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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: LLCF who wrote (101759)	5/13/2001 9:52:45 PM
From: yard_man	Read Replies (4) of 436258

I think it is a reasonable question to ask: Do sufficient conditions exist for a competitive power market to develop in California? I mean -- outside of the political and regulatory will -- are there in fact physical, financial and economic structures that preclude this? I have only a very rudimentary understanding of open transmission from the standpoint of billing, reciprocity, levels of service, etc. But -- I do know that these involve the fiction of a "contract path" and there is a methodology that provides for varying levels of "firmness" for transactions. "contract path" is a fiction with/respect to how flows actually happen -- all flows are network flows -- as such one supplier does not have unlimited capacity to supply customers anywhere within even a given range ... In areas of very tightly constrained transmission -- what some have termed competition is little more than financially swapping responsibilities -- the liklihood for this to benefit customers is small. If a customer really doesn't have a competitive supply choice and rates are released from regulatory controls why should prices be driven anywhere near the marginal costs to supply? Suppose for a moment that conditions in some areas are not sufficient for competition to develop because of inadequate transmission -- how can the parties be incented to develop the infrastructure sufficint to real competition, if that part of the business is supposed to remain regulated? Even if conditions are sufficient and competition does develop -- the transactions will still always be in part a financial swap of some sort until the total network flow effect of adding the incremental generation to the grid is calculated and compensated for in that fashion -- it is really not as fungible as people think -- generation at one buss is not the same product as generation at another buss -- For this reason I understand the theoretical attraction of pools, but I think truly free markets require unfettered bilateral transactions -- with a grid however, when two parties contract they can't help but affect third parties ... (I'll be the first to admit my thinking is incomplete on the issue. I am stuck at many places that eocnomists who are movers and shakers seem to have gotten over years ago in selling the proposition to the regulators.) Getting real competition (i.e. not a situation where market participants yield market power to gouge) is not any easy task. I still think there are some valid arguments that the business remains a "natural monopoly" and that competition cannot allocate resources properly -- i.e. with the lowest overall cost / best overall benefit to society. Any solution to these problems would seem to require to make transmission competitive, while providing the incentive for sufficient investment to take place in transmission as well as generation ... difficult to achieve -- perhaps impossible?

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