The Artificial Earthquake Electric Restructuring in California

Abstract

The electric power system is a crucial aspect of the infrastructure of contemporary society. The electric power system has undergone an artificial earthquake. Vertical integration was broken up, generation made competitive, and utilities pushed out of generation. Did this artificial quake, which is of worldwide interest, have to happen or are there lessons to learn? From the viewpoint of delivering physical reliability of services to customers, the system clearly was not “broke.” Interest groups’politics seem to have been the driver, the main groups being industrial customers, independent power producers, and “Chicago School” economists. The changes have not producedthe expectedreduction of rates to customers, have resultedin major financial consequences for utilities, ledthe state into the power-purchasing business, andcalledinto question aspects of the state’s own finances. In policy making, the pure theory of any discipline is likely to yieldunexpectedandundesirable results.

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