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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Patricia Trinchero who wrote (210308)	12/15/2001 2:36:04 PM
From: gao seng	Respond to of 769670

Professor Jim Sweeney of Stanford University is writing a book on California's electricity crisis. He points out that throughout the 11 Western states of the United States wholesale prices for electricity rose abruptly, and by more in the Pacific Northwest than in California. But "the only economic disaster" took place in California. The reason, Sweeney says, is that "the state government had regulated them (the electricity utilities) to force them to buy everything on the spot market and prevented them from entering into long-term contracts before the crisis occurred." If a utility is obliged to buy from the generator on the so-called "spot" market rather than being able to rely on guaranteed supplies, it is vulnerable. Sweeney argues that Davis forced California's utilities into this position. Davis, in Sweeney's view, might have alleviated the crisis by allowing the utilities to raise their prices in order to cover their input costs. "He (Davis) said himself," Sweeney says, "that he could solve the crisis in 20 minutes if he let prices go up." California's problem was not deregulation of electricity, which was effected five years ago but only for the wholesale market for electricity, but "greater regulation than there had been before," according to Sweeney, because the state imposed a price cap on electricity at the retail level. How has California's crisis played out? Rather than allowing the utilities to raise retail prices in order to cover their costs, Davis put the state's money to work and signed long-term supply contracts at an average price of around $70 per megawatt. According to Sweeney the current expectation is that the wholesale price will average $30 per megawatt over coming years. In other words, Davis committed California to pay more than twice the expected market price. California's budget, and California's consumers, are going to have to bear that cost. Sweeney characterizes Davis' management of the electricity crisis as "the worst failure of political leadership" he has seen in his lifetime. upi.com How much does the California utilities still owe Enron, anyway?