california electric

Les Schaffer schaffer at
Sun Feb 11 08:02:09 MST 2001

California's Panic Was Moneymaker for Energy Sellers

OLSOM, Calif., Feb. 9 — The largest planned blackout of electricity in
California since World War II came in the midst of a heat wave last June,
when the mercury hit 103 in San Francisco, and air-conditioners roared.
Electricity supplies fell to dangerous levels, and utilities cut power to
more than 100,000 homes.

Even more of a shock than the thermal blast in a city known for chilly
summers was what came next.

In July, temperatures moderated and energy use fell, but electricity prices
still spiked up to the highest ever seen for that month. California
utilities paid about $4 billion more for electricity than they did in the
summer of 1999.

This pattern has continued. Even now, when energy demands in California are
at the low ebb for the year, electric power has been selling at some of the
highest prices ever seen.

The attorneys general in California, Oregon and Washington are investigating
whether the handful of power companies that sell electricity to the state
manipulated the market, cutting back supplies to set off the threat of
blackouts — which then led to higher prices and profits. The companies deny
that they did.

What happened to throw the normal laws of supply and demand out of whack can
be largely explained by the system that California created when it
deregulated power three years ago. A backwater agency that was never
intended to buy power at competitive rates became a panicky buyer at the
mercy of a new breed of energy company that sold electricity like pork
bellies in a fast-moving commodities market.

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