Krugman on Cal power

Bob Morris bobmorris at mediaone.net
Sat Mar 24 21:00:13 PST 2001


I live in Los Angeles and have been following the power crisis closely. There are two main problems here, price and availability, plus a slew of others too; an inadequate grid to transport power within the state, a deregulation scheme that currently forces the big utilities to sell to customers at a loss, a governor who loudly proclaims "No new rate hikes".

However, IMO, availability is the most important problem. California does not create nearly enough electricity to meet its own needs. That is the crux of the problem. (The reason L.A. DWP is able to provide cheap uninterrupted power to the City of Los Angeles is because they produce most of their power in plants in Utah and Arizona. 45% being coal, which is against the law to burn in California. The other reason is the cowboy hat wearing head of L.A. DWP refused to go along with the deregulation).

Some think that Dubya is gaming this, so he can ride in to the rescue some months hence. It's difficult to imagine what he could do in one fell swoop to do to make the crisis go away. Seriously.


>[The new idea is in the penultimate paragraph -- that
price caps could increase the supply of power]

Possibly, although with water levels in the Northwest at 20% of normal, California is in serious trouble this summer, as large amounts of its power comes from hydro in the Northwest, and the Northwest won't have any power to spare this coming summer. And, to stop rolling blackouts now, California is ALREADY using water allocated for the summer. Yow.


> The I.S.O. is not alleging that power generators
were part of some

vast conspiracy.

Indeed. A Texas legislator said "A friend and I figured out how to game the California system on the back of a napkin in fifteen minutes. Imagine what the pros could do". Season this with no new power plants in California in years, a brain-damaged California "deregulation" system, plus a hot summer of 2000, rising natural gas prices, and you get...the current disaster.


> more or less unmistakably to the conclusion that
deliberate

withholding of electricity to drive up prices has been an important

factor in the California crisis.

This is no doubt true in some instances, however proving it will take years of court battles. California only has weeks left, and, in terms of the independent alternative power producers within California, who haven't been paid in months, maybe only days left until one of them forces the big utils in bankruptcy.

One of the major players in the California Senate, Debra Bowen, chair of the energy committee and an environmental lawyer, recently said "I don't think people realize how bad this summer is going to be. There's no power fairy".



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