The state foots the bill, while northern neighbors profit from a managed power market.
California's electric restructuring plan, launched on April 1, 1998, marks one of the most ambitious attempts in U.S. history to place the state in a social engineering role. Not only was the scale of the project daunting, with implementation cost estimates running as high as $1.2 billion, but the plan places California government in control of the most minute components of the electric system.
How has the experiment gone? Most participants on the retail side agree that restructuring California-style has had little impact as yet on final consumers. The complex mechanics and high entry fees simply have made large-scale customer participation impossible. Even the largest industrial customers have seen few benefits.fn1
Instead, the most far-reaching impacts have occurred at the wholesale end of the market. This finding is surprising, moreover, because the mechanism described in the program's enabling legislation, Assembly Bill 1890, was not designed to intervene in wholesale markets.
Granted, this analysis is preliminary at best; we can call on only eight months of experience with the new institutions, including only about five or six months of hard information, since data from the U.S. Energy Information Administration is usually lagged three months or more.
Nevertheless, the preliminary indications appear quite clear. California's intervention in wholesale markets, with its complex administered Power Exchange (PX) and Independent System Operator (ISO), has raised both prices and volatility across the West Coast. This experience suggests a series of questions for the state, the region and the nation as a whole: