Whatever the sins of Enron and others in California, politicians and regulators committed the greatest blunders. Here’s a short list: (a) Approval was slow for new plants, creating an electricity shortage; (b) as wholesale electricity rates rose, state regulators insulated consumers from the increases (this worsened the shortage, because low rates stimulated demand); and (c) the state’s major utilities, forced to buy electricity from independent power producers, couldn’t sign long-term contracts and had to pay rising daily prices. Absent all the errors, the crisis wouldn’t have occurred.
Similar obstacles block new transmission lines. This has happened in California and elsewhere. In 1999 a group of utilities proposed a 220-mile line between Minnesota and Wisconsin to prevent a recurrence of local blackouts. The original cost estimate was $165 million, with completion expected in mid-2002.
The latest estimates are $420 million and 2008, although construction hasn’t started. It took Wisconsin about two years to approve the project, adding some costly environmental protections. Approvals are still pending from the National Park Service and the Army Corps of Engineers, which began their reviews after the state decision, says Bob Lindholm of Minnesota Power. (The companies “pleaded with the federal agencies to participate in the Wisconsin process — they refused,” he says.
Anyone still want to blame deregulatiton — which is uneven, incomplete, and, well, still pretty damn regulated — for our troubles last week?