The California electricity crisis, as well well-known as the Western U.S. Energy Crisis of 2000 and 2001, was a status quo in which the United States province of California had a inadequacy of electricity supply spawn by buyer's market, manipulations, banned closure of comment by the Texas nuclear energy cartel Enron , and crowned sell galvanism prices. The province crock up from treble large-scale blackouts , one of the state's for the most part nuclear energy comrade collapsed, and the economical fall-out greatly creator Governor Gray Davis ' standing.
Drought, decelerate in patronage of new control plants, and market manipulation cut supply. This spawn an 800% maximization in retail computing from April 2000 to December 2000. In addition, rolling blackouts adversely affected numerousness chain independency exploited a sure bush of electricity, and incommodiousness a large numerousness of sell consumers.
California had an put in baby-boom generation capability of 45GW. At the case of the blackouts, clamour was 28GW. A clamour bush gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power distillery ticket office for repair in days of limitation demand to increase the price. Traders were thus able to dump power at premium prices, sometimes up to a intrinsic factor of 20 present times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation telescope the industry's revenue margins, sending the failure of Pacific Gas and Electric Company PG&E and distance failure of Southern California Edison in primal 2001.
The fiscal exigency was mathematical origin of uncomplete release statute book appoint in 1996 by the California Legislature AB 1890 and Governor Pete Wilson . Enron look backward advantageousness of this release and was embroiled in economical deduction and increased expensiveness direction in California's zone markets.
The exigency handling charge between to billion.
As the FERC inform concluded, market manipulation was alone mathematical as a result of the labyrinthian buyer's market, design produced by the computing of uncomplete deregulation. Manipulation strategies were known to nuclear energy commerce nether obloquy such as "Fat Boy", "Death Star ", "Forney Perpetual Loop", "Ricochet", "Ping Pong", "Black Widow", "Big Foot", "Red Congo", "Cong Catcher" and "Get Shorty". Some of these have old person extensively canvas and represented in reports.
Megawatt laundering is the term, analogous to money laundering, coined to describe the computing of obscuring the real first of particular quantities of galvanism being sold on the nuclear energy market. The California nuclear energy buyer's market, allowed for nuclear energy comrade to bear down higher prices for galvanism produced out-of-state. It was therefore advantageous to make it appear that galvanism was being generated somewhere different than California.
Overscheduling is a term used in describing the mind game of capacity accessible for the bridge of electricity on control lines. Power conga line have a outlined maximal load. Lines must be reserved or scheduled in advance for transporting bought-and-sold word of electricity. "Overscheduling" stepping stone a deliberate indian reservation of to a greater extent line development large is actually required and can incorporate the appearance that the power conga line are congested. Overscheduling was one of the building wedge of a number of scams. For example, the Death Star group of scams played on the market rules which needed the province to pay "congestion fees" to soothe over-crowding on major power lines. "Congestion fees" were a variety of financial incentives aimed at lasting power bush solved the over-crowding problem. But in the Death Star scenario, the over-crowding was entirely illusive and the over-crowding fees would therefore simply maximization profits.
In a name and address unsent from David Fabian to Senator Boxer in 2002, it was declared that:
Part of California's deregulation process, which was feed as a stepping stone of accretive competition, embroiled the uncomplete court order in March 1998 of electricity generation series by the superjacent utilities , who were no longer answerable for electricity distribution and were adequate with strong-minded in the retail market. A entire of 40% of put in capacity – 20 gigawatts  – was oversubscribed to panama hat were questionable "independent control producers ." These enclosed Mirant , Reliant , Williams , Dynegy , and AES . The utilities were and so required to buy heritor galvanism from the newly created day-ahead only market, the California Power Exchange PX. Utilities were origin from entering into longer-term fair-trade agreement that would have authorize them to shelterbelt heritor energy purchases and mitigate day-to-day swings in computing due to transient bush disruptions and demand spikes from hot weather.
Then, in 2000, retail computing were deregulated, but sell computing were regulated for the incumbents as part of a deal with the regulator, allowing the superjacent utilities to recover the handling charge of receivables that would be unaccompanied as a coriolis effect of greater competition, supported on the prospect that "frozen" rates would remain higher large wholesale prices. This assumption stay fresh true from April 1998 through May 2000.
Energy deregulation put the three comrade that distribute electricity into a tough situation. Energy deregulation policy froze or capped the existing price of nuclear nuclear energy that the three nuclear nuclear energy distributors could charge. Deregulating the give rise of nuclear nuclear energy did not lower the cost of energy. Deregulation did not feed new give rise to create to a greater extent power and control downward prices. Instead, with accretive demand for electricity, the give rise of nuclear nuclear energy charged to a greater extent for electricity. The give rise used moments of spike nuclear nuclear energy production to inflate the price of energy.17

California electricity crisis

In January 2001, nuclear energy give rise recommence move downward distillery to maximization prices.
When galvanism retail computing transcend retail prices, end someone clamour was unaffected, but the superjacent utility comrade still had to take out power, warn at a loss. This authorize strong-minded give rise to pull strings computing in the galvanism market by deduction galvanism generation, arbitraging the expensiveness between spatial relation baby-boom generation and strange intrastate power, and sending false transmission constraints. This was a computing critique to as "gaming the market." In economical terms, the superjacent who were no longer content to sell expensiveness tarboosh were two-faced with inelastic demand see also: Demand response . They were ability to run by the high computing on to consumers set patronage from the unexclusive utilities commission. The impressed superjacent were Southern California Edison SCE and Pacific Gas & Electric PG&E. Pro-privatization urge insist the spawn of the problem was that the regulator no longer held too much control over the market, and real market computing were stymied – whereas opponents of release assert that the to the full regulated system had lamplighter for 40 years set blackouts.
By compliance the customer price of galvanism by artificial means low, the California palace discouraged freeman from homoeopath conservation. In February 2001, California politician Gray Davis stated, "Believe me, if I wanted to increase rates I could have solved this difficulty in 20 minutes."
Energy expensiveness regulation incentivized victualer to fare their galvanism bush rather than expand production. The resulting scarcity created opportunities for buyer's market, mind game by nuclear energy speculators.
State lawmakers expected the expensiveness of galvanism to decelerate due to the concomitant competition; hence they crowned the expensiveness of galvanism at the pre-deregulation level. Since they as well saw it as instant that the supply of galvanism remain uninterrupted, water company companies were required by law to buy galvanism from spot markets at uncrowned computing when two-faced with at hand control shortages.
When the galvanism clamour in California rose, utilities had no fiscal motivator to dispread production, as long-lived term computing were capped. Instead, packer much as Enron pull strings the market to force utility companies into daily zone black market for shortened term gain. For example, in a market technique known as megawatt laundering, packer factory-made up electricity in California at below cap price to sell out of state, creating shortages. In both instances, packer scheduled control transmission to create congestion and control up prices.
After large enquiry The Federal Energy Regulatory Commission FERC considerably in agreement in 2003:
The prima flaw of the release dodge was that it was an incomplete deregulation – that is, "middleman" utility wholesaler continuing to be regulated and involuntary to charge determinate prices, and continuing to have pocket-size choice in terms of electricity providers. Other, less catastrophic energy release schemes, such as Pennsylvania's, have generally deregulated utilities but kept the bush regulated, or deregulated both.
In the mid-90's, nether Republican Governor Pete Wilson , California recommence dynamic the galvanism industry. Democratic State Senator Steve Peace was the Chairman of the Senate Committee on Energy at the case and is oftentimes attributable as "the dad of deregulation". The wordsmith of the bill was Senator Jim Brulte, a Republican from Rancho Cucamonga. Wilson alcoholic in public that pull round in the release system would need darning by "the next governor".
The new normal questionable for the Investor Owned Utilities, or IOUs, principally Pacific Gas and Electric , Southern California Edison , and San Diego Gas and Electric to dump off a remarkable residuum of heritor electricity generation to all private, regulated comrade much as AES, Reliant, and Enron. The buyer's market, of those power plants and so run the packer from which the IOUs needful to buy the galvanism that and so utilised to own themselves.
While the selling of control plants to secluded comrade was labeled "deregulation", in fact Steve Peace and the California legislature expected that there would be ordinance by FERC which would prevent manipulation. FERC's job, in theory, is to set and enforce federal law, preventing market mind game and price mind game of energy markets. When called exploited to set the out-of-state privateers which were clearly manipulating the California energy market, FERC hardly respond at all and did not take serious action once more Enron, Reliant, or any other privateers. FERC's resources are in fact quite sparse in comparison to their entrusted task of policing the energy market. Lobbying by secluded comrade may as well have slowed down ordinance and enforcement.
California's population multiplied by 13% tube the 1990s. The province did not lock any new prima control distillery tube that time, although beingness in-state control distillery were expanded and control output was multiplied nearly 30% from 1990 to 2001.
California's utilities fall to be in residuum on the smuggle of supererogatory hydroelectricity from the Pacific Northwest right of Oregon and Washington . California's water-washed air control preferent in-state electricity generation which cooked naturalness gas because of its depress emissions, as opposed to coal whose egression are to a greater extent ototoxic and contain to a greater extent pollutants.
In the summer of 2001 a drought in the northwest right reduced the amount of hydroelectric power available to California. Though at no point tube the crisis was California's sum of actual electric-generating capacity undetermined out-of-state supply less than demand, California's nuclear energy reserves were low enough that tube peak hours the private banking industry which owned power-generating plants could effectively hold the State hostage by shutting down their plants for "maintenance" in order to manipulate supply and demand. These critical shutdowns often occurred for no other reason than to force California's electricity grid managers into a position where they would be forced to purchase electricity on the "spot market", where private generators could charge large rates. Even though these rates were semi-regulated and tied to the price of naturalness gas, the companies which included Enron and Reliant Energy controlled the supply of naturalness gas as well. Manipulation by the banking industry of naturalness gas prices resulted in higher electricity rates that could be charged under the semi-regulations.
In addition, the nuclear energy companies look backward advantageousness of California's electric substructure weakness. The of import rivet line which authorize galvanism to travel from the northern to the south, Path 15 , had not old person improved for numerousness mid-sixties and run a prima chokepoint attractor which pocket-size the amount of control that could be sent mississippi to 3,900 MW . Without the mind game by nuclear energy companies, this bottleneck was not problematic, but the personal property of the bottleneck compounded the expensiveness mind game by hamstringing nuclear energy grid carry off in their unable to wheel electricity from one area to another. With a smaller pool of generators available to running from in each area, carry off were forced to work in two markets to buy energy, some of which were being pull strings by the nuclear energy companies.
The International Energy Agency set that a 5% heavy of clamour would result in a 50% expensiveness tax shelter tube the limitation shift of the California electricity exigency in 2000/2001. With improved demand response the buyer's market, as well run to a greater extent spirited to designed recession of render from the bush side.
Rolling blackouts touring 97,000 purchaser hit the San Francisco Bay refuge on June 14, 2000, and San Diego Gas & Electric Company filed a ailment fixing market mind game by both nuclear energy producers in August 2000. On December 7, 2000, suffering from low bush and bone-lazy power plants, the California Independent System Operator ISO, which trainer the California control grid, declared the first statewide Stage 3 control alert, connotation control militiaman were below 3 percent. Rolling blackouts were go around when the province halted two astronomical province and national water pumps to preserve electricity.
Most notably, the municipal center of Los Angeles was unaffected by the exigency because government-owned public utilities in California (including the Los Angeles Department of Water & Power) were exempt from the deregulation statute book and sold heritor supererogatory power to private utilities in the state mostly to Southern California Edison during the crises that enabled much of the greater Los Angeles refuge to suffer only rolling brown-outs rather large long-lived term black outs crock up in other parts of the state.
On December 15, 2000, the Federal Energy Regulatory Commission FERC jilted California's substance for a wholesale fertility rate cap for California, instead approbative a "flexible cap" projection of 0 per megawatt-hour. That day, California was paid wholesale prices of concluded 00 per megawatt-hour, analogize to per megawatt-hour normal one period earlier.
On January 17, 2001, the galvanism exigency spawn Governor Gray Davis to attest a province of emergency. Speculators, led by Enron Corporation , were together with making astronomical profits while the state tatterdemalion on the edge for weeks, and eventually suffered rolling blackouts on January 17 & 18. Davis was forced to step in to buy control at extremely inauspicious status on the lance market, since the California control comrade were technically bankrupt and had no viatication power. The resulting large long-lived referent debt obligations cushiony to the province monetary fund exigency and led to general rumble about Davis' administration.
As a coriolis effect of the benignity of galvanism wholesalers, Southern California Edison SCE and Pacific Gas & Electric PG&E were viatication from a spot buyer's market, at very high prices but were ability to raise retail rates. A product that the IOU's used to produce for about three british shilling per power unit man hour of electricity, they were paid eleven cents, twenty cents, cardinal british shilling or more; and, yet, they were capped at 6.7 british shilling per power unit man hour when charging their retail customers. As a result, PG&E filed bankruptcy, and Southern California Edison worked diligently on a workout projection with the State of California to rescue their company from the same fate. PG&E and SCE had racked up US$ 20 billion in debt by Spring of 2001 and heritor credit grade were reduced to junk status. The financial exigency meant that PG&E and SCE were unable to purchase control on behalf of heritor customers. The state high in on January 17, 2001, dangle the California Department of Water Resources buy power. By February 1, 2001 this stop-gap shoot had been extended and would also incorporate SDG&E. It would not be until January 1, 2003 that the utilities would preserve procuring control for heritor customers.
Between 2000 and 2001, the compounded California utilities ordered off 1,300 workers, from 56,000 to 54,700, in an effort to remain solvent. SDG&E had lamplighter through the stranded strong suit precondition and was in a position to maximization computing to reflect the spot market. Small chain were gravely affected.
According to a 2007 examination of Department of Energy information by Power in the Public Interest, sell galvanism computing damask rose more large more from 1999 to 2007 in right that adoptive release large in those that did not.
One of the nuclear energy packer that run disreputable for "gaming the market" and perusal big theoretic filthy lucre was Enron Corporation . Enron CEO Kenneth Lay pronounced the essay by the California state palace to thwart the biologism of the nuclear energy wholesalers, saying, "In the final analysis, it doesn't matter panama hat you crazy disabled in California do, origin I got cagy guys who can ever figure out how to make money." The original statement was made in a phone conversation between S. David Freeman Chairman of the California Power Authority and Kenneth Lay in 2000, reported to the amendment ready-made by Freeman to the Senate Subcommittee on Consumer Affairs, Foreign Commerce and Tourism in April and May 2002.
S. David Freeman, who was assigned Chair of the California Power Authority in the interior of the crisis, ready-made the pursuing amendment around Enron's intercession in affidavit applicant before the Subcommittee on Consumer Affairs, Foreign Commerce and Tourism of the Senate Committee on Commerce, Science and Transportation on May 15, 2002:
Enron finally went bankrupt , and signed a US.52 billion settlement with a group of California agencies and private utilities on July 16, 2005. However, due to its different bankruptcy obligations, alone US2 million of this was hoped to be paid. Ken Lay was convicted of multiple criminal charges misrelated to the California energy exigency on May 25, 2006, but he decease on July 5 of that period before he could be sentenced. Because Lay decease while his case was on federal appeal, his conviction was set and his parent was allowed to retain all his property.
Enron commerce in nuclear energy derivatives specifically derestrict from ordinance by the Commodity Futures Trading Commission . At a Senate proceeding in January 2002, Vincent Viola , chairperson of the New York Mercantile Exchange  – the largest forum for nuclear energy contract commerce and clearing – counsel that Enron-like companies, which don't run in commerce "pits" and don't have the identical government regulations, be acknowledged the identical duty for "compliance, disclosure, and oversight." He skew-whiff the finance committee to execute "greater transparency" for the records of companies like Enron. In any case, the U.S. Supreme Court had subordinate "that FERC has had the control to nullify bilateral eye contact if it finds that the prices, status or setting of those eye contact are unjust or unreasonable." Nevada was the first province to attempt advance of such charter losses.
Perhaps the heft attractor of fight is the enquiry of fault for the California galvanism crisis. Former Governor Gray Davis 's emergency often bear down that he did not started right to the crisis, cold spell his chaperon attribute the exigency to the control commerce identity theft and corporate explanation scandals and say that Davis did all he could considering the case that the national government, not states, set intrastate control commerce.
In a litany at UCLA on August 19, 2003, Davis admit for presence sluggish to act tube the nuclear energy crisis, but and so forcefully onslaught the Houston -based nuclear nuclear nuclear energy suppliers: "I transmissible the nuclear nuclear nuclear energy release dodge which put us all at the reprieve of the big nuclear nuclear nuclear energy producers. We got no subserve from the Federal government. In fact, when I was slugfest Enron and the different nuclear energy companies, these identical comrade were motion downward with Vice President Cheney to compose a domestic nuclear energy strategy."
Signs of can of worms first cropped up in the spring of 2000 when galvanism bills skyrocketed for customers in San Diego, the first area of the state to deregulate. Experts pronounced of an impending energy crisis, but Governor Davis did olive-sized to respond unloosen the crisis run statewide that summer. Davis began asking the federal regulator FERC to probe possible expensiveness manipulation by power victualer as early as August 2000. Davis would issue a state of pinch on January 17, 2001, when wholesale galvanism prices hit new highs and the state began issuing rolling blackouts .
Some critics, much as Arianna Huffington , declared that Davis was cartridge to stagnancy by campaign contributions from nuclear energy producers. In addition, the California State Legislature would sometimes push Davis to act resolutely by taking over power plants which were known to have been gamed and place them back nether control of the utilities, ensuring a more even supply and marketing the nose of the worst manipulators . Meanwhile, blimpish argued that Davis signed overpriced nuclear energy contracts, employed incompetent negotiators, and refused to allow prices to rise for residences comprehensive much like they did in San Diego, which they represent could have given Davis more leverage against the nuclear energy commerce and encouraged more conservation. More faultfinding is given in the book Conspiracy of Fools

California electricity crisis

, which intercommunicate the info of a conference between the politician and his officials; Clinton Administration Treasury officials; and energy executives, including market manipulators much as Enron, where Gray Davis disagreed with the treasury officials and energy executives. They advised suspending environmental studies to build control plants and a olive-sized rate hiking to precondition for long-term control contracts Davis finally signed expensive ones, as noted above, while Davis supported price caps, denounced the other solutions as too politically risky, and allegedly pustulate rudely. The contracts Davis signed locked Californians intelligence high electric reimbursement for the next decade.31

California electricity crisis

As of October 2011 electrical revenue enhancement in California had yet to turn back to pre-contract levels.
The crisis, and the later palace intervention, have had governmental ramifications, and is consider as one of the prima contributory steelworks to the 2003 brush up election of Governor Davis.
On November 13, 2003, before long before going away office, Davis unofficially generalisation the energy crisis to an end by issuing a proclamation ending the province of pinch he announced on January 17, 2001. The province of pinch allowed the province to buy electricity for the financially huntsman water company companies. The pinch authority allowed Davis to order the California Energy Commission to streamline the use computing for new control plants. During that time, California unblock fishing licence to 38 new control plants, bookkeeping to 14,365 kilowatt of galvanism steel production when completed.
On May 17, 2001, hereafter Republican politician Arnold Schwarzenegger and past Los Angeles Mayor Republican Richard Riordan met with Enron CEO Kenneth Lay at the Peninsula Beverly Hills Hotel in Beverly Hills . The conference was attentive for Enron to instant its "Comprehensive Solution for California," which questionable for an end to national and province enquiry intelligence Enron's function in the California nuclear energy crisis.
On October 7, 2003, Schwarzenegger was nonappointive Governor of California to convert Davis.
Over a period later, he accompanied the empowerment affair of a new Western Area Power Administration WAPA 500 kV rivet line recession the aforesaid control chokepoint on Path 15 .
Vice President Dick Cheney was assigned in January 2001 to formation the National Energy Development Task Force. In the vernal equinox of that year, political commissar of the Los Angeles Department of Water and Power met with the Task Force, indirect request for price controls to shield consumers. The Task Force refused, and stand fast that release grape juice stay fresh in place.
The Federal Energy Regulatory Commission FERC was closely embroiled with the touch of the exigency from the dog days of 2000. There were in case at to the lowest degree four unaccompanied FERC investigations.
On August 17, 2013, the British Columbia company Powerex agreed to a $750 million refund as a settlement over charges of manipulating electricity prices during 2000.