Many people will no doubt be asking,
why did they tinker with it? Why didn't they just leave the
electric utility infrastructre in California the way it was? Why
deregulate in the first place?
Well, why?
Because of unscrupulous people.
One of the most assinine lies voters and "consumers" have been asked to swallow in recent years is the panacea of privatization. Everything is better, some opine, when privatized (and/or, deregulated). Medical care, education, transportation services, the internet and of course, public utilities. It fosters "competition" and that means innovation and lower prices, right?
Wrong.
What it generally means is that a politician and a private citizen enter into a kind of scam. A public resource or facility, which has been developed and maintained with taxpayer dollars, looks good to this private citizen. Colluding with said politician, they negotiate for it to be "privatized." Sometimes there is a sham auction. Sometimes the private citizen simply "buys" or is even "awarded" what they want. A quick survey of news articles about these ownership transfers reveals a common trend.
These private citizens are getting some incredible deals.
Maybe they called up that guy with the question marks all over his suit.
In America we have some wonderful old reactionaries running around defending privatization and bashing the alternatives as communism/socialism. One thing many have in common is a complete lack of actual working knowledge of how privatization of a given entity actually works, at the nuts and bolts level.
You must admit it's been nagging you, hasn't it? I mean, Ford and Chevrolet can compete - we know how that works. You can go to different dealerships and buy one kind of car or the other. But how, exactly, can electric utilities compete? You don't have redundant power lines coming into your home, redundant outlets, or redundant power plants...
Though power plants are the most plausible of all of these alternatives; that's what everyone who'se thought about this at all must think is the real heart of the competition scheme for electrical utilities, right? You can have a bunch of different power plants, buying oil and selling electrity to the grid, right? But there is the problem of distribution.
Why, after all, can't New York loan California a little of it's juice?
Oh, what's that? Distribution of electricity in volume is nearly impossible over long distances? Up to 80% of generated power is wasted in the distribution network? Really?
No, let me tell you how "competition" really works in the power generation business.
If you build power plants, the power supply goes up, and your product is worth less. Hence, your profits go down.
If you do not build power plants, and/or take some of your plants off line, the power supply goes down, and then your product is worth more. Supply and demand! Whopee! Time to raise the rates!
This is exactly what's happened in New York, as well as in other areas where this scheme has been foisted on the taxpaying public. Step one, privatize and deregulate the utilities. Step two... surprise! Your rates just went up! And... hey! It's dark in here!
The only difference is that in California, the power distributors were not allowed to pass on the rate hikes to consumer. Causing the slight backup of money to the privateers. No matter - they'll be paid with public debt instead.
Why? Because "supply" and "demand" economics and electrical utilities are the proverbial square peg and round hole. You have to have your brains leaking out your ears to think this one would work. Markets are clever, but not a panacea.
And if your attention span is long enough, you will remember from the beginning of this writeup that the very power plants that are now price gouging you so hard that in another hour and a half, you won't have the juice to even surf this site, the very power plants that over the past three months have suddenly had the wherewithal to raise their rates almost 100 fold... were constructed, in many cases, with your tax money, or a government's gaurantee of debt... and sold to a political crony for the express purpose of perpetrating this very situation.
The only possible way the "private" power generation companies can fail to get rich is by doing what they're supposed to... which is, provide ample, cheap, environmentally sound generating capacity. If you want to make money, on the other hand, the opposite is true; it's in the private utility's best interests to use the cheapest, dirtiest power generating techniques available, to encourage as much waste as possible, and to cultivate their most profitable buyers at the expense of their least profitable low and middle income customers.
The other writeup here makes this sound almost like a little "accident" by California's political crew. There is nothing accidental about that privatization of public utilties. It's premeditated systematic theft of the public trust.
It has come to my attention that some people (i.e. the CEO of
National Grid USA) have been going around saying that the power shortage is due to California's (and I quote) "absurdly restrictive
environmental controls" preventing the building of new power plants.
Despite California's "absurd restrictions" (The California Environmental Quality Act - which I doubt he's read - is hardly what I'd call absurd) approximately 6,300 megawatts worth of new facilities (or 13% of the state's total generating capacity) have received approval. Regulation... ironically... is what they lack... or they would be online already.
I quote the New York Times: "But the real reason for the energy shortfall is that no new plants were built in the 1990's because prices were low, supplies were plentiful and producers wanted to wait until they better understood the new era of deregulation."
Hey, do you think they understand it better now?
Oh my. It gets better. There are people going around claiming that increases in
oil and
natural gas prices have caused the stretch.
Perhaps if the privately held California power generators would volunteer to raise their prices only to cover the exact increase in fuel oil costs...?
No? Not interested in doing that, for some reason?
Funny; that's what would have happened before, under a regulated electic utility. The generators would simply make a rate case (which, if validateable, would be approved) and pass along the increased fuel prices directly in your electric bill. Of course, that would leave little room for "exaggeration" - but then, that's what this entire charade is all about.
I apologize to the crowd for
capn haggis's smashing ignorance of the new "utility infrastructure" in California.
You see, haggis:
- The distributors of electricity have had their prices fixed. This was an afterthought in the process - a "concession" by the authors of this boondoggle to grease it's slide through the sometimes unpredictable state legislature. It was an easy giveaway to the consumer lobby, because it was meaningless. Everyone now knows what those who designed this little disaster knew all along: the distributors buy their power from the generators, who have no price controls at all.
- Those independent, "privatized" generators of electricity promptly stopped all new construction. Then, we find ourselves with a significant portion of the existing generating capacity "down for maintenance." Whoops! A "shortage". Then they turned the dial marked "price gouge" all the way into the red. This is when it dawns on you that there's no difference between your rates going up and your taxes increasing (or services decreasing) to pay for an electric utility bailout. Except that the latter is even more expensive than the former.
Now, don't you feel silly? Go sit in the corner.