Great post Martin,

As "his power and influence have grown immensely," as you have written, Dr. Chu leverage is simply helping end the obsolete Investor Owned Utilities Architecture Framework (IOUs-AF) to introduce the Electricity Without Price Control Architecture Framework (EWPC-AF).

As an introductory example of the EWPC-AF, Dr. Chu should consider the article "The Deadly Sin of State Regulators on the Smart Grid," which can be seen by hitting the link http://www.energyblogs.com/ewpc/index.cfm/2009/7/5...

The article summary says: "President Obama and Secretary Chu need to learn urgently about the deadly sin of the smart grid that state regulators are making, that is leading to a huge Greek Tragedy. Politics as usual will keep '... generating a legacy bubble that will explode with a stimulation package that will not transform the power industry at all.'"

Dr. Chu needs to read the article and the comments to see firsthand how the systemic leverage is available under the EWPC-AF to enable the renaissance of the power industry. Most importantly, as the entrenched IOUs will no longer be controlling most sales in the power industry, such leverage will induce and attract private sector investment that will avoid the need for a new stimulus package.

Best regards,

José Antonio

Hello Dr. Chu and Martin,

In the response to James, please take also into account the following interchange, focusing on the meaning of the extremists "nothing whatsoever" in his quote below, made in response to the same EWPC article I recommended Dr. Chu above as an introductory example of the EWPC-AF:

James Carson: ...What do you think that Chu and/or Obama can do about states' recalcitrance? Nothing whatsoever. Everybody knows that, except you.

José Antonio: Believe or not, there are important details that need to be understood by President Obama and Secretary Chu in order for them to develop priorities to distribute a stimulus fund that reduces the risks that States regulators can take to help avoid the deadly sin. As Most of the value creation of the Smart Grid will be in the development of the resources of the demand side, to follow Jeanne Liedka's advice, value creation is found in the marketplace and not by analysis that is used to make huge bets.

I repeat from the next to last EWPC article that "The 'massive' Greek Tragedy change effort (not a real transformation that is here to stay) will fail as a result of the fatal 1992 architecture flaw of the IOUs-AF. The IOUs-AF has been extended it way beyond its useful life (trying to fix the flaw, with capacity markets, NERC mandatory requirements, etc.), with organized wholesale markets based on said architecture flaw that is generating a legacy bubble that will explode with a stimulation package that will not transform the power industry at all. If the COMPETE Coalition does not act fast to shift its course, its members will need to pay the early obsolescence rates of the Greek Tragedy that will make many of their firms uncompetitive."

For those reasons, the market discussion details should concentrate on business model based on regulated or competitive Enterprise Solutions, independent of the existence or not of retail competition by First Generation Retailers (1GRs). For customers that have no access to 1GRs, profit and sales decoupling has been enacted or planned to be enacted at some jurisdictions increases the risks even more.

The deadly sin that leads to the Greek Tragedy is centered on Utilities' Enterprise Solutions (UES), which are still based on the obsolete business model of winning rate case to the regulator. The UES gives an unfair advantage to incumbent entrenched IOUs which that will be able to add to the rate base failed IOUs Smart Grid UES investments.

Under EWPC-AF, there is business model competition based on their Retailers' Enterprise Solutions (RES), which will not add to the rate base of the wires only Smart Grid Transportation utility. As total RES risks are infinitesimal, the marketplace will enable business model innovations that will make State regulators jobs very simple, as it used to be before 1970.

"With all due respect, thank you very much James," is part of what I wrote under the EWPC article "The Deadly Sin of State Regulators on the Smart Grid (please hit the link http://www.energyblogs.com/ewpc/index.cfm/2009/7/5... )," where the response can now be found under the heading "So Long IOUs-AF Part V."

Hi Martin,

In addition to my last post, to keep reading about how to respond about 'rigid orthodoxies,' please take a look at the EWPC article How Secretary Chu can Deliver a Win-Win, Big Deal Outcome at the Global Sustainability Game (http://www.energyblogs.com/ewpc/index.cfm/2009/7/1... ) and the comments.

William,

The need fo "...a push toward massive expansion of transmission capability and reliability..." is mainly the result of a flaw of the IOUs-AF.

Under the EWPC-AF, the development of the resources of the demand side will increase the load factor of existing distribution and in turns the load factor of transmission, leading to a least cost development of the transportation (integrated T&D) infrastructure.

The neglect is the result of the mistaken IOUs-AF restructuring. Integrated T&D should be expanded at least costs to enable maximum social welfare (1st priority) in the open market (2nd priority) under the EWPC-AF restructuring.

Thank you James,

When I wrote "Under the EWPC-AF, the development of the resources of the demand side will increase the load factor of existing distribution and in turns the load factor of transmission, leading to a least cost development of the transportation (integrated T&D) infrastructure," I was writing about the optimization of investments under one roof, as opposed to the optimization done by two independent organizations.

Thank you James,

You need to open your mind to see the whole picture of all the costs, including investment and operation costs. RTOs have been oversold as to increase load factors of physical transmission and distribution investments.

What has been happening in the U.S. is a lack of transmission investment to satisfy the IOUs-AF, when under the EWPC-AF many of those investment are not needed at all. In addition, physical distribution power lines are being operated at very low power factors, which can increase as time goes by with the development of the resources of the demand side,

When transmission and distribution companies are independent organizations, distribution companies are required to design their circuits to satisfy peak load no matter what. But when the resources of the demand side are developed to the optimal capacity, peak load investments gets reduced (or delayed) and load factor increase (during the delayed need for expansion).