Monday July 10 2006


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NEMA issues in NYSEG case
go well beyond state borders

Can monopolies ever compete fairly?

If you reread the document that NEMA submitted in New York State (RT, 7/3) you'll discover that the marketers bring up some concepts in the New York State Electric & Gas case that attack the flawed concept that regulated monopolies and competitive firms can play together in a competitive market.
The Future of ABC Channels in Texas

Restructuring Today Audio conference, July 21, 12:00 - 1:30 PM CDT

What does Texas' impending Jan 1 move to full competition mean for hundreds of ABCs? Restructuring Today has put together an ideal panel to address this question and more, including:

• David Wiers, Texas Electricity Professionals Association & Choice! Energy Services

• Jeff Nottingham, Cirro Energy Services & Dallas Electric Club

• John Elder, Legacy Energy Management Solutions
Click here for details         They really just can't.
        We've seen that in every state that's opened up -- even in Texas and even in the Georgia gas market.
        The biggest problem may be that state government employees can never get the prices they set right.
        Only the market can do that.
        How can you have some competitors trying to decide the best prices for them while the incumbent is trying to get a better price fixed for it by government employees?
        Just think about the latent conflicts of interest.
        Even a state as advanced in energy policy as New York can't do that if you believe the price picked for the incumbent is always wrong.
        That's as bizarre as taking away market forces and assuming government employees will get the price right.
        Bottom line, price fixing needs to be viewed in a Sherman Act sense.
        That means nobody should fix a price other than an adult, willing buyer and an adult, willing seller. Jail needs to be the alternative and was so provided originally in the Sherman Act.
        Those lawyers that created the exemption to the Sherman Act (state action doctrine) -- to let states fix prices without going to jail -- probably thought they did the right thing.
        And it's been a mess ever since.
        Take that a step farther by allowing monopolies to compete with independent marketing firms and invariably the monopolies will get state employees to fix wrong prices in their favor.
        You can see that in every state that's opened up -- the prices that monopolies charge are invariably wrong even if they may on occasion magically get a price right for a few days.
        How can government employees get the price right on a one- year contract when prices jump around as they do today?
        They don't, but here's the good news.
        Texas is going to get the prices right for power starting Jan 1.
        Our sources assure us that Texas will stick to its word and use market prices getting rid of the transitional, messy price-to-beat concept at midnight New Year's Eve.
        We're about to do a seminar on what that's going to be like.
        Back to New York.
        At the root of the evil in the New York hybrid market is that the state gets the prices consistently wrong.
        Check out this quote from the NEMA document (case number 05-E-1222):
        "The ALJs elude to the fact that NYSEG's fixed price product has foreclosed comparable competitive offerings, but the ALJs overlook the consequences of undervaluing the embedded costs associated with a utility's variable cost of serving retail load combined with the opportunity to profit from a no-risk fixed price product."
        No risk.
        Marketers get risk but NYSEG doesn't have any at all since it can go back and get the PUC tell it to collect what it got wrong.
        Marketers can't do that.
        That proves that it just doesn't work to allow some competitors to face risks while others don't.
        NEMA knows of no "evidence to support a natural monopoly's being permitted to profit from a no-risk, fixed-price product," in an otherwise competitive marketplace.
        "In essence, the ALJs require marketers to act irrationally and offer a competitively fixed price product that is simultaneously being offered by the dominant market participant, NYSEG, on terms that marketers cannot replicate because of NYSEG's regulatory recovery guarantees.
        "Its superior bargaining position in the market, the lack of transparency of NYSEG's rate, and NYSEG's ability to profit over and above a just and reasonable return by marketing a no-risk fixed price option to captive ratepayers that it already has an obligation to serve at a standard utility cost of service rate..."
        Anti-market forces shifted the battle from the federal level to the states creating a crazy quilt of badly skewed, miss- matched regulations whereby regulated service companies are allowed to compete unfairly.
        It was a major strategic error across our land.
        Originally published in Restructuring Today on July 7, 2006

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CONFERENCE LINKS

The Future of ABC Channels in Texas
When: 07/21/06 , 12:00 PM - 1:30 PM CDT
Where: Your home, work or cell phone
www.restructuringtoday.com/conferences/texasabc.html

Market monitoring: Is the focus changing?
When: 07/28/06 , 12:00 PM - 1:30 PM CDT
Where: Your home, work or cell phone
 http://www.restructuringtoday.com/conferences/monitor.html

EUCI's Western Resource Adequacy
When: 07/17/06 - 07/18/06, 7:00 AM - 12:00 PM
Where: Westin Horton Plaza -- San Diego, CA
http://www.euci.com

IQPC's 3rd Annual Broadband Over Powerline 2006
 When:  July 25-26, 2006
Where:  Dallas, Texas
www.iqpc.com/NA-2741/BPLT

EUCI's Using Shadow Settlement to Improve Profits in LMP Markets
When: 07/25/06 - 07/26/06, 8:00 AM - 5:00 PM
Where: Stanley Hotel -- Estes Park, CO
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EUCI's Preparing for New CAISO MRTU Market
When: 07/27/06 , 8:00 AM - 5:00 PM
Where: Stanley Hotel -- Estes Park, CO
http://www.euci.com

NET-ATHOME™ -- The world’s most international connected home event
When:  September 26 & 27, 2006
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