Mark writes:

> > The result of Roosevelt's initiatives was 60 years of
>  > extremely dependable,
>  > reliable and inexpensive power that fueled the growth of the
>  > US's economy. In
>  > the late 1980's the philosophical tide began to turn back to
>  > the notion of
>  > deregulation. The consequence of that ebb has been an amost
>  > 180 degree swing back to the unregulated world of the 1920's.
>
>  A slightly different perspective from the pro-market Cato Institute:
>
>  From http://www.cato.org/dailys/01-23-01.html

Of course, the Cato Institute is the think-tank mouthpiece for the
deregulatory idealogues, and it's always good to know that sort of bias
before reading anything that they might say, or reading anything from anyone.

Nonetheless, the solution proposed by the article that Mark references is
about as dumb an idea as you could imagine. It is a complex, technological
fix whose only advantage is that is congruent with their philosophy: in a
wholly deregulated environment, every consumer, including the homeowner,
becomes a free agent, essentially bidding on the instantaneous price of
electricity. If the instantaneous price becomes too high, the consumer will
recognize that price excess and switch to some form of locally generated
power, perhaps with locally sited fuel cells or photovoltaics on the roof, in
essence making every neighborhood in the US the technological equivalent of
the Chicago Board of Trade commodities trading floor.

Stated in their own words, they write:

======================================

Critics focus on the fact that the restructured California market has fixed
retail prices at 6.4 cents per kilowatt hour through March 2002, which keeps
demand from reacting to the supply scarcity and produces shortages and
blackouts. While true enough, even if prices were not fixed by policy, prices
in California would still be wrong all the time: They would be average
monthly costs rather than the hourly marginal costs that exist in the
wholesale electricity market.

If consumers faced real hourly time varying prices -- instead of fixed
monthly costs -- they would have an incentive to buy or contract for
small-scale power sources (fuel cells or small natural gas turbines). Those
would be activated by computer whenever the cost of power on the grid
exceeded the cost of these small-scale alternatives. Consumers would also
have an incentive to shift their electricity-demanding activities away from
peak periods.

Remember, it is the shortage of supply at peak demand that is California's
main problem. Moreover, the emergence of supply substitutes and more flexible
demand because of "real-time pricing" would reduce the ability of generators
to raise prices, as they have in California.

Governor Davis' call for a return to the "good-old days" is thus unlikely to
help. First, signing long-term contracts for energy during times of high
prices was tried and failed in the 1970s. An overinvestment in nuclear and
independent power contracts resulted, producing rates far in excess of the
spot market. A new set of boondoggles is undoubtedly on the horizon. Second,
until price controls are removed and real-time pricing put in place,
scarcities will continue.

=======================================

Large companies already do something very much like that. Five years ago, I
regaled the list with the story of our building a computer controller for
Kennecott at one of their copper mines in southern New Mexico. Kennecott had
the capacity to generate 60MW locally, but purchasing power off of the grid
was much cheaper. The only real difference was, instead of having any sort of
instantaneous price information, they were given a 15-minute by 15-minute max
draw allowance for each day, a week in advance.

The story (and it's long) appears at:

   http://raven.utc.edu/cgi-bin/WA.EXE?A2=ind9706B&L=hp3000-l&P=R1251

(It's one of the few stories that I've told on the list that Bruce Toback
said he liked :-).

And as it occurs, just last year, I gave very serious consideration to doing
the same thing for us. AICS Research's magnificient campus is actually just
four buildings, side-by-side, three 50 to 75 year-old houses and one 60
year-old tin garage, all strung together on one block, all of which we're
slowly renovating.

Our electrician, Dale Luddington, is extremely excited about photovoltaics
and he's recently taken all of his buildings off-grid. Last year and a bit
earlier, when the deregulatory fever was at its maximum and California was
becoming extremely unstable, it looked very much like California's problems
were going to become New Mexico's as well. Because two of our buildings have
flat roofs, Dale and I estimated that we had more than enough area to install
about $100,000 of photovoltaics and continue to run everything as we do now
and allow for a little growth, and yet be completely free of the grid.

New Mexico doesn't have an independent producer law like many states do, so
although Dale actually runs his power meter backwards, supplying power to the
rest of New Mexico and the southwest, he gets no credit for it. Even so, his
electric bill is now a constant $4.50, which is a "connect fee", and his eyes
twinkle mightily when he talks about it.

We also looked at fixed point fuel cells running off of natural gas, and they
looked very attractive as well. If the California deregulatory mess did march
its way back to us, bringing third-world power conditions to what had
previously been a stable and predictable power supply, we would have
definitely done this. But, as it occurred, the balkanization of the grid
began about the same time and most of the western states stopped their march
towards deregulation.

We're just barely large enough and technically adept enough as a company to
contemplate doing all of this. It doesn't even begin to be a reasonable
solution for every homeowner, especially among the poor. Nonetheless, for a
one-time investment of $100,000, we would have been free of the vicissitudes
and instabilities of a free-for-all market economy. Even more interesting, if
the situation had become really bad, California-squared, it would stirred a
great deal of research into methods to make every consumer its own local
power producer, breaking the grip of the Enrons of the world, exactly as the
the most free-market of the free-market freethinkers advocate. But it
certainly wouldn't do it in a manner that was by all means the most
resource-use efficient, and that's one of the primary reasons that none of us
are doing it today.

Wirt Atmar

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