[BETA] Fortnightly

Even the volatility is volatile. And that can play havoc with hedging.

Jeff Skilling resigned from Enron over a year ago-after power prices in markets serving California had fallen 90 percent in three months.

But in July, Bank of America won approval from the Treasury Department to offer cash-settled electricity derivatives-with a former Enron regional director at the head of the desk.

So what has changed, and what hasn't?

Presenting a fair and simple distributed generation plan for utilities and policy-makers.

Distributed generation (DG) continues to face many institutional barriers erected before the technology emerged as an economic alternative. Chief among these barriers are existing rate and regulatory regimes, which fail to offer appropriate incentives to utilities and customers who might otherwise substitute DG facilities for distribution and generation.

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Regulators will have to decide who pays to upgrade the transmission system.

But the lower returns on equity don't necessarily result from gen selloffs or moves toward stand-alone distribution.

A survey of utility rate decisions affecting authorized rates of return on common equity (ROE), as issued by state public utility commissions (PUCs) during the period Sept. 30, 1998 to Sept. 30, 1999, indicates a small but discernible trend toward lower returns.

California again is the proving ground. Analysts see DG as the biggest issue since the PUC first mapped its "vision" for retail competition.

The T&D grid, once deemed a bottleneck, will now face pressure from both ends. Is it still the same old monopoly?

Some 30-odd years ago physicist and philosopher Thomas S. Kuhn coined the phrase "paradigm shift" to describe a radical change in a mental framework for interpreting facts. His key work, "The Structure of Scientific Revolutions," published in 1962, focused on the role of paradigms in scientific thought - such as the Copernican sun-centered solar system or Planck's work in quantum mechanics.

The wires business goes up for grabs as California opens its landmark case on distributed generation.

Jay Morse has studied distributed generation for the past seven years. Today, as an engineer and policy analyst on regulatory transition and market development issues for the California PUC's Office of Ratepayer Advocates, he sits in the eye of the storm. Technology is busting out all over, says Morse, who calls himself the "godfather" of DG in California's electric restructuring.

Micro maverick Bill Althouse sees a grand conspiracy to blot out customer-owned generation.

Distributed generation is out of the box. It's time for regulators to wake up. The paradigm has already shifted."

That's Bill Althouse talking, president of Althouse Inc. of Albuquerque, N.M., a seat-of-the pants business (he says he's near bankruptcy) that helps homeowners and businesses install on-site generation. I met him via email as I researched why, on Jan.