The Electricity Crisis
The electricity crisis in California, also known as the crisis in the Western US energy 2000 and 2001, was a situation where the state of California United States had a shortage of supply of electricity caused by market manipulation, pipe illegal work stoppages by Texas the energy group Enron, and the price of retail electricity covered.
The state suffered from multiple large-scale blackouts, one of the largest companies collapsed state power and economic output falling heavily damaged standing Gov. Gray Davis.
Drought, delays in approval of new power plants, 109 and market manipulation decreased supply. This caused an 800% increase in wholesale prices from April 2000 to December 2000. In addition, rolling black out sad versely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers.
California had an installed generating capacity of 45GW. At the time of the blackouts, demand was 28GW. A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price. Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry’s revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.
The financial crisis was possible because of partial deregulation legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California’s spot markets.
The crisis cost between $40 to $45 billion.