California electricity: from disaster to farce Catalyst: Major power problems in California have led utilities to demand that deregulation is abolished.

14/12/2000 15:24:00 (CommentWire) - The power situation easily qualifies as an emergency. In the short term, wholesale electricity prices must be capped and consumer prices raised. But in the long term, re-regulation is not the answer. The only way to lower prices and get rid of power shortages is by building more power plants.

Californian electricity deregulation is now officially a disaster and in reality a farce. Deregulation has produced spiraling wholesale prices, power shortages, potentially bankrupt utilities and 'Stage 3' power emergencies. India now has a more reliable electricity system than the Golden State. It's hard to disagree with Edison International's statement that "the new market structure is broken and must be discarded."

But this is just the disaster. The farce is in the financial figures. The major distribution utilities, Southern California Edison and Pacific Gas and Electric, have been paying 25 cents/kWh for power on the wholesale market and selling at a capped price of 5 cents/kWh. Unsurprisingly, then, losses have been massive. This has led to a rapid drop in the utilities' credit ratings, to the point where the generation companies are refusing to sell them electricity, fearing they won't be able to pay.

Intervention is required before the Californian electricity industry moves on from just being a laughing stock and plunges an already nervous US economy into a downward spiral. But price-capping the wholesale market must only be a short-term fix; the long-term solution is not to turn back from deregulation.

Regulators must recognize that all this trouble stems not from deregulation itself, but the draconian environmental policy that prevents generators from building capacity. California simply must bite the bullet and speed up the permitting process for new, clean gas-fired plant. Edison International is right that the new market structure is broken, but turning back won't provide the answer.

http://www.commentwire.com/commwire_story.asp?commentwire_ID=517

-- Martin Thompson (mthom1927@aol.com), December 14, 2000

Answers

California simply must bite the bullet and speed up the permitting process for new, clean gas-fired plant.

Ah, a broken fix this will be. They've not paid attention to the Nat.Gas problems now have they.

-- (perry@ofuzzy1.com), December 15, 2000.