"Deregulation" did not cause California's power crisis. Government mismanagement and intervention in the marketplace did.
It seems so clear. The facts speak for themselves. Yet, virtually every day, political and economic propagandists apparently bent on returning all of us to the days of the horse and buggy, spread disinformation and lies about the recent history that led to this power shortage.
These folks either don't understand the way the marketplace works or prefer to deny reality and pretend that government can command-and-control its way to whatever goal it chooses. That has never worked throughout history, and it won't work now.
Here are the facts:
- In 1996, while I lived in California, the state deregulated the wholesale price of electricity – the price utilities pay to purchase it. But the state capped the retail price that utilities could charge consumers.
- Wholesale prices then skyrocketed, not because of "deregulation" but because of California's dependence on power derived from natural gas and hydroelectric production. Higher natural gas prices rose from 3 cents per kilowatt hour to 43 cents in less than one year. At the same time, a drought in the Pacific Northwest reduced exports to California. Those two power supplies account for 75 percent of the state's electricity demands. California, unlike the rest of the country, gets none of its power from plants fired by coal, which is cheap and plentiful. The rest of the nation gets 61 percent of its electricity from coal and nuclear plants.
- During this period, California's demand for electricity rose, while the state politicians refused to allow any more plants to be built.
Gov. "Gray-out" Davis' solution for this government-made crisis is more government intrusion into the marketplace. He wants the federal government to control wholesale costs – a move that would drive more power companies out of business.
The answer is not more government. It never is. Government only makes problems worse. The marketplace must be allowed to work. If we as Americans don't believe in that one single unifying principle by now – after all we have seen in the last 50 years throughout the communist and socialist world – there is little hope for solving any of our major economic and political problems.
Do you really believe politicians like Davis know anything about economics or energy? Do you really believe the people who have created this mess can acknowledge what they have done and reverse themselves? Do you really believe that people – consumers and power companies alike – can be squeezed, manipulated and coerced into a proper solution? Do you really believe that is the right way to handle any of this?
The California power crisis could be a good thing – if it serves as a wakeup call to the people who have been all-too willing to accept the word of politicians who pretend they know what's best for all of us. California is paying the piper.
Bad policy is coming home to roost.
There are consequences to the centralization of authority. There are consequences to refusing to allow power plants to be built because of bogus "environmental" concerns. There are consequences to short-term thinking and lack of foresight and planning.
Unfortunately, there will be suffering because of the mistakes of the past. It is inevitable. There are no easy solutions. There are no Band-Aids that can be applied by government now that will not make the situation worse.
By the way, just for the record, "Gray-out" Davis is hardly alone in the blame department. Many of the political decisions that led to this crisis were bi-partisan decisions. Republicans and Democrats alike in California participated – often unanimously – in creating the disaster that awaits.
That's almost always the way. There's plenty of blame to go around. But "Gray-out" Davis is in the hot seat now, and his management of this crisis shows little imagination, little insight and, if his policies were implemented, would amount to an even bigger power grab by government that will only make this crisis worse and create new ones down the road.
The California power crisis represents a great opportunity for the rest of the nation to observe and learn. We can continue to make the same mistakes of the past or we can adapt and act accordingly. So far, I fear, all the wrong lessons are being learned.
This is not a crisis borne of deregulation. It is a crisis borne of meddling politicians.