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Fortnightly Magazine - November 2006

The Fallacy of High Prices

We are better off under restructured electric markets.

Howard J. Axelrod, Ph.D., David W. DeRamus, Ph.D., and Collin Cain, M.Sc.

The most important action regulators can take to minimize consumer electricity costs is, and will continue to be, ensuring competitive wholesale markets, while demanding a rich mixture of products from the suppliers in these markets.

Demystifying Intelligent Networks

Why the next wave of transformation is already upon us.

Mani Vadari, Ph.D

The electricity system in the United States received renewed attention after the August 2003 blackout that affected more than 50 million customers across the Northeast United States and caused billions of dollars of damage to the U.S. economy. This blackout became a call to action as the event exposed the United States’ dependency on a vulnerable infrastructure. The intelligent network is one of the results of that call to action.

Letters to the Editor

Ken Glozer, President, OMB Professionals Inc.: “The Geopolitics of the Grid” was well done. I enjoyed reading it. Regarding the paragraph raising questions about why there are major disparities in retail electric rates from one region of the country to another, one major contributing reason is archaic and unfair federal subsidies.

Anonymous: “Gravy Train” articulately summarized the emerging tension between utility executive compensation and “return to basics” corporate strategies.

People

(November 2007) Public Service Enterprise Group elected Ralph Izzo president and COO of the company and a member of the board of directors. Ralph LaRossa is president and COO of PSEG’s utility business, Public Service Electric and Gas Co. WGL Holdings Inc., and its subsidiary, Washington Gas Light Co., named Douglas Staebler vice president of engineering and construction, and Lauren Foley named vice president of consumer services. ISO New England Inc. elected two new board members: Richard A. Abdoo and Paul F. Levy. And others.

An Unacceptable Outcome

Mixed signals leave developers wary of building new infrastructure.

Richard Stavros, Executive Editor

FERC Chairman Joseph Kelliher gives mixed signals that leave developers wary of committing to investments in new infrastructure, given his clear desire to affect positive change, while appearing to argue for policy decisions that are politically safe but arguably inconsistent.

LNG as Price Taker

And its impact on power generation.

Michael Donnelly, Ph.D.

While oil and gas prices now are falling after the latest experience with fuel-price volatility, the Global Energy Decision fuels team is focused on modeling an integrated world-wide system of fuel relationships encompassing crude oil, natural gas, coal, and increasingly, synfuels to help our clients assess the implications of fuel-price swings on their businesses. Let’s look at the potential impacts and implications of this growing reliance on liquefied natural gas for North America’s power-generation demand.

Miles to Go

Progress has been made, but much work remains along the path to ERO completion.

James Fama

FERC demonstrated strong leadership in meeting the aggressive timeline set by Congress for establishing the regulatory basis on which the Electric Reliability Organization will be created. But next summer’s peak-demand season is fast approaching. And much more work remains ahead for the industry to finish the job.

The Next Level of E-Procurement

Utilities must embrace supply chains that include planning, inventory optimization, and logistics.

Laura Powell

The procurement and supply-chain functions of today’s utility are the Rodney Dangerfield of the utility cost-cutting paradigm: They don’t get any respect. Supply chains in most industries extend beyond sourcing and e-procurement to include planning, inventory optimization, and logistics. When linked together with technology, this creates an “integrated supply chain” that provides visibility from customer to utility to vendors/strategic alliances, generating great value for the company.

The Weather in the Details

Why have utilities lost millions of dollars on weather-normalization plans? Blame deprecated NOAA calculations.

Jeffrey A. Dubin and Villamor Gamponia

NOAA’s measure of heating degree-days between a normal 30-year period and a given test year is consequently too high by 77 degrees when compared with the more accurate hourly estimates for the 30-year period and for the test year. In this case, a hypothetical Northwest utility would see a revenue shortfall of between $2 million and $5 million.

How Needed Is NERC?

Critics say its new budget and business plan could simply duplicate the work of RTOs.

Bruce W. Radford

FERC granted formal certification to NERC as the nation’s sole ERO and reliability czar, making it inevitable that NERC would delegate the job of regional enforcement to its various regional reliability councils, already constituted. To understand why FERC acted as it did, turn back the clock nearly a decade.

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