You state, "Just as the largest industrial concerns prompted state regulators in the United States to allow alternative power suppliers free and open access to the grid so that the buyers could have more choices, the same phenomenon has occurred in Europe."

This could leave readers with a mistaken impression that the adoption of retail restructuring is accepted and widespread on this side of the pond.

While it is literally be true that some state regulators in the U.S. adopted retail restructuring, at the urging of large industrial customers, and Enron, among others, retail restructuring is hardly the norm in the US.

Indeed, most state regulators actually have rejected retail restructuring. See the 2006 report on state retail restructuring conducted for the Virginia SCC. http://www.scc.virginia.gov/caseinfo/reports/2006_rose_1.pdf

Large industrial customers in the restructured areas with "organized" spot markets, and their representative, ELCON, now say it has not worked out as once hoped.

ELCON recently stated: "today's organized markets are not competitive ... "If today's organized markets cannot be fixed ... a return to traditional regulation" should be explored." http://www.elcon.org/Documents/PressReleases/12-4Press.PDF

Also, large industrial customer migration statistics in New York, and perhaps in other states that restructured, may be more a reflection of sales tax advantages flowing from electricity commodity unbundling (which in New York results in the delivery service not being taxed) rather than value added by new retail providers.

Gerald Norlander
Executive Director
Public Utility Law Project

The energy business liberalization in US and Europe will be bumpy road but inevitable.
The energy business is one of the most plan economic activities in our daily life. It is based on energy sources with high energy density (fossil fuel and uranium) so it can be transport to a big centralised power plant and distributed in a monopoly grid.

The nature forces with force the society to free market (as always) energy business because the only energy sources that is sustainable, independent of foreign countries and environmental benign is renewable energy. However, renewable are diluted and dispersed over everybody's roof and walls. Therefore future energy technology will be small-scale and decentralised and adopted to the particular local renewable energy situations. The sooner the energy market is deregulated the sooner the inevitable road (bumpy) toward nature adopted POWER TO THE PEOPLE energy technology will emerged. Current large centralised business models are not consistent with the law of nature. I believe that US will take the lead when it comes to developed the new energy technology that is based on small-scale renewable concept before Europe because it is consistent with the attitude in US, as strive for independence, believe in free market and less believe in government or large companies activities.

Peter Platell
Stockholm, Sweden

It appears to me that the fatal flaw in US electricity market pricing mechanisms is paying market clearing prices to all successful bidders for 24-hour supply blocks. The result is that base load plants are paid far above the cost of production during partial and peak load periods. Intermediate load plants are over paid during peak load periods. Are the Europeans using this flawed market pricing structure or do they have a pricing structure which recognizes the reality of the cost structure of base, intermediate and peaking generation facilities?

US electric supply deregulation has been huge failure, raising rates in the regions implementing these flawed schemes far above those in regions continuing cost based regulation. Why do the Europeans think they can do better?

Jim Malinowski
Amboy, WA

Thanks for a well-done wrap-up of what's going on in the European energy market. One problem you don't mention, however, is the lack of transmission infrastructure between and among EU nations. Theoretically, it would be great for Belgian customers if they could buy, and receive, cheaper power from Italy. As I understand the situation, that's not possible; and probably won't be for many years.

While the EU can persuade (force?) its members to create a single European market, what good is such a market if the energy can't flow freely from Britain to Poland? And the EU can't force a member nation to open its domestic market to competition, either. I agree that eventually market forces will expand the boundaries of the European electricity sector. But EU member nations are not accepting the argument that deregulation is an unmitigated benefit. If only someone like that had been in charge of electricity deregulation here in Montana back in the late 90s. Sigh.

Paul Ausick
BSRNews

Electricity liberalization has failed, is failing, or will fail just about everywhere. I remember pointing this out at a conference in Brussels, but the EU energy minister received the news with an uncomprehending look on his face. As a physicist, he understands about as much about the economics of electric and gas deregulation as he does about brain surgery, and as a result he relies on his economics experts -- who where energy matters are concerned are hopeless, and also do not have the advantage of his scientific education.

In so far as Europe is concerned, gas deregulation could be much worse. If it goes through as planned, which is far from certain, it would involve weak oligopolies bumping heads with monopolies (or near monopolies), which will be bad for everyone on the buy side of the gas market. What we have here is not just a failure of the EU bureaucracy, but a failure of academic economists to perform their duties satisfactorily, because the later chapters in microeconomics textbooks are fairly clear on this important subject. Of course, the persons providing Mr. Pielbags with information and advice were unable to comprehend the earlier chapters, and so to one extent or another the drowsy households and businesses in the EU are in line for another beating.

Ferdinand E. Banks
Uppsala, Sweden

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