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Electricity DeregulationChoices and Challenges$
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James M. Griffin and Steven L. Puller

Print publication date: 2005

Print ISBN-13: 9780226308562

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226308586.001.0001

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Lessons from the California Electricity Crisis

Lessons from the California Electricity Crisis

(p.145) 3 Lessons from the California Electricity Crisis
Electricity Deregulation

Frank A. Wolak

University of Chicago Press

This chapter analyzes the possible causes of the electricity crisis in California in 2000. It argues against the belief that the crisis was caused by a combination of rising input costs, poor market design, and the exercise of market power and failed market oversight by state and federal regulators, and suggests that the crisis fundamentally a regulatory crisis rather than an economic crisis. This chapter suggests that the most important lesson from the California crisis relates to how the Federal Energy Regulatory Commission (FERC) carries out its statutory mandate to set just and reasonable wholesale prices in a market regime.

Keywords:   electricity prices, California, rising input costs, poor market design, market power, market oversight, FEC, regulatory crisis

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