientes. Reconocimiento a Armando.

Felicidades, es un bonito análisis. También felicidades en el picoteo. Nos hace falta.

Luis

Please Blame The Deregulation and Regulation Fiascos Parte 4

Re: Please Blame The Deregulation and Regulation Fiascos Parte 3

Len Gould said:

It seems to need re-stating. There are many social benefits which cannot be delivered by competitive market systems. I REALLY need to hear Reaganomics / NeoCon proponents agree with that statement before I'll grant they any further time or interest.

José Antonio responded:

Len,

Social benefits that can be delivered by markets.

We need a system that mitigates fuel volatility.To do that the perceptions of the end-customer enter the equation. Marketing is the tool to learn and segment end-customer needs. Central planning and price controls don't work in those situations.

Social benefits that cannot be delivered by markets.

Central planning and price controls are required for T&D and system control.

Regards,

José

La Paradoja Tropical Obstruye la Solución de la Crisis Eléctrica

1. La Paradoja Tropical Parte 2
26 Apr 2006
Este fue un comentario que coloqué en Clave Digital debajo del artículo de Luis Arthur La prensa dominicana. El artículo de Luís aborda una parte importante del sistema imperante. Para otra parte más detallada de dicho sistema ...

2. La Paradoja Tropical
26 Apr 2006
Una buena explicación de lo que sucede aquí no ha salido en la prensa. Es un artículo del Times magazine titulado "Tropical Paradox." En el mismo se explica porqué mis propuestas de la Electricidad Sin Control de Precios no caen bien en ...

3. Deregulation Which Considers Only the Supply Side of the Supply ...
25 Apr 2006
This was a comment I made, on January 2nd, 2006, in the post "DRAINING THE POWER GRID?" in the the Tech Talk Blog, by Susan Hassler, Editor-in-Chief IEEE Spectrum . The authors place some of the blame on deregulation for grid maladies. ...

4. Constituyamos Equipos Virtuosos para Enfrentar Retos Parte 2
22 Apr 2006
Repetimos a continuación una nota que publicamos el 17 de julio del año 2005, bajo el título: Competencia en el Corto Plazo: EQUIPOS VIRTUOSOS Parte 2. La repetimos para contrastar la experiencia pasada, de la que cuento tres ejemplos ...

5. Please Blame The Deregulation and Regulation Fiascos Parte 3
22 Apr 2006
Prof. Banks made a response in the EnergyPulse article Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices to my comments, of which I selected the one directed to me. The Prof. said: ...

6. Please Blame The Deregulation and Regulation Fiascos Parte 2
22 Apr 2006
I added the following quote to EnergyPulse below my post Please Blame The Deregulation and Regulation Fiascos, which I entitle "Fundamentals of Deregulation." Slide #1 of 72. Retail Access is Easy, It’s Getting Wholesale Access that is ...

7. Constituyamos Equipos Virtuosos para Enfrentar Retos
22 Apr 2006
En el Editorial del Listín Diario Sin saber qué nación queremos Miguel Franjul presenta el reto principal de la nación. Hace un momento he sometido a su Bitácora Digital el siguiente comentario. La mejor manera de saber qué nación ...

8. Please Blame The Deregulation and Regulation Fiascos
21 Apr 2006
I just added a comment to the EnergyPulse article Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices, by Phillip T. Golden, Consultant, Camp Dresser & McKee, Inc., which says:. To Prof. ...

9. DL: ANJE Exige Cumplimiento Ley General Electricidad Parte 2
21 Apr 2006
Estimado señor Valcarcel, Leí con mucho interés la noticia sobre sus declaraciones a la prensa a nombre de ANJE y la coloqué en la Bitácora Digital del GMH. Tengo para informarle que el cumplimiento de la Ley General de Electricidad y ...

10. DL: ANJE Exige Cumplimiento Ley General Electricidad
21 Apr 2006
Diario Libre publicó hoy la siguiente noticia:. El presidente de la Asociación Nacional de Jóvenes Empresarios Inc. (ANJE), Eduardo Valcárcel, expresó que la Ley General de Electricidad 125-01 dispone la existencia de usuarios no ...

La Paradoja Tropical Parte 2

Este fue un comentario que coloqué en Clave Digital debajo del artículo de Luis Arthur La prensa dominicana.

El artículo de Luís aborda una parte importante del sistema imperante. Para otra parte más detallada de dicho sistema, pueden leer el artículo La Paradoja Tropical . Espero que Clave publique una traducción del mismo.

La Paradoja Tropical

Una buena explicación de lo que sucede aquí no ha salido en la prensa. Es un artículo de Time magazine titulado "Tropical Paradox." En el mismo se explica porqué mis propuestas de la Electricidad Sin Control de Precios no caen bien en el sistema imperante.

Deregulation Which Considers Only the Supply Side of the Supply-Demand Equation is Dangerous

This was a comment I made, on January 2nd, 2006, in the post "DRAINING THE POWER GRID?" in the the Tech Talk Blog, by Susan Hassler, Editor-in-Chief IEEE Spectrum .

The authors place some of the blame on deregulation for grid maladies. However, the blame should be placed on re-regulation, without a true retail deregulation. A complete market should have demand response at the center of individual customer rationing (based on segmented reliability pricing), to help keep the system operating 24/7 within the normal operating state (NOS). Drifts to alert or emergency operating states, on any control area, should be returned as soon as possible to the NOS, by combined supply side (G, T&D) and demand response operating actions. See Get-Rich Quick Scheme January 2005 article.

Late professor Fred C. Schweppe of MIT, and his colleagues, wrote in the book "Spot Pricing of Electricity": "We believe the deregulation which considers only the supply side of the supply-demand equation is dangerous and could have very negative results." It has taken a long time and a lot of value destruction to understand the above insight. The doors to innovative solutions in the power industry will be wide open when that concept is finally understood.

Posted by: Jose A Vanderhorst-Silverio, PhD 02 January 2006 9:06 PM

Constituyamos Equipos Virtuosos para Enfrentar Retos Parte 2

Repetimos a continuación una nota que publicamos el 17 de julio del año 2005, bajo el título: Competencia en el Corto Plazo: EQUIPOS VIRTUOSOS Parte 2. La repetimos para contrastar la experiencia pasada, de la que cuento tres ejemplos sin ánimo de crítica personal y abierto a recibir de ellos todos los errores que he cometido en esos esfuerzos. Yo creo que mi mayor error, no obstante ha sido no haber logrado encontrar expertos con quien trabajar. Lo hago porque en los equipos virtuosos aparecen gente como yo: "no es sorprendente que las superestrellas (no me lo creo - solo transcribo lo que aparece más abajo) que conforman estos equipos sean conocidas por ser elitistas, temperamentales, egocéntricos y difíciles de trabajar con ellas"

Muestra de ello son:

1. Un proyecto del Organismo Cooridnador para sustituir los gerentes y que a mi modo de ver no llenó las necesidades del sector.
2. Dediqcación de todo un año a un equipo en la Cámara de Comercio y Producción de Santo Domingo y que no aprovechó para incorporar las necesidades de los clientes.
3. Empleo de un número elevado de horas tratando de transmitir mis humildes conocimiento y visión junto con los organizadores del Foro Eléctrico sin lograr avanzar suficiente en la solución del problema.

En el artículo "Competencia en Electricidad en Corto y Largo Plazos," sugerimos el empleo de Equipos Virtuosos para desplegar la solución al problema eléctrico, cuya meta ... sería resolver la crisis de la relación entre los clientes y la industria eléctrica dominicana . Es importante que se entienda la importancia del modelo de Equipos Virtuosos. Si no tienen acceso a la revista física del mes de julio 2005, en el Sitio Web del Harvard Business Review tienen la posibilidad de comprar el artículo. Este es el resumen que aparece en el site de HBRAL: Bill Fischer y Andy Boynton

Gestionar un equipo tradicional pareciera ser algo bastante directo: reunir a quienquiera esté disponible, otorgarles el tiempo y el espacio para que realicen su trabajo, y asegurarse de que todos trabajen bien en conjunto. Pero estos grupos producen resultados que a menudo son tan comunes como los equipos en sí. Cuando se necesita un gran cambio o un gran desempeño, es mucho más probable que un equipo virtuoso genere resultados sobresalientes e innovadores. Los equipos virtuosos son fundamentalmente distintos a los grupos de trabajo convencionales que la mayoría de las organizaciones forma para perseguir objetivos modestos. Éstos comprenden a la elite de expertos en sus respectivos campos y son convocados especialmente para los proyectos ambiciosos. Su estilo de trabajo tiene un ritmo frenético y emanan una energía perceptible. Sin embargo, no es sorprendente que las superestrellas que conforman estos equipos sean conocidas por ser elitistas, temperamentales, egocéntricos y difíciles de trabajar con ellas. En consecuencia, muchos ejecutivos temen que, si obligan a estas personas a interactuar en proyectos de alto riesgo, el grupo simplemente explote. En este artículo, Bill Fischer y Andy Boynton muestran el funcionamiento interno de estos equipos virtuosos a través del despliegue de tres ejemplos: el equipo creativo de West Side Store; el equipo de escritores del exitoso Your Show of Shows, de Sid Caesar, en los 50; y los tecnólogos de alto poder de Norsk Hydro, el gigante energético noruego, que evitaron una crisis en la relación con los inversionistas. Cada uno de estos equipos logró enormes metas y cambió a sus negocios, sus clientes, e incluso a sus sectores. Lo hicieron rompiendo con todas las reglas convencionales de la colaboración, desde la forma en que
reclutaron a sus miembros hasta la forma en que cumplieron con sus procesos poco comunes; desde las altas expectativas que tenían hasta los resultados excepcionales que generaron. Reimpresión R0507K–E

Dado que se trata de un proyecto pre-competitivo para la industria eléctrica nacional, y no para una empresa particular, se sugiere hacer un acuerdo similar al que dio vida al Organismo Coordinador. Una diferencia es que no sería obligatoria la participación de todas las empresas eléctricas, sino un conjunto representativo, en adición a la participación de otras especialidades que faciliten la solución, por ejemplo, en tecnología de información y mercadeo al detalle. El financiamiento sin ataduras de los organismos financieros multilaterales y las agencias donantes sería muy bienvenido. Al mismo tiempo, se podrían incluir expertos provenientes de las empresas telefónicas, las universidades, los suplidores de soluciones individuales o de cualquier sector que tenga un grado de experticio superior.

En ese sentido, Fernando Flores ha publicado en uno de sus escritos la escala de aprendizaje siguiente:

1) Principiante,

2) Principiante avanzado,

3) Competente,

4) Perito,

5) Virtuoso y

6) Maestro,

Según:

1) las Tradiciones Pasadas Encadenadas en el Practicante,

2) el Involucramiento Presente

(a) Experiencia,

(b) Involucración y

(c) Expectativa) y

3) los Retos y Oportunidades Futuras.

En ese sentido estaríamos buscando recursos de los niveles superiores. En la elección de los integrantes, Fischer y Boynton han destilado que debe ser por sus habilidades: "Se insiste en reclutar solo a aquellos con las mejores habilidades, sin importar la familiaridad de los individuos con el problema " y "Se reclutan especialistas para cada posición del equipo."

Please Blame The Deregulation and Regulation Fiascos Parte 3

Prof. Banks made a response in the EnergyPulse article Post hoc ergo propter hoc: The fallacy of blaming deregulation for rising electricity prices to my comments, of which I selected the one directed to me. The Prof. said:

Jose want Swedish executives to have a talk with their colleagues in the U.S: Now that's beautiful, isn't it. We had the lowest cost electricity in the world here, and some of the lowest prices until electric deregulation came along. In this situation, I think that we can alter the proposed arrangement: American executives can talk with their colleagues in Sweden, who can explain to them what happens when you listen to the advice of crank academics with a lech for airline tickets to (what they think are) romantic places.