Who Turned The Lights Out?

In an attempt to offer consumers a choice in purchasing energy, California passed AB190 in September of 1996. AB190 was passed with the intent of opening the electricity market to competition. Competition was supposed to lead to lower prices, spur innovation and economic growth, and promote efficiencies in the energy industry (CPUC). California was the first state in the U.S. to open the electricity market to competition by creating a separate independent system operator, the ISO, to control utility-owned transmission facilities. California is considered to be the "experiment" state. There are still 25 states that are standing by to see if they should go ahead with their plans to "deregulate" (Erwin, 3).

Governor Gray Davis recently declared the states' shift to a deregulated market place "a dangerous and colossal failure."(Verdicso, 26) This paper will talk about the way the electric market used to work, what deregulation is supposed to do, and how California's electric market has changed through deregulation.

CALIFORNIA 1941-44 LICENSE PLATE WITH TABS

[California delegates cheering on stagecoach at th...

The California State Capitol building in Sacrament...

We will then discuss what went wrong and opinions on how to fix the problem.

WHAT WAS CALIFORNIA LIKE BEFORE DEREGULATION? Before deregulation took place all the components of electric service were provided by electricity utility. There were three components at the heart of the electric system. Generation, transmission, and distribution act in concert to provide California's power supply.

Generation refers to the production of electricity at power plants or other facilities. California has about 1000 generation facilities with 55,000 MW (megawatt) of capacity, including the ones run by gas and oil, nuclear power, hydro, biomass, wind, solar, and cogeneration. One megawatt can provide energy for approximately 1000 houses (Sanchez). California was able to import an additional 8000 MW from other states, while 4500MW of them were under contract as "firm" supplies.

Transmission refers to the wires that run from generators...