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Electric Restructing and the California "MOU"Alex Henney

Fortnightly Magazine - October 15 1995

It does not touch on governance nor on how to incentivize the ISO. In England and Wales, the ISO was initially expected to influence only one percent of system costs. But with cost-plus passthroughs and lack of responsibility for management, that share has increased to 10 percent.

At this point, the philosophical stage of restructuring may be over. Now begins the serious negotiation. But few realize how complex those talks will be. (If we in Britain can construct a PoolCo with a 1,000-page contract, think how many more pages U.S. attorneys can manage.) At the end, the whole thing could be left lying on the floor, as was our restructuring in July 1989, after a failed attempt to develop a PoolCo. The government (with political face at state) and the players (eyeing their stock options) then picked it up and developed a PoolCo that today more or less works.

The only three PoolCos in the world \(em England & Wales, Argentina, and the State of Victoria in

Australia \(em have been created to the agenda of government, with government acting as project manager and arbiter of irreconcilable points of view. Will the CPUC be able to deliver in a more complex plural environment? t

Alex Henney is director of EEE Ltd. in London, and has consulted on electricity restructuring in many countries, including the United States. He is the author of A Study of the Privatisation of the Electricity Supply Industry in England and Wales.1. That is, all successful are paid the price bid by the last generating unit.

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