Eighteen months ago the California energy crisis captured the world’s attention. Many saw the crisis as the death knell for customer choice and a deregulated power market – a conspiracy of generators and traders to extort short-term profits at the expense of Californian customers. Others saw the crisis as a predictable response to California’s notoriously poor energy market design. Now, in its second year, the California energy crisis has taken new forms and the challenges are even greater.
The energy crisis that began in the autumn of 2000 had multiple causes. First, the designers of the restructured Californian market had neglected to repeal the law of supply and demand. Although restructuring was partly a response to the recession in California in the mid-1990s, by 2000 California was enjoying an incredible energy-intensive high tech boom. Demand far outstripped supply and no new power plants had been built in more than a decade.
