  Executive Summary: Download (690k) If you are interested in obtaining a full version of the study please email us at info@trinstitute.com. |
The extraordinary electricity price spikes
that occurred in California during 2000 and subsequent events
do not need further documentation. Although previous studies
provide interesting perspectives and historical data, they tend
to stray from an examination of the fundamental assumptions
(and ideological positions) that provided the basis on which
restructuring proceeded. This literature describes California’s
electricity debacle as a “perfect storm,” implying
that it was both somewhat accidental and that it cannot happen
again. The events were not natural, but a result of a series
of flawed assumptions and a lack of enforcement. These points
are important due to the fact that California’s small
business community is currently receiving information and advice
on how to proceed with future decisions on the electricity sector
from many of the same players involved in the initial restructuring.
There are two basic points that underlie our approach in this report. First, reforms to electricity markets are often described as involving deregulation. In reality, they |
generally involve “re-regulation.” The primary aim is to implement more transparent and independent regulatory arrangements to replace systems where the state and state-controlled entities performed both regulatory and service provision functions. Second, the unique characteristics of electricity must mold the design of any effective framework for structuring the electric utility industry. The laws of physics that govern electricity are inflexible, leaving economics to adapt. It is this uncompromising physical character that underlies the restructuring of the electric utility industry. Recognizing the above issues, this report is organized around a basic set of lingering structural issues for which we provide recommendations:  The Unrecognized Switch from an Electricity Market to a Financial Derivatives Market The Crisis and the California Public Utility Commission [CPUC]: Enforcement versus Design
The Federal Energy Regulatory Commission [FERC]: Confusion, Enforcement, and Reoccurrence
Back to Publications... |
