June 08, 2002
California's Electricity Crisis

California's electricity crisis is back in the news. It remains my belief that the crisis was primarily the result of massive ideological stupidity on the part of FERC--the federal regulator--and a poorly-designed system of deregulation and marketization that left individual producers able to wield immense market power even without formal collusion. But this is not why it is back in the news. It is back in the news because of suspicion that Enron and others--Perot Systems, Mirant, Duke Energy, and Williams--may not have been satisfied with the extraordinary legal profits they earned during the crisis, but may have crossed the line into illegal activity. But as far as keeping our eyes on preventing similar disasters in the future is concerned, it is more important to look at the primary causes of what went wrong--the economic structure--than at the secondary causes--the crimes. Stanford's Frank Wolak on the California electricity crisis Paul Krugman channels Frank Wolak: FRANK THOUGHTS ON THE CALIFORNIA CRISIS FRANK (WOLAK) THOUGHTS ON THE CALIFORNIA CRISIS: We're approaching the first anniversary of the sudden, unexpected end of California's energy crisis. I went way out on a limb, at least by journalistic standards, by saying that market manipulation was a...

Posted by DeLong at 06:05 PM