Don't blame Enron
California's electricity crisis of 2000-2001 was brought about by misguided government policies, not corporate misconduct or market forces, according to a study by economist Benjamin Zycher, released yesterday by the San Francisco-based Pacific Research Institute.
California Gov. Gray Davis, a Democrat up for re-election in November, blames Enron and other energy companies for the crisis. Other liberals have rushed to support the idea that government did nothing wrong — it was all the fault of greedy corporations that gouged the state and its residents.
"For those willing to let economic realities speak for themselves, and to recognize the link between policies and consequences, the answers are readily apparent," Mr. Zycher said in his study, "Power to the People: An Economic Analysis of California's Electricity Crisis and Its Lessons for Legislators."
"California's electricity crisis was entirely due to poorly designed public policies. Unfortunately, the issue has been surrounded with misperceptions and clouded by demagoguery," he said.
"The retail rate freeze provided poor incentives for consumers to reduce their demand for power and the price ceiling imposed by California's Independent System Operator worsened supply difficulties," said Mr. Zycher, a senior fellow at the institute who served as senior staff economist with the President's Council of Economic Advisers during the first two years of the Reagan administration. |
