Attached is a new version including Jim and Amr's comments.

Regarding Jim's questions, the open possibility of the utility acting as Provider of last resort (POLR) means, in fact, that the utility may still be in the merchant function, but only as a back up provider (when the alternative supplier fails to provide the service or departs the area), with a very limited scope. Note that I am talking about the POLR and not of Default Provider (the supplier of those customers who choose not to choose) as defined in the paper "The role of the Default Provider in Restructuring Energy Markets". 

This means I would allow the utility to be POLR (which means a very limited merchant function) but not be Default Provider (which means a larger merchant role). Anyway, I think perhaps would be more realistic to allow the utility to keep a larger merchant function for residential customers, specially when few suppliers are willing to enter that market. I was told that in Georgia (the ideal "theorical" model) there are only 4 marketers still competing.

If you want to follow this approach, the message should be: The incumbent utility should be outside the merchant function except, for residential customers and, possibly, as a Provider of Last Resort of the remaining customers.

As it is written, I did not include the residential as exemption.
I think "pricing the utility out of the merchant function" (I guess you mean force it to charge high prices or to afford high costs without pass through) is not as good alternative as getting the utility out of the merchant function, since the last is easier to justify and makes more certain that all customers must choose an alternative supplier. As suggested by Jim I am including again the wording related to Order 636 that explains the reasons to limit the merchant function. I also included some wording related to pricing for the POLR.

 

 -----Original Message-----
From: 	Steffes, James D.  
Sent:	Wednesday, October 31, 2001 1:19 PM
To:	Canovas, Guillermo
Cc:	Frank, Robert; Kingerski, Harry; Levy, Alberto; Ibrahim, Amr
Subject:	RE: Disco of the future

Here are some thoughts from me.

Jim

 

 -----Original Message-----
From: 	Canovas, Guillermo  
Sent:	Sunday, October 28, 2001 10:38 PM
To:	Steffes, James D.
Cc:	Frank, Robert; Kingerski, Harry; Levy, Alberto; Ibrahim, Amr
Subject:	Disco of the future

Jim,
Attached is the note to CAEM related to the "Disco of the future" paper. It includes comments of the team.
I will be in a course Monday and Tuesday but I will connect at night. You can leave me a message at 703.549.6080 room 434.
Regards,
Guille

 << File: n-distco future3.doc >>