ÿWPCO ¡Ç¥&:n|ÌKÏÓ/<—,`Î,[–˜¦ë²óÊðþzªët4‰Zï”Ô‘¡!ؽo\æŠþ Rwë ½{ÿΰ]I<–IO⺢/w`ׇÍ9ÀÄž0igØ¢% ¹— R¹ËçL¯N<Ü ®8›T|cŽÝ¨¡‚ïí!裢›Q4I#‰1¥ï˜k-,ºö„ÊòÃÒE½L5(–DÀíí±3‰èû¥£&óéù ¨ÎVôix*uJ5Ä«;~b`óE‘ËÁÈS÷z .µìÖ*E+°"@yãtimOûpía®î¬iþüFΊ=:ü<“Ëæ˜:|íÌs†ßâ~‹Ô®0s)ùÎs3I'áÁ$Áï߃²ÂþA[óôD…ÕŠ1°]„¡ç‰ƒ™guTðH?tð–ç8õÍ (ò>U {JnÒ·cðlßúœÊ-’æ.Y‹?,(-¯:óÎß/Ó?–›ÿR!‹±z;o``M?¾mç"ÿ¶7¸ë‡šÁs°dÖ›BDÁŽ}ÈœK—¿ëÑ#íej€Pñouã\½§ {z•©öGG‹uáÐõOÑ%ç¶úvi¿’¨s6vŠ„\û^'<Á€¥`ZŒ/YN*á"Á¼3HÞsÞô[U0ún* %- š3 Í šå 0O U.Î 0Cü Ä? 0¡"¤Æ 04Ö#Á (ËNó^ õw4 m B2)Ͼ¦ `CG Times«)Ͼ¦ `CG TimesôôcϾ¦ PìE37ûôP)Ͼ¦ `CG Times&&mϾ¦ PìE37û&P<þ6X9`(CourierXôxþ6X@ɹ`7ûX@ô' Ë Response to framework 2  0 .    Ö€Ö Ý ƒÐ)ÝÓ  ÓÝ  ÝÔ€&M%òôÔRichard€D.€Ely,€Economistà@¶¶NìàPage€„€Ú  Ú2Ú  Ú('2Ð$©©Ý ƒ¤T!ÝÓ  ÓÝ  Ý<þ6X9`(Courier(ÿÿ$òòÚ  ÚÚ  Úóó ºÝ ƒ :Á$ÝÓ  ÓÓÓÔ€søXòôÔ€€€€€òòÚ  Ú1Ú  ÚóóÝ  Ý€Economic€efficiency€has€more€theoretical€elements.€Typically,€all€goods€are€priced€atÐ ° Ðlong€run€marginal€cost.€That€marginal€cost€must€be€the€minimal€average€cost€consistent€with€aÐ xÈ Ðcapital€market€inter„temporal€loss€structure.€Ð @ ÐOther€notes€on€market€structure:€Buyers€and€sellers€may€be€any€size,€but€no€buyer€or€sellerÐ X Ðcan€effect€market€or€factor€(oil€or€information)€prices€or€availability.€€As€a€society€we€wouldÐ Ð  Ðwant€all€external€costs€returned€to€the€entity€creating€them.(X!2:Á$¤¤Ý ƒ¤T!ÝÓ  ÓÝ  ÝÓÓÔ€søXòôÔ€€€€€òòÚ  Ú0Ú  Úóó Ý ƒ :Á$ÝÓ  ÓÓÓÔ€søXòôÔ€€€€€òòÚ  Ú2Ú  ÚóóÝ  Ý€PBR€has€little€punitive€meaning€when€free€capital€markets€reward€utilities€with€generousÐ ° Ðstable€rates€with€low€cost„of„capital,€and€penalize€utilities€under€punitive€and€unstable€rateÐ xÈ Ðdecisions€with€high€costs„of„capital.€€PBR€may€easily€be€a€zero„sum„game,€played€primarilyÐ @ Ðfor€the€benefit€of€the€appearance€of€regulation.€This€is€an€empirical€question.3|> ( ¤T$¡¡Ó  Ó˜HP LaserJet 5M - PLCÈ,,,,È0! ½G4L õSJ/ier Ne ÿU‹ÿÀÀÀ dÝ ƒ¤T!ÝÓ  ÓÝ  ÝÔ_ÔÔ€&M%òôÔÌÓ  ÓòòBefore€the€Public€Utilities€CommissionÐ h¸ Ðof€the€State€of€CaliforniaÐ |Ì ÐÓ  ÓóóÌOrder€Instituting€Ô_ÔRulemakingÔ_Ô€on€theà h àà À à)Ð H˜ ÐCommission's€Proposed€Policiesà h àà À à)Ð  P ÐGoverning€Restructuring€California'sà h à€à À à)à  àà p àR.94„04„031Ð ¸  ÐElectric€Services€Industry€and€à  àà h àà À à)à  à€(filed€April€20,€1994)Ð p À ÐReforming€Regulationà ¸ àà  àà h àà À à)Ð ( x Є„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„à h àà À à)Ð à 0  ÐOrder€Instituting€Investigation€on€theà h àà À à)Ð ˜ è  ÐCommission's€Proposed€Policies€à h àà À à)Ð P    ÐGoverning€Restructuring€California's€à h àà À à)à  àà p àR.94„04„032Ð X  ÐElectric€Services€Industry€and€à  àà h àà À à)€à  à(filed€April€20,€1994)Ð À  ÐReforming€Regulationà ¸ àà  àà h àà À à)Ð xÈ  Є„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„„à h àà À à)Ð 0€  ÐÌPresident€Daniel€Ô_ÔWmÔ_Ô.€Ô_ÔFesslerÔ_ÔÐ  ð  ÐCommissioner€P.€Gregory€ConlonÐ X¨  ÐCommissioner€Jesse€J.€Knight,€Jr.Ð ` ÐCommissioner€Henry€M.€DuqueÐ È ÐCalifornia€Public€Utilities€CommissionÐ €Ð Ð505€Van€Ness€AveÐ 8ˆ ÐSan€Francisco,€California€94102Ð ð@ ÐÌDear€Commissioners:Ð `° ÐÌÌIn€your€Coordinated€Commissioner€Ruling€you€posed€two€complex€questions:€1)€How€can€theÐ ˆØ ÐFramework€and€the€Ô_ÔMOUÔ_Ô,€where€they€differ,€be€brought€together?€2)€What€are€the€recommendationsÐ @ Ðthat€would€most€likely€assist€small€customers€Ô_Ômake€educatedÔ_Ô€choices?€€And€2a)€What€does€theÐ øH ÐCommission€and€Legislature€need€to€do€to€implement€these€recommendations?Ð ° ÐÌThis€letter€is€from€an€economist€who€has€his€FERC€preliminary€permit€in€California.€He€has€a€licensedÐ  p! Ðsite€in€New€York,€and€has€been€involved€in€electric€service€industry€in€New€England€for€many€years€asÐ Ø(" Ða€consultant,€litigant,€participant,€analyst,€FERC€license€holder,€developer,€and€Commission€staffÐ à# Ðregulator.Ð H˜$ ÐÌI€am€enclosing€10€copies€for€you€use,€and€a€copy€on€Ô_ÔdisketteÔ_Ô€for€your€Gopher€site.€It€would€be€useful€ifÐ ¸ & Ðall€these€documents€were€on€your€gopher€site,€as€distribution€to€the€mailing€list€is€becoming€prohibitive.Ð p!À' ÐÌRespectfully,Ð à"0) ÐÌÌRichard€D.€Ely,€Ph.D.€EconomistÐ %X , ÐDavis,€CaliforniaÐ À%!- Ðà  àEnclosure:€Comments€Ð x&È!. Ðà  àcc:€Restructuring€Mailing€list,€Oct€26,€1995€€(as€on€the€CPUC€gopher€site)Ð  0'€"/ ÐÔ_ÔÌÓ  ÓòòBefore€the€Public€Utilities€CommissionÐ h¸ Ðof€the€State€of€CaliforniaÐ |Ì ÐÓ  ÓóóÑ€ÑØØÌÓ  ÓComments€in€Response€to€two€QuestionsÐ H˜ Ѐon€Ð  P ÐFramework€and€Structure€for€Restructuring€the€Electric€UtilitiesÐ ¸  ÐÓ  ÓÌÌThis€filing€is€divided€into€five€Sections:Ð à 0  ÐÌ€€€A)à0  àAn€economic€examination€of€the€physical€electrical€services€market.ÐP   (#(# ÐÌ€€€B)à0  àMicroeconomic€analysis€of€Framework€principles.ÐÀ (#(# ÐÌ€€€C)à0  àCommissioners'€question:€How€can€the€MOU€and€Framework€be€brought€together?Ð0€ (#(# ÐÌ€€€D)€à0  àCommissioners'€question€2a:€What€are€the€recommendations€that€would€most€benefit€smallÐ  ð  Ðcustomers?ÐX¨ (#(# ÐÌ€€€E)à0  àCommissioners'€Question€2b:€What€are€the€specific€step€required.ÐÈ(#(# ÐÌÌòòÓ  ÓA.€€€An€Economic€Examination€of€the€Physical€MarketóóÐ ð@ ÐÓ  ÓÌA€market€structural€efficiency€measure€will€be€used€in€this€paper€to€look€at€the€ProposedÐ `° ÐReorganization€Memorandum€of€Understanding€sponsored€by€SCE€and€other€parties€(MOU)€and€theÐ h ÐFramework€of€Principals€(Framework)€put€forth€by€a€coalition€of€private,€environmental,€socialÐ Ð  Ðdistribution,€and€societal€interest€groups.€Market€access€by€a€marginal€consumer€or€producer€will€beÐ ˆØ Ðused€here€to€gauge€a€market's€structural€efficiency.€The€opportunity€set€provided€a€new€small€customerÐ @ Ðand€a€new€small€supplier€signals€whether€a€market€can€be€efficient.€If€a€small€buyer€can€find€and€buyÐ øH Ðfrom€a€small€seller€with€low€information€and€transaction€costs,€market€structure€will€be€efficient.€Ð ° ÐÌExamples€of€the€most€efficient€markets€in€the€world€are€the€large€stock€and€commodity€exchangesÐ  p! Ðwhere€anyone€for€about€2€percent€of€the€transaction€value€can€buy€or€sell€any€of€thousands€of€securitiesÐ Ø(" Ðwith€a€very€high€confidence€that€he€got€the€best€price€and€that€he€securely€received€exactly€what€heÐ à# Ðpaid€for.€An€inefficient€market€structure€is€probable€if€a€buyer€cannot€find€and€economically€buy€aÐ H˜$ Ðparticular€product€in€a€reasonable€period€of€time.€Ð  P% ÐThe€following€problems€are€not€clearly€addressed€by€the€MOU€in€a€way€that€meets€the€principals€of€theÐ ¸ & ÐFramework.Ð p!À' ÐÌà  àMonopsony€Power:€Lack€of€market€access€by€generatorsÐ à"0) ÐÌà  àMonopoly€Power:€Lack€of€market€access€by€consumersÐ P$ + ÐÌà  àMarket€Structure:€Continuance€of€market€powerÐ À%!- ÐÌÌòòLack€of€market€access€by€small€generators:€Monopsony€PoweróóÐ è'8#0 ÐÌWhy€are€there€very€few€small€IPPs€in€California?€If€a€small€IPP€wishes€to€sell€power,€the€firstÐ X)¨$2 Ðencounter€with€the€electric€service€market€will€be€to€negotiate€an€interconnection€agreement.€ThisÐ *`%3 Ðagreement€is€with€a€utility€that€has€a€list€of€reasons€to€make€things€as€difficult€as€possible€for€the€IPP.Ð È*&4 ÐThe€resident€utilities€will€still€have€under€the€MOU€many€tools€to€inhibit€IPP€access€include:€actively€orÐ €+Ð&5 Ðpassively€stalling€at€every€stage€so€that€the€IPP€looses€his€license€or€financing;€requiring€large€"fees"Ð 8,ˆ'6 Ðfor€undisclosed€purposes€such€as€drawing€review€or€"engineering";€and€requiring€ridiculously€complexÐ ð,@(7 Ðand€expensive€interconnection€equipment.€It€is€not€clear€how€any€of€these€behaviors€or€motivations€willÐ ¨-ø(8 ÐÑÑâ âÖ€ÿÿÖâ âÑ  Ñbe€ameliorated€under€the€MOU,€yet€small€generation€access€is€essential€for€efficient€market€operation.Ð ° ÐÌWhen€operating,€dispatch€and€kw€reserve€services€may€be€available€through€an€the€ISO.€However,€theÐ  p Ðresident€utility€who€owns€generation€may,€use€other€means€to€prohibit€a€economic€IPP€operation.€TheÐ Ø( Ðfranchised€utility€may€charge€for€expensive€wheeling€and€unsubstantiated€line€losses€over€òòdistributionóóÐ à Ðline€services€outside€of€ISO€purview.€€The€franchised€utility€might€require€"customer€suppliedÐ H˜ Ðequipment"€that€ends€up€being€maintained€by€the€utility€at€IPP€expense.€These€practices,€commonÐ  P Ðthroughout€the€US,€eliminate€all€but€a€narrow€range€of€larger€cogenerator€and€fiercely€determined€IPPsÐ ¸  Ðsurviving€in€California.€Market€access€and€local€O€&€M€charges€are€issues€for€the€marginal€generatorÐ p À Ðthat€do€and€will€exist€if€an€IPP€must€market€through€the€wires€of€a€competing€generator.Ð ( x  ÐÌ€€€Rule€1:à0 ` àDistribution€or€Transmission€providers€must€not€have€an€economic€reason€not€to€wantÐ ˜ è  Ðto€interconnect€with€any€generation€supplier.ÐP   ` (#` (# ÐÌÌòòMonopoly€Power:€€Lack€of€market€access€by€consumersóóÐ xÈ  ÐÌConsumers€or€groups€of€consumers€should,€to€the€extent€possible€without€building€extensive€duplicativeÐ è8  Ðdistribution€equipment,€be€able€to€use€any€distributor,€or€group€of€distributors.€€If€they€cannot€chooseÐ  ð  Ðdistributors,€there€is€no€way€to€know€that€the€best€price€is€being€provided.Ð X¨  ÐÌ€€€Rule€2:à8 ` àConsumers€and€consumer€groups€should€be€able€to€choose€their€ownÐ È Ðdistributor.ЀÐ` x` x ÐÌThis€means€that€service€area€franchises€should€be€eliminated€as€soon€as€CTC€is€recovered.€The€conceptÐ ð@ Ðof€stranded€assets€could€extend€to€the€substation€level€if€there€is€a€potential€competitor€wishing€toÐ ¨ø Ðsupply€distribution€services.Ð `° ÐÌòòMarket€Structure:€Market€PoweróóÐ Ð  ÐÌTransmission:Ð @ ÐÌMarket€power€of€transmission/generation/distribution€companies€is€a€problem€identified€by€the€FERC.€Ð °  ÐThe€ISO€and€the€nominal€opening€of€the€power€market€will€only€partially€solve€this€problem.€BecauseÐ h¸! Ðelectricity€flows€only€over€lines,€the€physical€power€and€energy€market€is€embedded€in€those€wires.€Ð  p" ÐThe€entity€that€controls€the€physics,€operation,€and€maintenance€of€that€market€will€òòde€factoóó€have€aÐ Ø(# Ðmarket€advantage.€The€MOU's€ISO€partially€addresses€this€concern€in€the€daily€dispatch,€but€it€ignoresÐ à$ Ðaccess,€physical€layout,€physical€extensions,€scheduled€outage,€and€long€term€expansion€that€might€beÐ H˜% Ðdone€by€the€owner€to€differentially€benefit€himself€rather€than€others€on€the€line.Ð  P& ÐÌConsider€the€following€model:€((rendered€in€letters€for€GOPHER€distribution)).Ð p!À( ÐÔ€XsøX%&MÔÔ€Xo<XXXsøÔÌà  à€€€€€€€€€€€€€U€€€€€€€€UÐ ð"@* Ðà  à€€€€€€IPP„„„UUU„„„t„„„U„„„CUSÐ ¸#+ Ðà  àà ` àà ¸ à€€€U€€€€€€€€UÐ €$Ð, Ðà  à€€€€€€€€€€€€€|Ð H%˜ - Ðà  à€€€€€€€€€€€€€GENÐ &`!. ÐÔ€&#ê%XXo<ÔÔ€&M%%&#êÔÌIPP€is€a€small€IPP,€The€U's€represent€a€large€Utility.€The€GEN€is€utility€owned€Generation,€t€is€aÐ 'à"0 Ðoccasionally€fully€loaded€transmission€line,€and€CUS€is€a€customer.€Assume€that€there€is€occasionallyÐ H(˜#1 Ðinsufficient€capacity€on€the€transmission€line€for€both€the€IPP€and€GEN€to€ship€power€to€the€customer.€Ð )P$2 ÐIf€a€generating€or€distributing€utility€owns€the€line,€then€an€IPP€and€other€customers€will€have€toÐ ¸)%3 Ðcontend€continuously€for€access,€operation,€and€maintenance€scheduling.€Even€if€capacity€wereÐ p*À%4 Ðadequate,€who€would€pay€the€non„linear€energy€related€losses€is€contentious.€The€presence€of€the€IPPÐ (+x&5 Ðincreases€the€losses€per€kw€from€GEN€to€the€customer€CUS,€and€therefore€U€will€discourage€theÐ à+0'6 Ðaccess,€presence,€and€operation€of€the€IPP.€Having€the€transmission€owned€by€a€generating€companyÐ ˜,è'7 Ðprecludes€equitable€cost€and€capacity€allocation€without€a€long€series€of€equity€allocating€regulationsÐ ° Ðand€rationing.Ð h¸ ÐÌConsider€an€example€the€Commission€has€and€will€soon€deal€with€again:€say€an€IPP€is€trying€to€build€aÐ Ø( Ðsmall€hydro€in€northern€California.€The€IPP€needs€access€to€markets€in€central€California.€The€IPP€willÐ à Ðbe€pleased€to€pay€the€market€price€to€clear€congestion€on€the€transmission€lines,€but€it€is€unwilling€andÐ H˜ Ðunable€to€fight€FERC€and€or€CPUC€battles€with€the€transmission€company€which€is€owned€by€U,€andÐ  P Ðdoes€not€want€to€loose€the€customer€C€in€Central€California€who€wants€to€buy€IPP€power.€TheÐ ¸  Ðconsumer€is€deprived€of€the€IPP's€economical€"green"€power,€and€U€maintains€its€monopoly€becauseÐ p À Ðthe€transmission€and€distribution€lines€are€the€physical€market:Ð ( x  ÐÌ€€€Rule€3:à8 ` àThe€a€source€of€generation€cannot€own€a€transmission€or€distributionÐ ˜ è  Ðline,€as€its€access,€maintenance,€and€operation€will€not€be€independentÐ P    Ðof€its€ownership.ÐX ` x` x ÐÌUnder€the€common„carrier€mandate€of€the€FERC,€the€potential€is€there€for€assuring€the€builder€a€justÐ xÈ  Ðreturn,€while€allowing€common€access€and€benefit.€€However,€if€the€small€generator€has€to€carry€hisÐ 0€  Ðcase€for€transmission€services€to€the€FERC€for€a€500€kw€hydro€site,€he€is€economically€denied€access,Ð è8  Ðand€the€system€will€not€work.€Either€the€transmission€is€independent€of€distribution€and€generation,€orÐ  ð  Ðthe€market€is€not€accessible.€An€independent€transmission€price€once€exposed€and€charged€gives€clearÐ X¨  Ðsignals€as€to€what€the€value€of€new€transmission€lines€will€be.€€An€independent€transmission€line€ownerÐ ` Ðwould€not€wish€to€charge€less€or€more€than€the€market€clearing€price€assuring€equitable€access€for€all.Ð È ÐÌÌOpen€access€conflicts€with€bilateral€contracts.Ð ð@ ÐÌClearly,€a€remote€generator€of€distributor€or€his€underwriter€may€want€to€have€transmission€accessÐ `° Ðguaranteed€so€as€to€construct€a€viable€business.€The€balance€between€open€access,€which€is€required€forÐ h Ða€free€market,€and€bilateral€contracts€with€a€known€price€and€availability€structure€which€is€required€forÐ Ð  Ðgeneration€and€transmission€financing€viability€is€the€classic€problem€of€integral€facilities€avoided€byÐ ˆØ Ðmicro„economic€theory.€As€a€society,€we€want€resources€to€be€priced€at€efficient€market€clearingÐ @ Ðprices,€but€that€goal€has€to€be€balanced€against€the€revenue€stability€for€capital€accumulation€needed€toÐ øH Ðassert€minimum€long€run€average€costs.€Ð °  ÐÌIn€this€regard,€the€state€can€do€little€but€bow€the€extensive€common€carrier€provisions€regulation€of€theÐ  p" ÐFERC.€It€can€however,€within€the€rubric€set€down€under€these€laws,€provide€mechanisms€for€lateÐ Ø(# Ðarrivals€to€have€as€low€transaction€cost€gaining€access€to€transmission€capacity€as€possible.Ð à$ ÐÌÌBilateral€Contracts:Ð ¸ ' ÐÌBilateral€contracts€at€all€levels€should€not€be€discouraged.€Small€customers€have€to€be€able€to€join€suchÐ ("x) Ðbuying€coops€as€"Green„Power„Consumer„Coop"€or€"Cheap„Power„Buyers„Coop".€Likewise€sellersÐ à"0* Ðcan€band€together€and€form€"Cheapgenco"€and€Greengenco".Ð ˜#è+ ÐÌ€€€Rule€4:à0 ` àBuying€and€selling€of€energy€and€capacity€(kwh€and€kw)€cooperatives€should€beÐ %X - Ðallowed€so€long€as€no€restraint€of€trade€occurs,€and€that€all€energy€passes€allÐ À%!. Ðtransmission€and€distribution€at€marginal€cost.Ðx&È!/` (#` (# ÐÌEncouragement€of€buying€cooperatives€will€benefit€small€consumers€and€small€generators€alike.€InÐ è'8#1 Ðeffect,€by€lowering€transaction€costs€and€providing€competition.€That€is€what€MCI€did,€and€òòallóóÐ  (ð#2 Ðcustomers€benefitted€even€if€they€stayed€with€ATT.Ð X)¨$3 ÐÌIn€summary,€if€an€action€of€the€CPUC€increases€the€ability€of€a€small€consumers€to€buy€from€a€smallÐ È*&5 Ðgenerator,€while€assuring€that€all€intermediate€and€ancillary€services€are€charged€at€their€marginal€rate,Ð €+Ð&6 Ðit€will€be€in€everyone's€interest.€Ð  8,ˆ'7 ÐòòÓ  ÓB.€€€€Microeconomic€Analysis€of€Framework€Principles,óóÐ ° ÐÓ  ÓÌÌThe€following€is€a€discussion€some€of€the€issues€raised€framework€outline€from€a€market€structureÐ Ø( Ðperspective.€The€principles€are€paraphrased€for€brevity.€€Not€all€principles€are€addressed,€as€some€ideasÐ à Ðand€implementation€problems€are€subsumed€under€comments€in€earlier€responses.Ð H˜ ÐÌPRINCIPLEÐ ¸  ÐI.A.(1),B.(1):à0 ` àConcern€for€reduction€in€rates€for€each€and€every€small€customers.Ðp À` (#` (# ÐÌEfficient€economic€markets€are€enabled€by€easy€free€entry€and€exit€of€large€numbers€of€buyers€andÐ à 0  Ðsellers׃ ×Ý ƒ ÿÿÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×.€To€the€extent€that€barriers€to€entry€can€be€decreased,€and€information€can€be€increased,€marketÐ ˜ è  Ðentry€and€exit€by€buyers€and€sellers€can€be€improved,€costs,€and€prices€will€decrease.Ð P    ÐÌArguing€against€this€market„theoretic€efficiency€of€the€free€market€is€the€occurrence€of€economies€ofÐ À  Ðscale.€In€all€known€industries,€economies€of€scale€are€balanced€at€some€point€by€inefficiencies€that€setÐ xÈ  Ðin.€These€include€chunkiness€of€contracts€(SO4€contracts,€for€example)€and€investments€(nuclear).€AlsoÐ 0€  Ðmanagement€control€becomes€difficult€with€size.€It€is€suggested€that€economies€of€scale€have€beenÐ è8  Ðexceeded€in€the€electric€services€industry,€and€that€franchises€originally€erected€to€allow€theseÐ  ð  Ðeconomies€have€become€simple€barriers€to€entry€and€market€competition.Ð X¨  ÐÌI.A.(1)(b):€à0 ` àInduce€installation€of€socially€efficient€non„polluting€generationÐÈ` (#` (# ÐÌBy€freeing€all€generation€to€compete,€the€"efficient"€will€prosper.€If€society€wants€non„pollutingÐ 8ˆ Ðgeneration,€then€with€a€freeing€of€generation,€Framework€members€could€legislate€to€tax€oneÐ ð@ Ðgeneration€type€and€subsidize€others.€Also,€if€non„polluting€generation€is€preferred€by€consumers,Ð ¨ø ÐGREENGENCO€will€come€into€existence,€selling€only€environmentally€friendly€power,€and€will€beÐ `° Ðable€to€garner€a€premium.€GREENCONSUMER€COOP€will€come€into€existence€as€a€buyingÐ h Ðcooperative€that€buys€primarily€green€power€and€energy.Ð Ð  ÐÌI.A.(1)(c):à0 ` àImprove€operating€efficiencies€including€customer€service€and€reliability.Ð@` (#` (# ÐÌIf€distribution€companies€can€compete€for€customers,€the€customer€will€be€able€to€choose€the€degree€ofÐ °  Ðcustomer€service€and€the€quality€of€power€reliability€desired.€Reliability€is€complicated€in€that€itÐ h¸! Ðinvolves€all€elements€of€the€system.€This€will€provide€opportunities€for€buying€cooperatives€to€express,Ð  p" Ðactively€or€passively€different€reliability€services€demanded€from€the€ISO,€for€the€ISO€will€beÐ Ø(# Ðempowered€to€differentially€dispatch€load€as€well€as€generation€in€the€interests€of€system€security.Ð à$ ÐÐ  H˜% ÐI.A.(1)(d)i.:€à0 ` àAll€power€plants€should€be€operated€"competitively"а` (#` (# ÐÌAxiomatically€competition€is€assured€only€if€generators€have€market€access€and€are€dispatchedÐ  p Ðeconomically.€GREENGENCO€will€be€able€to€sell€"green"€power€only€if€the€generation€it€contracts€forÐ Ø( Ðis€dispatched.€The€acid€test€is,"Can€small€consumers€buy€from€small€producers?"Ð à ÐÌI.A.(1)(d)ii.:à0 ` àGrid€access€should€be€independent€of€ownership.Ð P` (#` (# ÐÌThis€is€assured€if,€and€only€if,€transmission€and€distribution€is€completely€independent€of€generation.Ð p À ÐÌI.A.(2,3):€à0 ` àIndividual€customers,€not€broad€classes€should€see€rate€reductions.Ðà 0 ` (#` (# ÐÌTo€the€extent€that€a€small€customer€can€economically€find€and€trade€with€a€small€generator,€the€smallestÐ P    Ðcustomer€will€benefit.€The€ATT€breakup€model€is€applicable.€Clearly€the€larger€consumer€will€saveÐ X  Ðmore,€but€the€extensive€small€consumer€marketing€by€ATT€and€MCI€suggests€that€end€consumers€are€aÐ À  Ðvery€viable€market.€It€is€likely€that€in€five€years€we€will€be€getting€almost€as€many€calls€during€dinnerÐ xÈ  Ðfrom€CHEAPPOWERCO€as€we€do€from€ATT.Ð 0€  ÐÌ1.B.(1)€à0 ` àThe€Commission€must€{significantly}€lower€rates€for€each€customer.Рð ` (#` (# ÐÌThe€free€market€is€the€only€known€mechanism€to€assure€the€lowest€prices€prevail.€€Neither€theÐ ` ÐCommission€nor€any€entity€can€do€better.€€The€Commission€along€with€many€others€brought€us€SO4Ð È Ðcontracts€and€huge€nuclear€power€plants.€The€supposition€that€the€Commission,€or€any€entity,€can€takeÐ €Ð Ðsome€action€to€guarantee€lower€prices€is€not€supported€by€history.Ð 8ˆ ÐÌThe€Commission€can€foster€competition,€It€can€promote€and€oversee€a€market€free€of€interference€soÐ ¨ø Ðthat€competition€might€flourish€between€the€smallest€of€suppliers€for€the€smallest€of€consumers.€It€canÐ `° Ðdo€little€else.Ð h ÐÌ1.B.(2)€€à0 ` àPBR€should€likely€reduce€bills€proportionately.ЈØ` (#` (# ÐÌPBR€should€be€replaced€quickly€by€free€market€pricing.€€Free€markets€will€requires€completeÐ øH Ðseparation€of€generation€from€transmission€and€distribution.€There€is€no€other€way.Ð °  ÐÌ1.B.(3,4)€à0 ` àGeneration€services€can€be€provided€at€market€prices€by€a€distributor€through€PBR.Ð p"` (#` (# ÐÌThis€PBR€has€no€theoretical€basis€for€efficient€operation.€In€markets€controlled€by€fiat€prices€there€areÐ à$ Ðhave€no€meaningful€prices׃ ×Ý ƒ ÿÿÝòòÚ  Ú2Ú  ÚóóÝ  Ý×  ×.€Performance€based€rates€might€be€meaningful€when€consumers€have€aÐ H˜% Ðchoice,€and€the€regulator€is€offsetting€some€monopoly€power€invested€by€a€physical€attribute,€but€it€hasÐ  P& Ðno€meaning€when€the€word€"performance"€means€different€things€to€each€player.Ð ¸ ' ÐÐ  p!À( Ð1.C.(5)€à0 ` àThe€utilities€should€"spin„off"€resources€and/or€limit€recovery€to€market€prices.а` (#` (# ÐÌUnless€the€resources€are€sold,€market€prices€are€unavailable.€There€seems€little€reason€why€allÐ  p Ðgeneration€and€transmission€assets€should€not€be€divested€as€soon€as€possible.€If€they€are€sold€belowÐ Ø( Ð"book€value"€the€Commission€should€grant€a€CTC€long€enough€to€the€residual€distribution€company€toÐ à Ðretire€that€equity€on€both€sides€of€the€ledger.€Once€the€CTC€is€recovered,€the€area€franchise€is€revokedÐ H˜ Ðso€consumers€can€more€clearly€choose€suppliers.Ð  P ÐÌ1.C.(6):€à0 ` àStranded€costs€should€not€influence€free€market€prices.€Ðp À` (#` (# ÐÌThey€will€not€directly€under€a€separation€of€generation€from€T€&€D.€The€onus€of€stranded€costÐ à 0  Ðrecovery,€must€be€incident€on€the€legacy€distribution€companies.€It€will€effect€market€prices€onlyÐ ˜ è  Ðthrough€shifts€in€the€demand€curve€not€the€supply€for€generation.Ð P    ÐÌ1.D.(1,2):à0 ` àThe€Commission€must€immediately€deal€with€market€power€issues.€ÐÀ ` (#` (# ÐÌThere€is€no€other€way.Ð 0€  ÐÌ1.D.(3):€€à0 ` àMarket€must€be€formed€such€that€all€competing€suppliers€{and€buyers}€have€equalÐ  ð  Ðaccess.ÐX¨ ` (#` (# ÐÌThis€goal€ignores€transaction€costs€and€ancillary€service€costs€such€as€kw€services€as€distinct€from€kwhÐ È Ðservices.€€The€role€of€the€commission€is€to€chart€a€rapid€path€towards€these€ends,€but€aggregation€atÐ €Ð Ðboth€the€consumer€and€supplier€ends€is€to€be€expected.Ð 8ˆ ÐÌ1.D.(4):€à0 ` àThe€Commission€must€order€the€complete€separation€of€generation€from€distribution.Шø` (#` (# ÐÌThere€is€no€other€way€if€a€pretence€of€a€free€market€is€to€be€achieved.Ð h ÐÌ1.E.(1):€€à0 ` àThe€ISO€must€be€an€independent€entity.ЈØ` (#` (# ÐÌWhile€this€Principle€addresses€dispatching,€all€other€aspects€of€transmission€will€be€influenced€by€itsÐ øH Ðownership.€€The€ownership€of€transmission€must€be€decoupled€not€only€from€generation,€but€also€fromÐ °  Ðdistribution.€If€distribution€companies€own€transmission,€decisions€on€service€reliability€to€distributionÐ h¸! Ðcompanies€would€be€biased€toward€ones€own€customers,€and€the€non„transmission€owning€distributionÐ  p" Ðcompany€would€end€up€with€the€least€reliable€service,€and€perhaps€unable€to€expand.Ð Ø(# ÐÌNot€only€must€the€ISO€be€independent€as€described€in€the€MOU€and€Framework,€but€the€ownershipÐ H˜% Ðmust€be€severed€from€the€distribution€companies.Ð  P& ÐÌ1.E.4€€à0  àAs„available€generation€should€be€accommodated.Ðp!À((#(# ÐÌWholesale€real„time€power€pooling€develops€an€extensive€set€of€charges,€fines,€fees,€and€inducementsÐ à"0* Ðfor€all€participants€to€extract€the€full€value€and€no€more€from€their€participation€in€the€pool.€DefiningÐ ˜#è+ Ðthese€schedules€is€always€a€contentious€environment,€as€the€exact€market€clearing€tariff€structure€willÐ P$ , Ðfavor€those€who€write€them.€€Once€however,€pool€rules€get€built€into€everyone's€production€costÐ %X - Ðsimulation€models.€Whether€or€not€the€rules€are€equitable,€a€secondary€"sub„pooling"€will€form€quicklyÐ À%!. Ðand€may€come€to€dominate€the€magnitude€of€daily€transactions€(as€in€stocks).€"Sub€pooling"€helpsÐ x&È!/ Ðassure€an€efficient€market,€but€it€may€reduce€the€applicability€of€the€pool€incremental€cost€numbers,€asÐ 0'€"0 Ða€member's€actual€costs€will€be€at€some€variance€at€any€moment€due€to€asset€and€load€ownership.€€ToÐ è'8#1 Ðthe€extent€that€generation€is€traded€on€an€hourly€subpooling€market,€each€entity's€marginal€costs€willÐ  (ð#2 Ðtrack€the€pool's€lambda.€To€the€extent€that€sub„pooling€does€not€occur,€and€capacity€commitments€mustÐ X)¨$3 Ðbe€met€under€pool€rules,€a€company's€marginal€costs€may€diverge€significantly€from€Pool€lambda€dueÐ *`%4 Ðto€deficiency,€reserve,€and€uneconomical€dispatch€charges.Ð È*&5 ÐÌ1.F€à0  àSmall€customers€must€be€able€to€benefit€via€buying€through€cooperatives,€collaboratives,Ð 8,ˆ'7 Ðmunicipalities,€etc.а(#(# ÐÌSome€clarification:€Ð  p ÐÌGeneration€sources:€Any€small€customer€or€group€of€customers€should,€after€paying€appropriateÐ à Ðwheeling€and€transaction€costs€be€able€you€purchase€power,€energy,€and€other€ancillary€services€fromÐ H˜ Ðanyone,€or€any€group€of€suppliers.Ð  P ÐÌTransmission:€Any€entity€should€be€able€to€build€new€transmission€provided€the€State€finds€it€in€theÐ p À Ðpublic€interest.€Eminent€domain€provisions€might€be€present€under€Commission€new€rules.Ð ( x  ÐÌDistribution:€The€words€"service€territory"€are€going€to€take€on€a€whole€new€meaning.€With€franchisesÐ ˜ è  Ðgone,€any€entity€who€can€buy€install€and€serve€at€the€substation€level€new€customers€most€economicallyÐ P    Ðwill€acquire€those€customers.€If€the€current€municipal€preference€of€WAPA€power€continues,€SMUDÐ X  Ðmight€responsibly€acquire€Davis€or€Palo€Alto€might€acquire€a€willing€San€Francisco€market€share.Ð À  ÐÌNew€distribution€acquisition€have€already€started€at€unit€commercial€and€industrial€loads.€€This€can€beÐ 0€  Ðfollowed€at€the€substation€level€wherein€any€load€on€say€1€mw€or€more€can€become€its€own€distributionÐ è8  Ðcompany,€or€choose€to€join€other€distribution€companies€to€form€cooperatives€or€Bureau€approvedÐ  ð  Ð"municipalities".€Any€distributor€should€be€able€to€take€customers€from€a€neighboring€entity.€Likewise,Ð X¨  Ðblocks€of€customers€identified€by€a€substation,€should€be€able€to€choose€its€distributor€and€its€ownÐ ` Ðgeneration€mix.€€Disaggregation€improves€access€and€customers€for€the€smaller€IPPs.Ð È ÐÌII.C€à0  àà0` (#(#àRenewables€should€be€encouraged.Ð8ˆ` (#` (# ÐÌThis€goal,€if€advisable,€can€be€accomplished€in€three€very€different€ways.Ð ¨ø ÐÌFirst€by€providing€markets€that€will€allow€customers€to€see€and€have€access€to€renewable€generation.Ð h ÐGeneration€source€choice€might€be€as€easy€as€buying€long€distance€services€from€MCI.€A€smallÐ Ð  Ðcustomer€should€be€able€to€buy€their€generation€from€GREENPOWERCO€who€will€use€only€(orÐ ˆØ Ðmostly)€renewable€technologies.Ð @ ÐÌSecond,€by€creating€efficient€ancillary€service€markets€for€both€energy€and€capacity€so€that€intermittentÐ °  Ðpower€can€be€combined€through€diversity€with€hydro€to€provide€a€homogeneously€environmentallyÐ h¸! Ðfriendly€power€and€energy€product.Ð  p" ÐÌFinally,€by€differentially€taxing€or€subsidizing€generation€to€capture€external€societal€costs€(like€airÐ à$ Ðpollution)€or€social€goals€(like€energy€independence)€not€properly€captured€by€the€consumer€market.Ð  H˜% ÐòòÓ  ÓC.€€€The€Commissioners€First€QuestionóóÐ ° ÐòòHow€can€the€framework€and€the€MOU€be€brought€togetheróóÐ h¸ ÐÓ  ÓÌIn€response€to€the€Commission's€first€question€of€how€can€the€MOU€and€the€Framework€be€broughtÐ Ø( Ðtogether.€They€cannot.€Under€an€open€generation€market,€it€is€not€possible€to€have€a€distribution€andÐ à Ðtransmission€company€also€own€generation€and€make€any€responsible€representation€to€a€consumer€orÐ H˜ Ðtentative€IPP€that€there€interests€will€be€protected€by€the€Commission.€Ð  P ÐÌIt€is€not€possible€to€have€franchised€distribution€territories€and€suggest€that€there€is€an€open€retailÐ p À Ðmarket.€It€is€not€possible€even€under€the€ISO€to€have€an€open€transmission€market€when€theÐ ( x  Ðtransmission/distribution/generation€owner€will€control€scheduled€maintenance,€fixed€contract€access,Ð à 0  Ðand€expansion€to€that€line.€Ð ˜ è  ÐÌBut€assuming€that€the€Commission€and€legislature€see€that€generation€and€transmission€divestiture€is€aÐ X  Ðrequirement€for€an€efficient€market€structure,€the€second€question€can€be€addressed.Ð À  ÐÌÌòòÓ  ÓD.€€The€Commissioners'€Second€question:€óóÐ è8  ÐòòDiscuss€Frameworks€goals€that€would€assist€small€customers.óóÐ  ð  ÐÓ  ÓÌ"Are€there€any€recommendations€that€more€likely€than€others€to€assist€{small€consumers}€...€in€makingÐ ` Ðeducated€choices€in€a€competitive€electric€services€industry?"Ð È ÐÌThe€societal€interest€in€the€electric€service€industry€as€codified€by€the€writers€of€the€Principles€of€theÐ 8ˆ ÐFramework€appear€for€several€reasons:€the€industry€is€huge€and€has€large€social€costs;€the€market€isÐ ð@ Ðimperfect€and€appears€to€be€biased€away€from€equity€and€intertemporal€social€externalities€and€goals;Ð ¨ø Ðand€the€product€has€an€average€value€to€the€consumer€far€in€excess€of€its€marginal€cost.Ð `° ÐÌSocial€Goals:Ð Ð  ÐÌTo€the€extent€possible,€the€"Framework"€is€motivated€by,€and€addresses€primarily,€social€goals.€TheÐ @ ÐFramework€is€also€internally€inconsistent,€in€that€it€stresses€savings€for€each€and€every€consumer,€but€atÐ øH Ðthe€same€time€incorporates€agenda€that€transfers€wealth€from€some€customers€to€others.€These€includeÐ °  Ðtransfers€from€white€males€to€others,€from€generally€elderly€equity€holders€(savers)€to€generallyÐ h¸! Ðyounger€consumers,€and€from€owners€of€non„renewable€resources€to€our€children.€These€are€societalÐ  p" Ðchoices€that€many€believe€should€considered€and€as€appropriate,€carefully€encouraged.€We€all€have€aÐ Ø(# Ðmixed€record€in€this€regard.€€We€as€individuals€do€not€save,€and€as€a€nation€we€pass€on€debts,€dirtyÐ à$ Ðwaters,€polluted€grounds,€drained€resources€to€our€children.€It€would€be€unfortunate€if€in€our€Adam„Ð H˜% ÐSmithian€dash€for€economic€efficiency,€we€choose€to€lose€grasp€on€societal€goals.Ð  P& ÐÌHow€then,€in€the€absence€of€the€Commission€to€adjudicate€these€conflicting€goals,€will€they€be€resolvedÐ p!À( Ðin€a€restructured€market.€The€answer€is€through€a€transfer€of€some€responsibility€to€existing€stateÐ ("x) Ðagencies,€and€the€retention€of€other€functions€by€a€revitalized€Commission.Ð à"0* ÐÌThe€Commission€asks€in€their€question€2a,€what€are€the€key€actions€needed€to€implement€social€actionÐ P$ , Ðgoals.€The€best€approach€to€answer€this€question€is€to€divide€the€goals€into€Consumer€and€GenerationÐ %X - Ðsectors.€Consumer€goals€focus€primarily€on€equity€redistribution€or€societal€improvement.€GenerationÐ À%!. Ðgoals€focus€primarily€on€the€internalization€of€social€costs.Ð x&È!/ ÐÌòòCustomer€Distributional€Goals:óóÐ è'8#1 ÐÌGOAL€C1:à0 ` àIncrease€personal€freedom€and€lower€cost€through€consumer€choice:ÐX)¨$3` (#` (# ÐÌà  àà0 ` àMethod:€Provide€consumer€and€consumer€group€access€to€different€generation,Ð È*&5 Ðtransmission,€and€if€feasible,€distribution€suppliers.Ѐ+Ð&6` (#` (# ÐÐ 8,ˆ'7 Ðà  àà0 ` àGeneral€Solution:€Remove€all€barriers€other€than€transaction€cost€that€inhibit€a€theÐ ° Ðsmallest€consumer€from€buying€from€the€smallest€producer.€Minimize€transaction€costs.Ðh¸` (#` (# ÐÌGOAL€C2:à0 ` àDecrease€price€paid€by€small€consumers:ÐØ(` (#` (# ÐÌà0  àà0` (#(#àMethod:€Remove€barriers€to€entry€for€all€alternative€consumer€cooperatives.€€IncreaseÐ H˜ Ðaccess€to€€òògenerationóó€aggregators.Ð P` (#` (# ЀÌà  àà0 ` àGeneral€Solution:€Reduce€transaction€costs.€Today,€for€example,€a€hydro€IPP€needs€aÐ p À ÐFERC€license€(complete€with€exact€timing€requirements),€an€electrical€interconnectionÐ ( x  Ðagreement€(currently€written€to€be€expensive€as€possible),€transmission€agreementsÐ à 0  Ð(usually€contested€before€the€CPUC).€An€IPP's€customer€needs€back„up€KW€reserveÐ ˜ è  Ðservices€(negotiated€only€with€a€hostile€franchised€utility€„€no€others)ÐP   ` (#` (# ÐÌà0  àà0` (#(#àSecond€Method:€Remove€barriers€to€entry€for€new€òòdistributorsóó:ÐÀ ` (#` (# ÐÌà0  àà0` (#(#àGeneral€Solution:€Allow€for€substation€by€substation€auctioning€of€rights€to€distributeÐ 0€  Ðpower€for€a€given€period.€Remove€barriers€for€access€by€any€entity.€SMUD€should€beÐ è8  Ðable€to€sell€to€Davis.Рð ` (#` (# ÐÌGOAL€C3:à0 ` àAssist€those€that€cannot€pay€for€power.Ð`` (#` (# ÐÌà  àà0 ` àGeneral€Solution:€Competitive€electric€distribution€companies€are€in€a€uniquely€poorÐ €Ð Ðposition€to€administer€social€programs.€A€better€system€is€to€have€state€agencies€whoÐ 8ˆ Ðhave€the€mechanism€for€client€identification€and€needs€assessment€determine€who€isÐ ð@ Ðneedy.€Then€revenue€from€kw€and€kwh€taxes€can€be€rechanneled€through€energy„Ð ¨ø Ðstamps€or€other€script.Ð`°` (#` (# ÐÌÌòòConsumer€Internalization€of€societal€costs€or€goalsóóÐ ˆØ ÐÌGOAL€C4:à0 ` àReduced€Consumption,€as€electricity€consumption€degrades€the€environment.ÐøH` (#` (# ÐÌà0  àà0` (#(#àGeneral€Solution:€This€is€incorrect.€Generally,€it€is€the€generation€and€transmission€thatÐ h¸! Ðdegrade€the€environment.€Tax€the€specific€generation€and€transmission€intertemporalÐ  p" Ðand€external€social€costs.ÐØ(#` (#` (# ÐÌÐ  H˜% ÐòòGeneration€Societal€Goals:óóÐ ° ÐÌGOAL€G1:à0 ` àEnergy€Independence€from€"foreign"€suppliers.Ð p` (#` (# ÐÌà  àà0 ` àGeneral€Solution:€Tax€foreign€fuels,€and€subsidize€non„foreign€fuels.Ðà` (#` (# ÐÌGOAL€G2:à0 ` àDelay€in€our€planet's€destruction€through€green„house€gas€emissions.Ð P` (#` (# ÐÌà  àà0 ` àGeneral€Solution:€Tax€destructive€emissions€by€generators€including€cogens.Ðp À` (#` (# ÐÌGOAL€G3:à0 ` àInternalize€catastrophic€lossÐà 0 ` (#` (# ÐÌà0  àà0` (#(#àGeneral€Solution:€Require€fiscal€responsibility€for€generators,€dams,€pipelines,€andÐ P    Ðother€generation€equipment,€and€built€up€insurance€fund.ÐX ` (#` (# ÐÌòòóóGOAL€T1:€à0 ` àMinimize€the€amount€of€transmission€linesÐxÈ ` (#` (# ÐÌà0  àà0` (#(#àSolution:€Tax€transmission,€subsidize€energy€technologies€that€reduce€transmissionÐ è8  Ðneeds.€Tax€the€lines€to€the€extent€they€detract€from€the€public€good.Рð ` (#` (# ÐÌThese€generation€and€distribution€goals€will€assist€small€customers€both€now€and€into€the€future.€ThisÐ ` Ðseparation€of€goals€into€two€categories€suggests€the€structure€of€a€solution€to€the€Commission's€questionÐ È Ðof€"How"€posed€above.€€Have€existing€social€service€agencies€design,€require,€and€manage€socialÐ €Ð Ðdistribution€programs€that€are€customer€specific.€€Have€the€legislature€design€a€generation€tax€andÐ 8ˆ Ðsubsidy€structure€that€addresses€societal€intergenerational€and€externality€goals.€€In€this€dual€approach,Ð ð@ Ðthe€Commission€will€be€able€to€fulfill€its€closing€public€responsibility€to€all€concerned€in€direct€concertÐ ¨ø Ðwith€the€wishes€of€the€people€and€state€entities€best€able€to€deal€with€these€issues.Ð `° ÐÌThe€distributional€goals€and€societal€goals€addressed€above€will€be€in€addition€to€the€small€customersÐ Ð  Ðbenefiting€from€competition.€With€open€markets€there€will€be€more€choices,€less€exhaustive€regulation,Ð ˆØ Ðand€lower€transaction€costs€for€all.€The€loss€of€efficient€operation€from€lack€of€price€signals€underÐ @ Ðcurrent€utility€monopoly€and€monopsony€structures€will€be€recoverable€under€competition€by€even€theÐ øH Ðsmallest€consumers.€The€incidence€of€the€distributional€programs€will€be€contained€in€the€agencies€bestÐ °  Ðable€to€deal€with€them,€and€the€incidence€to€the€societal€taxes€and€subsidies€on€generation€will€have€aÐ h¸! Ðvery€visible€presence€for€all€to€see€and€incorporate€in€decision€making.Ð   p" ÐòòÓ  ÓE.€Commissioners€Question€2b.€What€are€the€specific€step€required.óóÐ ° ÐÓ  ÓÌThis€paper€has€discussed€market€structure€in€response€to€the€MOU.€€It€has€rearranged€the€FrameworkÐ  p ÐPrinciples€into€a€simplified€duality€that€reveals€the€òòmeansóó€of€effecting€the€outcomes€desired€by€theÐ Ø( ÐFramework€and€some€MOU€participants.€Now,€in€response€to€Question€2b,€what€is€it€that€has€to€beÐ à Ðdone:Ð H˜ ÐÌ€€€0.à0  àFirst€state€a€new€set€of€Commission€goals€such€as:€We€as€a€society€shallи (#(# Ðà0  àà0` (#(#àInternalize€social€goals€for€our€children€and€the€planet,Ðp À` (#` (# ÐÌà0  àà0` (#(#àAssist€those€in€our€society€that€need€help,€andÐà 0 ` (#` (# ÐÌà0  àà0` (#(#àMake€and€keep€markets€efficient.ÐP   ` (#` (# ÐÌIn€order€to€effect€these€goals,€the€specific€steps€that€have€to€be€taken,€more€or€less€in€order€onÐ À  Ðimportance:Ð xÈ  ÐÌ€€€1.€à0  àRequire€òòall€generation€assets€to€be€divestedóó,€sold,€or€split€into€a€new€unrelated€company.€Ð è8  ÐAssets€that€are€valued€below€book€value,€should€generate€a€CTC€that€is€paid€by€the€distributionÐ  ð  Ðcompany.ÐX¨ (#(# ÐÌ€€€2.à0  àWhen€the€CTC€has€been€paid€off,€òòremove€all€distribution€franchisesóó,€and€all€possible€obstaclesÐ È Ðthat€inhibit€any€consumer€or€group€of€consumers€from€buying€power€or€energy€from€anyÐ €Ð Ðsupplier€or€group€of€suppliers.Ð8ˆ(#(# ÐÌ€€€3.à0  àRequire€the€divestiture€of€transmission€companies.Шø(#(# ÐÌ€€€4.à0  àTransfer€to€common€carrier€status€all€transmission€lines€under€the€FERC,€but€request€backÐ h Ðfrom€the€FERC€approval€under€state€control€for€access,€ISO,€maintenance,€and€expansion€ofÐ Ð  Ðthe€system.ЈØ(#(# ÐÌ€€€5.à0  àTransfer€to€a€State€taxing€authority,€the€aegis,€and€ability€to€òòtax€and€subsidize€the€distributionóó€ofÐ øH Ðelectricity€for€goals€that€are€customer€related.€The€Commission€having€the€staff€and€theÐ °  Ðunderstanding€of€these€issues€might€do€this€for€a€while€as€a€first€step.€Specifically€request€thatÐ h¸! Ðthe€legislature€address€low€income€and€minority€issues€and€undertake€equity€redistributionÐ  p" Ðsolutions€effective€in€a€free€market.ÐØ(#(#(# ÐÌ€€€6.à0  àRequest€the€legislature€to€transfer€to€a€taxing€authority€the€mandate€to€òòtax€and€subsidizeÐ H˜% Ðgeneration€and€transmissionóó€in€proportion€to€the€societal€burden€of€those€assets.€SpecificallyÐ  P& Ðrequest€that€the€legislature€in€is€wisdom,€assess€facility€burden€on€our€planet€and€children,€andÐ ¸ ' Ðrecommend€appropriate€taxing€and€subsidy€structures.Ðp!À((#(# ÐÌ€€€7.à0  àSpecifically€introduce€legislation€authorizing€legislation€to€change€the€CPUC€mandate€of€theÐ à"0* ÐCPUC€into€a€òòmonitor€of€the€competitive€electric€services€industryóó€for€predatory,€orÐ ˜#è+ Ðanticompetitive€acts.ÐP$ ,(#(# ÐÌ€€€8.à0  àClean€up€all€the€existing€regulatory€laws.€Work€with€the€FERC€to€formulate€low€transactionÐ À%!. Ðcost€for€transmission€access.Ðx&È!/(#(# ÐÌ€€€9.à0  àConsider€and€design€new€eminent€domain€procedures€that€considers€costs€and€benefits€toÐ è'8#1 Ðsociety.Р(ð#2(#(# ÐÌ€€€10.à0  àSet€up€an€institute€to€study€where€the€intertemporal€social€benefits€of€communal€R&D,Ð *`%4 Ðmonopoly€and€monopsony€facilities,€information€and€education€programs,€DSM,€insulation€andÐ È*&5 Ðconservation€programs€outweigh€the€social€costs€of€these€programs.€Ð€+Ð&6(#(# ÐÐ 8,ˆ'7 Ѐ€€11.à0  àWork€toward€uniform€taxation€of€environmentally€detrimental€fuels€for€any€purpose,€otherwiseÐ ° Ðcogeneration€that€used€a€taxed€non„renewable€fuel€will€be€uneconomic€if€the€alternative€fuel€isÐ h¸ Ðnot€taxed.Ð p(#(# ÐÌÌòòIn€summaryóóÐ H˜ ÐÌUnder€reconstruction€of€the€electric€services€industry,€the€smallest€customer€must€"see"€the€smallestÐ ¸  Ðgenerator.€New€IPP's€like€PGEgenco€and€SMUDgenco€and€old€IPPs€like€the€preset€cogenerators€willÐ p À Ðbe€encouraged€to€package€their€power€in€ways€attractive€to€consumers.Ð ( x  ÐÌThe€distributing€companies€have€every€reason€to€help€the€customer€find€the€best€generator,€as€they€alsoÐ ˜ è  Ðwill€face€distributor€competition.€Distributors€will€be€preferred€who€can€provide€information€of,€andÐ P    Ðaccess€to,€low€cost€or€environmentally€friendly€generation€options.€They€will€be€indifferent€as€to€theÐ X  Ðsource€of€generation€as€they€will€not€own€any.€Freed€to€serve€customers€rather€than€generation,€theyÐ À  Ðbecome€the€answer€to€the€Commission's€question€of€"How€to€assist€consumers,€particularly€residentialÐ xÈ  Ðand€small€business€customers€make€educated€choices€in€a€competitive€electric€services€industry?"