The California Electricity Crisis: Causes and Policy Options

Publication Date: January 2003

Publisher: Public Policy Institute of California

Author(s): Christopher Weare

Research Area: Energy

Type: Report

Coverage: California

Abstract:

In 1996, the deregulation of California's electricity market was hailed as a historic reform that would lower prices, reinvigorate California's flagging economy, and provide a model for other states to emulate. By 2002, the reform lay in ruins, overwhelmed by electricity shortages and skyrocketing prices for wholesale power. Utilities were bankrupted, the state became the buyer of last resort, and the institutions established by the 1996 reform were dismantled. What happened? In The California Electricity Crisis: Causes and Policy Options, Christopher Weare shows how several factors combined to produce blackouts, financial crisis, and the breakdown of market institutions. It also discusses the major options for rebuilding the electricity sector and offers recommendations for improving the performance of the electricity sector under any particular regulatory and market structure.