Regulators who failed to enforce the rules created a bizarre market in which speculators controlled vital commodities, says the president of the California Public Utilities Commission (CPUC).
Loretta Lynch told a Ziff Energy Group conference in October in Calgary that California is now having to rebuild its energy market structure.
Problems with deregulation
Lynch said the California electrical market is an example of what happens when regulators step aside. She said development of new generation capacity screeched to a halt in the mid-1990s when the state relied entirely on a free, deregulated market.
The CPUC executive said that placing regulation in the hands of federal agencies limited the ability of California to protect its consumers. She said the trading of commodities such as wheat and barley was more regulated than natural gas or electricity after California ended a system of regulation that had worked for years.
The CPUC executive said that because of price spikes and market volatility, consumers were forced to decide between buying food and clothing and heating or cooling their homes.
Restoring order
Lynch said the state is now taking a number of steps to restore order to energy markets:
The state is being transitioned out of, and the regulated utilities back into, the electricity buying business.
Requirements are being adopted for utility procurement plans.
An integrated, long-term resource planning process is being reestablished.
Causes of the electricty system failures are being analyzed so that they are not repeated.
The state's electricity debt is being financed.
CPUC also is working to bring San Francisco-based utility Pacific Gas & Electric Co. out of bankruptcy with a plan that is financeable and consistent with state law.
Lynch said California also is taking remedial action to ensure a healthy natural gas market:
Current and future pipeline and storage capacity needs are being addressed.
Additional in-state capacity of 450 MMcfd has been added in the past year, and the PG&E gas pipeline system is being expanded.
Storage facilities are being added and expanded, and existing infrastructure is being used more efficiently.
She also said that CPUC is fighting to ensure that the Federal Energy Regulatory Commission enforces rules to require interstate pipelines to provide open, nondiscriminatory access to their systems, along with the addition of 180 MMcfd of interstate capacity.
