John,
Do you think this fellow is off base?
From your post.....>>There is plenty of power, but at a higher price than people want to pay<<
>>Hearing: To receive testimony on California's Electricity Crisis and Implications for the West
Date and Time: January 31, 2001, 9:30 a.m.
Location: Senate Hart Office Building, Room SH-216
Witness Name and Title: Larry Makovich, Senior Director of Research, North American Electric Power, Cambridge Energy Research Associates, Cambridge, MA <<
>>The crisis in California arose because people believed that electric energy markets were just like other commodity markets—when demand and supply tightened up then prices would gradually rise, stimulate investment and keep supply and demand in balance. That assumption, however, is wrong. P However, power markets are not like other commodity markets. The power business is complex and has due to unique characteristics. Research over several decades pointed out that These characteristics led economists to develop a complete but rather obscure literature from the 1920’s to the 1970’s concerning how to set up a power market the right way. Their message was clearpower markets are far more challenging to set up properly than most other markets. The system that was set up in California could have taken these realities into account—and come out with a good result. The system that was set up did not take these realities into account—with the results that we now see.
WHAT TRIGGERED THE CRISIS
The flaws of the market design prevented supply from keeping up with demand. Five years ago, when California passed its power restructuring legislation, the state had a surplus of power generating capability. Since that time, the California economy grew a phenomenal 32 percent, fueled by a 24 percent increase in electricity consumption. The fact that electricity use increased less than overall economic growth meant that the state was becoming more efficient in its use of power. Yet conservation and greater efficiency could not stem the need for additional supply. By 1998, demand growth had ended California’s power surplus. The record of the past five years is clear—California failed to approve the siting and permitting of anything near the 1,200 Mw needed each year to keep demand and supply in balance. As a result, far too few new power plants were added to California’s power sector over the past five years. Moreover—and this point needs to be faced—not enough power plants are currently under construction to end this shortage in the near term.
<< |
