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Author: Lance Winslow Article source: http://www.advicelife.com/. Used with author's permission.
Why did the California energy crisis happen? Who is to blame? How come deregulation was a financial disaster? Some of the data in the research did not predict what would happen, probably because research people are not; go for it, make it happen entrepreneurs. So their report was just 1000s of pages of incessant data about nothing and basically BS. It was much like a master thesis of a psychology, philosophy or work of a business student at any university. Written by guess whom and not understood by guess whom else.
So the data was wrong and the politicians could not know the difference, due to ignorance, importance of political self-preservation, and therefore accepted the data at face value. As the fiasco unfolded the politicians decided they did not want it. Thus they went and made more laws after the fact and still to this day want to make even more laws, which is why deregulation of the utility industry is a great idea in the first place, because minus all the over regulation it can better perform.
The only problem is that there was so much waste, that the utility companies did not know how to operate efficiently in the first place. Instead, when it sold its excess capacity to the commodity type trader, it did not know what to do when it went over its capacity. It then had to buy on the open market energy for a higher price. Of course the same commodity brokers, were there also and had also bought the other energy companies capacities on contracts. What did this whole thing cause? It nearly caused the collapse of California's government, a major utility company in California filed BK, and both of which refused to pay Enron the money they owed on the contracts that were sold. And the premature collapse of Enron.
It doesn't matter that Enron manipulated the market to get a financial gain. The fact is, that the State of California deregulated their energy caught off guard when someone took advantage of the rules they set out. Had the State of California not had a closed system for so long on energy generation, had better and less regulations there would be more plants. The energy could go less distance and it all would have worked and this would not have happened. But to wait until 2000 to straighten out CA energy system and go to a free market system, what did they expect?
The CA department of energy did not even realize that the transmission lines were not big enough to allow for the excess capacity to be distributed to all possible customers that the contracts might be sold to. Yet that should have been fairly obvious since the costs to create energy are so different using different methods and producing it in different regions, again this fact is due to the over regulation in the first place. If the transmission lines could not handle additional loads then the excess capacity did not exist to all markets, so then it cannot be traded. Yet the CA department of energy never had a clue to think on this when they opened up the trading and deregulation. Why? Linear thinking politicians did not understand free enterprise and efficiencies or the capabilities of their own infrastructures. Thus the California government was taken over by more savvy individuals. Think on it. "Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs/
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