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California in the early 2000s


Santa Catalina in California
Santa Catalina in California

At the beginning of the 21st century, California seemed to be facing a severe energy crisis. For several days in 2001 much of California endured rolling blackouts, during which power was turned off because the state could not meet its energy needs. California’s energy problems were a result of the state government’s decision to deregulate the electricity industry in 1996.

TUnder that deregulation plan, California’s utility companies had to sell their power-generating plants to private companies and then buy power on the wholesale market. In the summer of 2000, the price for power on the wholesale market rose dramatically as hot weather increased demand. However, the conditions of deregulation prohibited the utilities from passing higher prices on to consumers until the year 2002. As a result, the utilities began to run out of money to buy power. Banks became increasingly reluctant to lend them money. Power-generating plants resisted selling the utilities power because they could not pay for it.

The state struggled to deal with its energy crisis. On top of the utilities’ problems, many power plants were taken offline in early 2001 for repairs or maintenance. In addition, California had not built any new power plants to accommodate its growing population and technology industry. The state appealed to the federal government to set a limit on wholesale market prices, but it refused.

The California Public Utility Commission initiated rate increases despite the rate freeze until 2002, citing the severity of the situation and state laws that granted the commission the power to adjust rates. California considered a variety of other solutions, including speeding up the construction of new power plants and negotiating long-term contracts between the utilities and the power-generating plants to control the volatility of prices.

New, costly long-term contracts for electricity and natural gas burdened the state with millions of dollars of debt. Ultimately, by late 2001 careful public conservation of electricity and natural gas had overcome the state’s power shortages, and it appeared that the severity of the energy crisis had been overestimated. Encarta "USA" © Emmanuel BUCHOT, Encarta, Wikipedia

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