California has a great opportunity to repair the damages of the BIG California LIE to the world. The CPUC can do it by introducing a high leverage shake-up of the power industry that results in a win-win proposition for every stakeholder, becoming the example of indiscriminate access of electricity for the third industrial revolution.
High Leverage Shake-Up in California
By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity
First posted in the GMH Blog, on March 11th, 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 California Public Utilities Commission (CPUC) has begun a process that could allow businesses and homeowners to bypass utilities and buy power on the open market. See Shake-up could be coming in electricity. The CPUC is considering a limited form of deregulation called “direct access.” This time there is hope that the intervention of the systemic electricity crisis does not result once again in a BIG California LIE.
On the EWPC article Shrinking the Regulator’s Jobs, I updated my views on the BIG California LIE and wrote that “I am now convinced that FERC, the CPUC and the three largest California utilities actions were integral part of the natural systemic response that led to the vicious circle of the mistaken efforts that has had a large impact on the delay of restructuring worldwide.” In that light, for details (please hit corresponding link of the EWPC article here and below) see Slicing the Last of the Regulated Monopolies.
However, direct access could be just another form of low leverage structural separation, which maintains in place incumbent utilities and produces well known unintended consequences. See Utilities vs. Neelie Kroes.
To become a high leverage shake-up, the process should allow all customers, without any discrimination, to buy and sell power (Watt-Vars and NegaWatts-NegaVars) in the open market. The term “bypass” is a trap; utilities should be restructured by having the CPUC consider the following:
Adopt a shared vision of the end-state of the electricity industry for quite some time, as provided by the Electricity Without Price Controls (EWPC) paradigm. See Creative Destruction of the Old Electric Paradigm.
Adopt the essential requirements of the electricity industry which are: Active Demand, Retail Competition and Ultraquality Transportation. See Power Markets Essential Requirements and Power Markets Essential Requirements - II.
Perform restructuring to provide a high leverage shake-up that minimizes unintended consequences by considering the management of systemic risks in the long run and the short run. See Another EWPC Discovery and Another EWPC Discovery II.
Redefine utilities as transportation only utilities that provide Ultraquality Transportation. See The Smart Grid Transportation Utility.
Retain price controls on the transportation utilities closed market. Shift from price controls to prudential regulations in the open market. For details see Shrinking the Regulator’s Jobs.
Introduce “direct access” under Second Generation Retailers - 2GRs with statewide Retail Competition. Later on those 2GRs should be able to operate in federal and worldwide markets as EWPC becomes the new paradigm, where the large value creation will result in a win-win proposition for every stakeholder. See The Sixth Disruptive Technology.
The WTO could be entrusted as the "single agency" with "the power to enact globally binding environmental legislation." Clearly the WTO disciplines should be developed with a corresponding "miracle" attitude in place.
That is in line with what I suggested earlier, that instead of a tax or emissions trading, tariff schedules on exports of GHG should be in place. Since this is no a tax, the tariffs schedules would have a range that would be negative, meaning that company export below the threshold level would generate a credit for the company. This is just an idea for discussion to suppress GHG, by changing the tariffs schedules and reducing the corresponding thresholds as time goes on.
The case for WTO disciplines has already been studied earlier, I recall around the year 2000 in the energy and environment task forces of the WTO. In fact, there is an important unfair competition issue involved, making GHG suppression a trade issue amenable to binding agreements.
Just like Demand Integration, GHG Suppression, is just another externality that can be handled by 2GRs for the electricity industry. California is once again in the process of shaking-up the power industry, as can be seen in the EWPC article High Leverage Shake-Up in California. Since California has probably invested more than any other place in the world in the suppression of GHG gases, their companies could well become competitive by the process. The coalition of California businesses promoting "direct access" should look closely into this idea.
It is very clear that in the process, transportation should undergo GHG Suppression and thus shift to electricity. That is already happening with cities mass transportation initiatives.
In the column of things with which I wholeheartedly agree is that we can change the industry dramatically by giving customers, all customers, choices. However, the choice that is important is NOT who to buy your electrons from, but rather when to buy them. The electronics that are about to really change the market are those that allow customers to choose to buy or not at specific times, without requiring that they pay more attention to the issue than is reasonable. Controls that communicate with the utilities' meters, receive price signals, control (e.g., shut off) equipment and even whole circuits, and do so on a user-selected pre-set price response schedule, will find acceptance among consumers and put control back in their hands. Controls that shut off equipment or step up t-stat settings, but are only really controlled by the utility will continue to foster dissatisfaction, and will never provide the right kind of demand-side market signals.
Whether I buy from PG&E or Green Mountain Energy only really matters to me to the extend I know, believe and care about the renewable energy portfolio of each. On the other hand, if I can set a schedule that automatically shuts off power to my washer, dryer and dishwasher at $0.18/kWh, THAT is valuable. Especially if it can also shut off my AC at $.28/kWh unless the temp reaches 90F, at which point it would cycle the AC on for 15 of every 60 minutes. And even more especially, if it could shut off all my non-essential "off-but-really-only-sleeping" loads 10 minutes after I leave the house and turn the appropriate ones back on twenty minutes before I get home. THEN I will have control that gives me some market power - as long as the "me" is a large enough plural.
"Don,
Thank you.
Please help the CPUC consider the EWPC article High Leverage Shake-Up in California."
Jose, you're entirely welcome. Vis a vis EWPC, the only help I can offer you or Mr. Stone is to suggest you both strive, as you say, for greater "eloquence".
Related to the solution to the flaws of what happen in California deregulation is well documented in the links above related to it. EWPC emerged in the past two years and there are more than 100 articles already to attest it.
Your whole argument against the need for a high leverage shake-up is in the statement "What doomed [California Deregulation] to failure remains unanswered in the current suggestion." The rest of the post is developing a vision to keep the utilities as they are.
This is the answer that is already in the already mentioned EWPC articles: the obligation to serve shifts to an obligation to transport at ultraquality for the transportation utility under its regulatory compact to receive tolls under price controls. In the open market retail and wholesale customers need to make contractual arrangements with 2GRs and generators, respectively, in the open market. The process of Demand Integration to power system planning will transfer those arrangements are contractual obligations between the parties, to come up with system adequacy proceedings (to manage long run systemic risk of system failure).
The market mechanism is not a simple supply and demand to come with prices. The mechanism is better represented as stock and flow pricing system.
The utilities have great learning disabilities. One of them is the ownership of the CIS, which is overdue in need of replacement, as Warren Causey explains very clearly in the article "What doomed it to failure remains unanswered in the current suggestion." See the article and my comments in the link http://www.energyblogs.com/Causey/index.cfm/2008/3...
CPUC CONSIDERS PROACTIVE STEPS TO ENABLE LIFTING SUSPENSION OF DIRECT ACCESS
SAN FRANCISCO, February 28, 2008 - The California Public Utilities Commission (CPUC) today said that while it does not have the authority to unilaterally lift the suspension on Direct Access at the present time, it can consider lifting the suspension if certain legal requirements are met.
Assembly Bill (AB) 1X mandates that the suspension of Direct Access continue until the California Department of Water Resources (DWR) no longer supplies power. As stated in today's decision, as long as DWR holds legal title to power that it sells to retail customers it is deemed to be "supplying power" under the statute. Before the CPUC can consider lifting the ban on Direct Access, it must consider proactive strategies to remove DWR from its role as a power supplier under AB 1X.
"The suspension of choice in power providers cannot be lifted until DWR no longer supplies power through the contracts that were signed during the energy crisis," said CPUC President Michael R. Peevey. "Accordingly the CPUC can and should evaluate the merits of ways to extricate DWR from its current role as supplier of energy under those existing contracts. After that the CPUC can proceed to the question of whether and how to reinstate Direct Access."
Be of good cheer, Jose, you are not the only one willing to bankroll untried market schemes with ratepayer dollars. Today's San Diego U-T headlines "PUC considers expanding 'direct access' to buy power". Among other things, the byline notes:
"Advocates say 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.
Opponents say 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."
Let's see. The last experiment cost CA ratepayers an extra $23 billion over a two year period. With a little luck or maybe pure EWPC, CPUC and company can double the extra cost of that travesty.
There are three stories: 1) EWPC is about the good story; 2) the oponents of direct access (incumbent utilities) have a bad story; and 3) the advocates (the coalition) of direct access have an ugly story.
If you dislike sending the commissioners the article, I hope somebody else will, as well as also sending them the EWPC article "The Good, the Bad and the Ugly," whose summary is "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."
To read the complete complementary article "The Good, the Bad and the Ugly," please hit the link http://www.energyblogs.com/ewpc/index.cfm/2008/3/1...