Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Political Science Deregulation Deregulation The current energy crisis in California is due to an economic crisis. Who’s 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 California’s 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 hasn’t run into any of the problems that California is currently facing. The combined population of those three states is about 77% of California’s. 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. California’s 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. Additionally, it barred the increase of consumer rates until 2002. Companies were required to purchase their energy from a state-administered exchange, which hikes prices by making utilities had to pay each supplier the price demanded by the highest bidder, instead of generating their own power. The government has also instituted numerous laws to protect the environment. The state has made it so difficult to build new power plants that construction of new facilities averages about seven years. By comparison, power plants in Texas take no more than two or three years to begin. The end result has been that California hasn’t seen a major power plant built within the past decade while Texas has seen 22 new power plants since 1995. This is coupled with the fact that Californians demand more and more energy each year. The government’s defiance of economic principles by placing price controls on electricity coupled with electric companies being forced to sell their power-generating facilities and the ever-increasing demand of Californians for electricity has led to the current energy crisis. Bibliography: Sources “California Dreamin’” http://www.free-market.net/cgi/redir.cgi?http://www.csmonitor.com/durable/2001/01/19/fp1s1-csm.shtml “How California lost its power” http://www.free-market.net/cgi/redir.cgi?http://www.csmonitor.com/durable/2001/01/19/fp1s1-csm.shtml “California power play” http://www.free-market.net/spotlight/electric/ “Power Hungry” http://www.redlanternreview.com/powerpg2.html Word Count: 511
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