1. Trading and Power Market Deregulation – The California Story
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Trading and Power Market Deregulation – The California Story
October 2004

2. California Power Market
California Power Deregulation Cost Utilities About $20 Billion During 1999/2000 Crisis
Total Cost Is Some Multiple Of That
The California Deregulation Approach Was Probably Doomed From The Start
Damped Enthusiasm for Deregulation In Other States

3. Any Lessons From California’s Deregulation?
Partial Deregulation Does Not Work
The California Crisis Does NOT Prove That Deregulation Does Not Work
Supply And Demand Will Prevail As The Drivers In The Market
No One Is Too Big To Fail
Intuitively Obvious Points – But Profound Lessons For The Californians

4. Underlying Phenomena That Created The Flawed California Deregulation Strategy
Powerful Political Forces Designed The California Deregulation Strategy
To Appease A Number Of Participants
With Provisions That Were Thought To Be Favorable To The 3 Big Utilities

5. A Recap Of The California Situation
Lots Of Debate Over Why The Situation Occurred, But The Facts Of What Occurred Are These
Electric Power Prices In California Skyrocketed
Power Supply Shortages Resulted In Rolling Blackouts
The 2 Largest California Utilities Lost About $20 Billion, One Went Into Bankruptcy (PG&E), And The California Power Exchange (CalPX) Failed
SLIDE MOVED!
The problem was due to a mismatch in supply and demand, and the solutions all lie in s/d factors.

6. Collateral Damage From The California Situation
The State Economy Was Hurt
Lost Production During Repeated Blackouts
Loss Of Confidence In The Reliability Of The Grid
Businesses Considering Locating In California Reconsidered
Some Industry There Moved Production Elsewhere
Still A Factor That New Gov. Will Have To Address

7. Collateral Damage From The California Situation
First Big Political Hit To Former Governor Davis, Who Was Then Considered A Presidential Contender
Political Factions Still Trying To Assign And Avoid Blame For The Debacle
Increased Reluctance In Congress Of Addressing National Electric Power Issues That Are Still Pending, Even After 8/03 Blackouts

8. Questionable Trading Practices
Enron Collapse and Subsequent Investigations Revealed Market Manipulation
Results Are Increased Market Oversight
What Were the Basic Trading Practices that Were Exposed?
Did Trading Caused the California Debacle?

9. What Was Needed? Change Of The Deregulation Plan
More California-Sited Generation Supply
Price Signals To Users, So That Consumers Will Respond
Motivate Conservation
Encourage Energy Efficiency Projects
Investments In Transmission Upgrades
SLIDE MOVED!
The problem was due to a mismatch in supply and demand, and the solutions all lie in s/d factors.

10. Energy Policy US Energy Policy May Finally Change
Due To New Concerns About Excessive Reliance On Oil Imports
The California Debacle
The 2003 Northeast Blackout
This Will Have Global Implications
In Oil & Gas, And In Power (e.g. Possible Repeal of PUHCA)