It is always amusing when government (via the California Legislature in 1996) creates a problem, then more government intervention by the regulators is the proposed solution. We free market libertarians are not pleased. Business and economics are obviously not subjects taught in the California public school system.
The "average" consumer is still under the impression that utilites were "deregulated" in California.
Nothing could be further from the truth.
They did dumb things like:
1)Outlaw vertical integration forcing distributors (PGE, Edison, and SDGE) to divest their power generating capabilities.
2)Required the utilites to buy all their power through a state run ISO (a government monopoly)
3) Forbid them from signing long-term contracts with power generators. Duke, Dynery, Enron, Reliant, Calpine, etc.. all were willing to offer contracts as low as 5 cent/kwhr about a year ago. When you are a power consumer hedging (floors, caps, collars, etc. ) are almost a required form of risk management (very different from producer hedging like gold)
Deregulation did not work in California, because we have not tried it yet ! Putting price caps on retail consumer prices while leaving the wholesale side wide open has resulted in one of the largest government mandated transfers of wealth from the electric distributors to electric generators. |
