Despite some modest successes in restructuring, as in Pennsylvania, the California crisis has had a larger impact on policy makers. Because of restructuring’s failure in the Golden State, legislators and regulators in seven states delayed implementing their own restructuring plans.[1] Further complicating matters were revelations that Enron, the largest power marketer in California and elsewhere, had hidden a huge amount of debt from its books. The high-flying company, whose stock price soared above $80 per share in the fall of 2000, as the California crisis intensified, had also allegedly pursued trading practices that artificially elevated the wholesale prices of power.
After Enron fell from grace (and into bankruptcy in December 2001), observers and policy makers worried that free markets for power in their states might be similarly affected by unscrupulous marketing companies.[2] In such cases, the benefits of restructuring would never flow to customers, the intended beneficiaries. With the California crisis and the Enron scandals prominent on their minds, policy makers lost much of their ardor for restructuring, as is reflected in the following map.
Restructuring Status as of March 2002
Source: U.S. Department of Energy, Energy Information Administration, at http://www.eia.doe.gov/cneaf/electricity/chg_str/regmap.html. (Image text retyped for clarity.)
But these disappointments
do not mean that the restructuring process is dead. Few people seek a
return to the “old”days
of regulation, when bureaucrats (often unduly influenced by utility companies)
took months or years to approve rate requests and plans to build new plants.
Rather, the consensus appears to be that government still needs to play
a role in restructuring, though in a less obtrusive manner.
State and federal regulators will need to monitor the marketplace better and ensure that generating companies do not have too much market power or withhold power from the grid when demand increases. Regulators may also need to guarantee that power brokers do not trade unfairly in ways that enrich themselves at the expense of customers. Finally, they may need to create more effective power pools (so-called regional transmission organizations, similar to the PJM interconnection system) that allow for more efficient trading of power over large areas. In these ways, observers argue, the benefits of competition can still accrue to customers, despite some rocky experiences during the first years of restructuring.
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| Notes: |
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| Steven, Pearlstein, “On California Stage, a Cautionary Tale; Prices, Blackouts Spotlight Deregulation's Risks,” Washington Post, 21 August 2001, A1. (Return) | |
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2.
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After revelations of Enron's activities, other companies (such as Dynergy and CMS Energy Corporation) allowed that they too had participated in some trading activities that, the companies claim, may not have been illegal, though they may have been somewhat deceptive. Chip Cummins, Jathon Sapsford, and Thaddeus Herrick, “Watson, Who Long Led Dynergy in Enron's Chadow, Steps Down,” Wall Street Journal, 29 May 2002, A1 and A8. (Return) |
