Lessons learned from California's experience on electric power deregulation

Lessons learned from the California's experience on electric power deregulation could make the transition to deregulation easier for the other states. California that had not added a major power station even with increasing demand for power due to an emerging digital technology ran short of electricity. Drought conditions throughout the Pacific Northwest had affected the available output of hydroelectric power resources and could not export electricity to California as it traditionally did. Higher emission costs, higher gas prices, under-scheduling of loads and generation, unscheduled outages, unusual weather conditions and reluctance of out-of-state generators' to deliver power affected power supply. The reserve dropped below 1.5% (Stage 3) often and a rolling blackout was declared each time. California State signed long-term power contracts with companies. Since then, the wholesale electricity prices have dropped. Since January 1, 2001, about 4,300 MW of new generating capacity has been added in California. A limited price control may be the best way to handle a situation of rolling blackouts and surging wholesale electricity prices. The state should monitor power generating stations' operations and set the rules to make sure they are not being intentionally shutoff. Industry experts concluded that the problem was isolated primarily to California.