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California's Electricity Crisis

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  • Paul L. Joskow

Abstract

The paper examines the economic and regulatory factors that led to an explosion in wholesale power prices, supply shortages, and utility insolvencies in California's electricity sector from May 2000 to June 2001. The structure of California's restructured electricity sector and its early performance are discussed. The effects on wholesale market prices of rising natural gas prices, increasing demand, reduced power imports, rising pollution credit prices, and market power, beginning in the summer of 2000, are analysed, The regulatory responses leading to utility credit problems and supply shortages are identified. The effects of falling natural gas prices, reduced demand, state power-procurement initiatives, and price-mitigation programmes on prices beginning in June 2001 are discussed. A set of lessons learned from the California experience concludes the paper. Copyright 2001, Oxford University Press.

Suggested Citation

  • Paul L. Joskow, 2001. "California's Electricity Crisis," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 17(3), pages 365-388.
    • Handle: RePEc:oup:oxford:v:17:y:2001:i:3:p:365-388
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    1. David M. Newbery & Michael G. Pollitt, 1997. "The Restructuring and Privatisation of Britain's CEGB—Was It Worth It?," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 269-303, September.
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    More about this item

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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