Arnold Kling  

California Energy Crisis Redux?

Liquidity Trap, II... Economic Attribution Error...

Could California suffer another "energy crisis?" Lynne Kiesling writes,

California has a lower construction rate for proposed generation projects than other states that have implemented electricity restructuring...even in states that started with higher capacity relative to demand, such as Texas and New York, generation construction success rates are higher than California’s. Regulatory uncertainty in California has a variety of sources – the denouement of the 2000-2001 crisis and the shadow of expensive energy contracts to pay back, the introduction of legislative proposals to re-regulate the industry in California, the prolonged siting and permitting process that makes building baseload plants extremely difficult (leading to a shift toward construction of peaking plants), and the persistence of retail and wholesale price regulations that make it almost impossible to earn a return on your peaking plant investment.

Kiesling cites a report by the Bay Area Economic Foundation that forecasts renewed shortages within a few years.

For Discussion. California wants to have adequate energy without sufficient generating capacity and without using retail pricing to influence consumers to conserve when there is peak demand. How would you explain to politicians that something has to give?

Comments and Sharing

COMMENTS (7 to date)
David Thomson writes:

Do most Californians really believe they have a crisis? My guess is that a high number of them think the electricity problem is nothing more than a con game devised by certain “evil” capitalists. We can at least partly blame Paul Krugman and his fellow travelers for much of this confusion. He pointed out the possible deceit practiced by some of these energy companies, but virtually ignored the reality that California just does not generate enough power.

What should Californian voters tell their politicians? Heck, there is a far more important question to be asked of these folks themselves? What were you thinking when you voted in all those crazy and irresponsible Liberals? Who told you to take seriously the radical leftist junk science environmentalists? Californians and New Yorkers are their own worst enemies.

Mcwop writes:

Good observation, David. I would say the reason why many CA residents don't see the crisis, is that the state borrowed heavily to avoid a "noticeable" crisis. Of course the only way politicians notice a problem is when the garbage starts collecting on their own lawn. When CA runs out of financial leg room, then people will notice something is wrong. They may not know/understand the cause, but they will vote people out.

GT writes:

"We can at least partly blame Paul Krugman and his fellow travelers for much of this confusion. He pointed out the possible deceit practiced by some of these energy companies, but virtually ignored the reality that California just does not generate enough power. "

Truly ridiculous and borderline made-up.

David Thomson writes:

"Truly ridiculous and borderline made-up."

Oh really? Please point out any of Paul Krugman’s writings arguing that California does not generate sufficient power to cover its needs. I will be glad to apologize if I’m mistaken.

By the way, the Dow Jones is now over 9000. It seems that Krugman is unraveling---and not the American economy!

GT writes:

Among many, many other writings Krugman wrote the following on January 2001:

"The biggest single cause of the California power crisis is simply that nobody expected demand for electricity to grow so rapidly. When the political momentum for deregulation was building, in the mid-1990's, California's economy was still suffering the aftereffects of a nasty recession; most experts thought that there would be excess generating capacity well into the next decade. Then California began growing faster than anyone had thought possible. The result was surging demand for power.

To cope with an increase in demand, you either need to persuade consumers to consume less or make it possible to produce more. But California's deregulation did neither."

Like I wrote, ridiculous and borderline made-up.

David Thomson writes:

NOTE: not the same David Thomson that is making those ridiculous comments above - must be my evil twin...

I wonder what the evil DT thinks about Greg Palast's reporting on the energy crisis in California? His webpage ( is currently unavailable but you can check out the Google cache if you are in a hurry.

Seems like Arnold really was on a mission to derail the $9 billion dollar suit against Enron et al. I find it superbly ironic that Californians had to suffer the consequences of Pete Wilson's deregulation and then vote his staff back into office when the chickens come home to roost! (I have heard that the 3x car tax was also a Pete Wilson emergency budget rule - and Gray Davis had nothing to do with it! California must really be the state of airheads!)

cr writes:

actually, saying that california plants don't produce enough power (aside from recognized market manipulation) just isn't true. Supply has kept pace with demand as long as the power plants aren't mysteriously off line.

see pdf_energy_west_myths_facts_rep.pdf

Comments for this entry have been closed
Return to top