A 1996 state deregulation plan that was supposed to make electricity cheaper instead shifted billions of dollars from utilities and consumers to energy companies and electricity brokers.
California businesses and residents paid $10.9 billion more for electricity last summer than the year before, with much of the money flowing to out-of-state energy firms. One of them, Houston-based Reliant Energy, saw its wholesale energy profits jump 600% during that time, with about $100 million coming from California.
The dramatic increases are the result of critical misjudgments by the California Public Utilities Commission and the state Legislature, the two main architects of the plan to open the market.
* A gross underestimation of demand as the state’s economy came to life after years of recession and California’s burgeoning computer-based businesses ate up electricity at rates unheard of in the old economy.
* A failure to anticipate that energy companies could easily exploit a mechanism designed to ensure the even flow of electricity. By holding back electricity and selling when the system was desperate, they could earn double the going rate.