Causes and Lessons of the California Electricity Crisis

The 1996 law that restructured Californias electricity industry was intended to be the first step toward lower electricity prices for 70 percent of the states population. Few observers foresaw the situation that would exist in California by the summer of 2001. Just five years after restructuring became law, the states electricity market was commonly described as being in crisis. The goals of restructuring-lower prices for residential customers and more competitive prices for industrial customers-seemed farther away than ever. This paper addresses four questions 1 What happened in Californias electricity market from the mid-1990s through the middle of 2001 2 What role did the states restructuring plan play in those events 3 How did California respond to its market problems What can other governments learn from Californias experience