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California Electric Woes Provide Blue Print for What Not To Do

Both consumer and industry groups have met California's recent spate of power shortages, brownouts and blackouts with angry accusations. Calls to "re-regulate" California's electric utilities have come from talking heads on most major television networks as consumers throughout the state find their bills having more than doubled from the same period last year.

Record high temperatures this summer, coupled with several unplanned power plant outages has forced rolling blackouts throughout the state. Some concern has been expressed that the Democratic National Convention, scheduled to kick off in San Diego next week may face unexpected power failures which would interrupt televised coverage to the rest of the U.S..

On August 2nd, California Governor Gray Davis issued Executive Orders designed to increase electrical generating capacity and conservation. The Order also requested the California Attorney General to investigate "possible manipulation in the wholesale electricity marketplace".

No new major power plant has been constructed in California in the past 10 years, despite increased demand for electricity. Presently, 5 plants are under construction, designed to generate 3,500 megawatts.

California, which took the lead in deregulating it's electrical utilities has been criticized by some industry analysts for provisions in it's deregulation package which allowed generators to drastically increase prices as demand increased. This has resulted in recent calls to place limits on the price of electricity charged by generators, as demand has peaked amid soaring temperatures.

Although California's plight will not likely dampen the movement to deregulation of electric utilities, individual States will do well to examine the California model and take steps to avoid the same mistakes apparent in their deregulation plan.

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