The current energy crisis in California is due to an economic crisis. Whos to blame for the crisis is still in debate today. This paper will attempt to argue that the government and its poor planning are to blame for this fiasco.The timing of the government to institute deregulation was extremely poor. The price for a barrel of crude oil, used by some power generation plants, has virtually tripled since bottoming out at around $10 per barrel in December of 1998. The cost of natural gas has increased by almost 100% in the past two years; natural gas is used by over 50% of Californias power generation companies. Consumers have significantly less incentive to conserve electricity today than 18 years ago since the average real cost of electricity in the Unites States has declined almost 32% since 1983. There was an obvious lack of power generating capacity. Governor Davis said on January 8th, 2001 For the twelve years before I took office, this state failed to build a single major power plant - not one.Deregulation in itself has proven that it can be successful. The Pennsylvania-New Jersey-Maryland (PJM) electricity grid hasnt run into any of the problems that California is currently facing. The combined population of those three states is about 77% of Californias. PJM has a reserve requirement (around 20 percent) to ensure that there is enough generation to meet the expected peak. California has no reserve requirement and relied on imported power for up to 25% of its electricity. Californias reserve margins have dropped to 6% below demand at times. In New Jersey, electricity suppliers use long-term contracts to ensure stable prices for over 80% of their transactions. California has required utilities to purchase their energy in the day-ahead market, which adds volatility to prices.The 1996 law deregulation the California energy market forced utilities to sell off at least 50% of their power generating capacity. Additionall...
