Fwd: FW: Fessler - what went wrong in CA

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< < -----Original Message-----
< < Electricity Daily
< <
< < March 2, 2001
< <
< < Fessler Fesses Up to What Went Wrong in California
< < Breaking a lengthy refusal to comment publicly on the California
< < electricity "Perfect Storm," Dan Fessler (chairman and a member of the
< < California Public Utilities Commission from 1991 to December 1996)
< < described to a recent conference in New York why things have gone so awry
< < in the state and what he thinks might now be done.
< < His explanation of why the crisis arose is fairly conventional: a shortage
< < of generation capacity; grossly erroneous predictions of the timing and
< < strength of the economic recovery in the state; and a fatal decision to
< < separate the California Power Exchange from the California Independent
< < System Operator. That's a policy to which Fessler (now with the meaty
< < LeBouef, Lamb law firm) believes that the PUC should never have agreed.
< < "Little did I realize," he told the meeting, "that the market design to
< < which the commission and legislature had acceded would turn out to bear a
< < striking resemblance to the battle cruiser, that ill-fated darling of
< < virtually every naval power in the period 1910-1914. At Jutland, it was
< < belatedly discovered that these vessels-imbued with attributes of speed
< < and weaponry that made them so appealing on paper-could not take a punch.
< < Their armor was too thin: a fatal design flaw revealed only when they were
< < tested in battle."
< < So what do we do now? Fessler suggests "a technique which I advocated in
< < 1996 and which remains available for deployment next week. If successfully
< < implemented, my suggestion would directly assail the vehicle of high
< < prices by enlisting self-interested opportunistic behavior to make the
< < demand curve elastic for the first time in the power crisis.
< < "I propose that California pay large users to get off the system the
< < moment reserves approach Stage One conditions. Demand bidding would
< < replace interruptible tariffs for the simple reason that [the latter] have
< < not worked."
< <