The 2000-2001 energy crisis in California is not a hoax

We have been living with rolling blackouts and the daily threat of them since January 2001. The two utility companies that serve roughly 75% of the state have incurred so much debt by being forced to sell power below market cost that their credit rating is in the toilet and the only thing that saves them from bankruptcy is the goodwill of their creditors.

What's almost as bad is the incessant noise—talk, legislation, and news coverage—about the situation. I am barraged by it daily. And my home is dark and cold in the name of conservation and keeping my utility bills down.

What a state!


"Deregulation" in California was dreamed up as a path to lower consumer prices—while the business of delivery of energy remained quietly in the background.

Given today's noise, confusion, and energy shortages, it's easy to conclude that deregulation is a flop. Even the lower energy prices that accompanied it were artificial, achieved with bonds, which must be repaid with interest, and the insolvency of two publicly-owned utilities. In some way we got what we deserved. "We"—residents and taxpayers of California—settled for a superfiical understanding of the energy business and misguided legislation and CPUC action and inaction. Unless we wise up, we will compound those mistakes.

Deregulation, California-style took two large companies with excellent records at providing energy reliably and brought them to their knees. I for one am embarrassed. Even worse, the jackals that circle the defective energy market are only looking for their own gain. Some like to say that the problems were caused by the utilities and if they collapse so much the better. Serves them right. Good riddance.

Wild animals are nicer to each other than this.


The Bay Guardian has long championed a local government-owned utility for San Francisco. Lately they spoke out:
1) for energy generation that is not at the expense of the environment, and
2) for government ownership as a way to ensure operational efficiency.

I applaud #1 and deplore #2.

Certainly the chaos is a fertile opportunity for developers to move in on priceless environments that we have steadfastly protected in our more comfortable days. There is no need to give into panic and sacrifice those places and values. It wasn't about the spotted owl and this is not about electricity—it is about profit at any expense. We must resist.

Government ownership as a model of efficiency is an old idea. The USSR lived and died by it. It is an illusion. The primary objective of a government is self-perpetuation, closely followed by power and wealth.


The people of California have the right—and the obligation—to specify what they will allow and what they will not allow in the generation of energy. The issues are:
1) location of power plants,
2) generation capacity,
3) environment protection and conservation,
4) what percentage of demand should be meetable by in-state generation, and
5) environmental impacts of out-of-state generation.

We cannot ignore the interconnection of power generation throughout the western US. Most electricity from the Pacific Northwest is generated by hydroelectric plants that endanger the sustainability of native populations of salmon and other fish.

Self-sufficiency is an important way to limit California's negative impact on the environment in other states and to ensure a reliable supply to meet conservative needs. Self-sufficiency is the in-state generation of power sufficient to meet those needs.


Profligacy must end. We must collectively and individually choose to use only so much energy as is truly necessary for safety and the basics. This will be a great challenge. Since the 1950s we have been encouraged to rely on power, especially electricity, for everything. Not only does power freeze our ice cream, dry our clothes, and whack our weeds, but electronic devices are ubiquitous. Thinking about non-powered alternatives will require more than memory. It will require open-mindedness, creativity, perseverance, determination, and communication.


The current state of affairs clearly illustrates our ability to screw up. We can also fix things. What we need is a way to evaluate the success of our plans to fix things—before the fact.

There is no room for ideology and wishful thinking. We must be practical, detailed, and thorough. We must test our ideas. We teach our children not to cross the street without first looking both ways, even if it's a one-way street. We must take our own advice. We cannot rely on miracles.

We must address:

Power Supply

Immediately establish a mechanism that will enable the purchase of energy at the lowest prices possible. This likely includes the use of long-term contracts.

Implement conservation measures to reduce demand. These should include a tiered pricing structure that penalizes excessive consumption.

Develop a supply-side plan that establishes "conservative demand" volumes, identifies the existing shortfall, specifies the preferred degree of statewide self-sufficiency (percent of in-state generation), outlines a mechanism by which new generation facilities can be built that meets our generation constraints, and discusses ownership and operation alternatives.

Build new power plants. But ONLY those that are consistent with the plan.

Require that all new development provide for its own energy consumption in a way that will not adversely affect the rest of us. Perhaps a planned subdivision or factory can have its own power generation plant, or perhaps it can pay for the expansion of a nearby plant.

DO NOT sacrifice the environment for another power plant.

DO NOT rely on elected officials and people appointed by elected officials to play a major role in the ongoing management of the energy market. Keep the amateurs out of it—and the people motivated by (re)election desires.

Close the Power Exchange and the ISO.

Financial Stability

We must take immediate steps to allow the utilities to recover their debt that is related to energy purchases. The bad news is that someone will have to pay: taxpayers or ratepayers. The state might sell bonds with the proceeds going to the utilities; the utilities can repay the money with surcharges levied on customer bills. Alternatively, the utilities could levy a surcharge on customer bills. The state might defer or cancel payment of taxes while the debt is being recovered.

We must take immediate steps to allow the utlities to set prices based on costs.

Redefine Regulation

Develop a plan that outlines what oversight is needed and by whom. This must include energy market audit and public disclosure measures. Re-charter the CPUC. Re-populate it as necessary.


When the dust has settled on this crisis, we can re-imagine what a free energy market can be. What competition is possible and under what conditions. What oversight is necessary for the common good. How the market can respond to weather conditions that reduce the supply and/or increase the demand. Who can best own and operate the different parts of the market.


A company with specialist skills and knowledge in the generation, transmission, distribution, and billing of power to end-use consumers.
A company that is owned by stockholders.
A company whose stock is publicly traded.
A company whose stock dividends are a major source of income for many retired people.
A company that pays taxes to cities, counties, the state, and the federal government.
A company that employs many state residents.
A company that values minority-owned suppliers.
A company that gives to the communities in which it does business by volunteerism, charity, financial assistance, contributions to non-profit organizations, job training, and scholarships.
A company that implements state-mandated social programs related to energy.

This is not the face of the devil.


Generation: Electricity is generated by power plants fueled by falling water (hydroelectric), coal, oil, natural gas, geothermal steam, windmills, nuclear fission of uranium, sunlight, and biomass. Natural gas is pumped from subterranean wells and stored in tanks.

Transmission: Regional distribution includes the movement of gas and electricity between states and counties. Electricity moves on a regional power grid. Gas moves in pipelines.

Distribution: Local distribution is the delivery of energy from the regional transmission channels to the end consumer.

Customer service: Customer service includes service start and stop for individual customers, meter reading, billing, payment processing, and collection.

Regulation: The California Public Utility Commission (CPUC) regulates privately owned telecommunications, electric, natural gas, water, railroad, rail transit, and passenger transportation companies. The Federal Energy Regulatory Commission (FERC) also

There are three investor-owned utilities in California: San Diego Gas & Electric, Southern California Edison, and Pacific Gas and Electric Company.

Prior to 1996 in Northern California, PG&E was a vertically integrated business: It owned and operated generation, transmission, and distribution facilities and provided customer service. It bought natural gas and electricity from in-state and out-of-state generators.

What About Bankruptcy?

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Written: 1-2-2002. Revision: 1-14-2006.