(October 2009) In his article “Paradox of Thrift, author James M. Seibert looks to be calculating his average service lives as the reciprocal of depreciation rates, whereas utility...
Letters to the Editor / Corrections, Clarifications
does not work without a good interstate system, and most consumers like the benefits the transportation-dependent Wal-Mart system provides.
The lack of grid enhancements is hurting consumers today. Fortunately, the analysis is finally being done by the RTOs and others to show the value of transmission.
To the Editor:
Your discussion about the capacity of the transmission network (as expressed in MVA-miles per megawatt) in your editorial "Grid Glut" (Public Utilities Fortnightly, May 15, 2003) shows the common misunderstandings of the applicability of this model. As the original author of the concept, I would like to explain how it came about and what it can be used for.
As an executive of a large transmission materials manufacturer in late '70s, I was interested in developing a model for forecasting demand for transmission line materials. One of the elements of the model was growth of network capacity (expressed in gigawatt-miles) divided by peak load of the system in gigawatts. There were a number of other key elements in the forecast model, such as cost of utility funds, planned generation startups, etc. In the relatively stable regulatory environment of late '70s and '80s the model was quite satisfactory.
I dusted off the model in early '90s and presented reports based on the model in three IEEE conferences.
At that point my interest was mainly to study if the differences of the ratio could explain some of the known congestion problems in different regions of the United States. Note that the ratio serves as a proxy for the trade radius of a generating plant under peak load conditions. Not surprisingly, the highly congested regions such as New England and Florida, have low "ratio miles," while the situation is quite different in the Pacific Northwest, for example. Similarly, the model indicates that there should be essentially no congestion in the United Kingdom, which is a known fact.
The model has been misunderstood and misapplied. Naturally, it should not be applied without consideration of the regional generation patterns, etc. But it clearly shows the folly of assuming that the U.S. transmission system is an unconstrained "network."
Issue of May 15, 2003:
In the "Business & Money" column, we erred when we selected a title and lead sentence for the sidebar on page 21 that misrepresented the position of the article's authors, Raymond Hill, George J. Benson, and Al Hartgraves-all from Emory University's Goizueta Business School. We had added the sidebar to the author's article on how cash flows alone can give an inaccurate picture of the financial performance of energy companies.
Using Mirant as a case study, the authors explain that they cited two reasons why cash flow might distort financial performance-(1) understating performance where Mirant bought power plant capacity and resold the output at a discount to the seller, and (2) overstating performance where cash flow reporting failed to reveal a decline in commodity power prices in the PJM regional spot market.
We seized on the second effect (overstating performance) in crafting the headline to the sidebar, whereas the authors want readers to know