California’s Electricity Debacle: A Guided Tour

Residential implementation of critical-peak pricing of electricity

“…While factors leading up to the onset of the California electricity crisis are complex, there is reasonable consensus that the lack of real-time response by retail demand was a major contributor to its severity and duration (Borenstein, 2002;Jurewitz, 2002;Woo, 2001;Woo et al, 2003). Since that time, increasing real-time demand response to electricity price changes by strengthening the real-time price link between wholesale and retail markets has become an explicit policy goal at both state and national levels.…”

Likely failure of electricity deregulation: Explanation with application to Israel

“…Moving from regulation to competition is unlikely to solve regulatory inefficiency under condition (5) because the same regulator is often in charge of transforming the regulated market into a deregulated one [36,37]. Our results and the cost-benefit analysis in [27] indicate that the gains from a perfectly executed reform of the Israeli regulated generation market into a competitive one are, at best, very small.…”

Market efficiency, cross hedging and price forecasts: California's natural-gas markets

“…A case in point is the energy-crisis issue. Based on the federal energy regulatory commission's (FERC) 2003 report [10] on price manipulation in the western markets and the chronology of events detailed by various researchers [8,[11][12][13][14][15], the model incorporates dummy variables to account for each of the prongs, notably, the electricity-crisis period from May 2000 to June 2001, and the natural-gas crisis period from November 2000 to May 2001 and estimates the dollar impact of these crises on the daily spot prices in two California gas markets: PG&E Citygate and SoCal Gas (Topock) 1 .…”

“…With regard to the market-efficiency and cross-hedging issues, the estimated regression coefficients enable us to infer that, except for the aberrant period identified by the FERC [10] and other researchers [8,[11][12][13][14][15], California's natural-gas spot markets have indeed been efficient, with prices in those markets moving in synch with those at Henry Hub. The inference, in turn, has important implications for traders in two related regards.…”