Powering Up California: Policy Alternatives for the California Energy Crisis

Publication Date: February 2001

Publisher: Reason Foundation

Author(s): Adrian T. Moore; Lynne Kiesling

Research Area: Energy

Type: Report

Coverage: California

Abstract:

Many view California's electricity crisis as proof that electricity deregulation and indeed deregulation in general does not work. This is wrong. California did not deregulate its electricity market, but rather "restructured" it, requiring far more state intervention in electricity transactions than existed before. In doing so, the law created a micromanaged pseudo-market where suppliers of electricity have the ability and incentive to manipulate prices to their advantage, and utilities are forbidden to shop for better prices. Unfortunately, state leaders are working in an environment of widespread misunderstanding, such as many mistaking the state's restructuring for deregulation. Clear and effective policies, and public support for them, depend on an accurate analysis of the issues at hand and alternatives available. To that end, this study examines California's electricity crisis from three directions, analyzing:

1. The most important aspects of what went wrong with the restructuring;
2. How deregulation of electricity has worked in other states, and even other nations; and
3. Gov. Gray Davis' action plan, point by point.