Refusing to learn

Here’s David Freeman addressing a Senate subcommittee in 2002. He was then serving as chair of the California Power Authority, having been appointed during the West Coast energy crisis. The quote is from Wikipedia:

There is one fundamental lesson we must learn from this experience: electricity is really different from everything else. It cannot be stored, it cannot be seen, and we cannot do without it, which makes opportunities to take advantage of a deregulated market endless. It is a public good that must be protected from private abuse. If Murphy’s Law were written for a market approach to electricity, then the law would state ‘any system that can be gamed, will be gamed, and at the worst possible time.’ And a market approach for electricity is inherently gameable. Never again can we allow private interests to create artificial or even real shortages and to be in control.

 

Enron stood for secrecy and a lack of responsibility. In electric power, we must have openness and companies that are responsible for keeping the lights on. We need to go back to companies that own power plants with clear responsibilities for selling real power under long-term contracts. There is no place for companies like Enron that own the equivalent of an electronic telephone book and game the system to extract an unnecessary middleman’s profits. Companies with power plants can compete for contracts to provide the bulk of our power at reasonable prices that reflect costs. People say that Governor Davis has been vindicated by the Enron confession.

Yesterday I saw this article in the New York Times. I quote:

Across the nation, investment funds and major banks are wagering billions on [electricity market] trades using computer algorithms and teams of Ph.D.s, as they chase profits in an arcane arena that rarely attracts attention.

 

Congestion occurs when demand for electricity outstrips the immediate supply, sending prices higher as the grid strains to deliver power from distant and often more expensive locations to meet the demand. To help power companies and others offset the higher costs, regional grid operators, which manage the nation’s transmission lines and wholesale power markets, auction off congestion contracts, derivatives linked to thousands of locations on the grid. When electricity prices spike, contract holders collect the difference in prices between points from the grid operators. If the congestion moves in the opposite direction, holders pay the operators.

Nothing learned.

_______________

UPDATE (August 15, 2014):

Actually, electricity can be stored, and several distribution utilities, including the PUD, are busy at this new technology.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s