Editor's Note
For months now, the big story coming out of California, that great American bellwether, has been the state's massively failed utility-restructuring scheme. For all the rolling blackouts and power outages so far, it seems likely that the worst is yet to come. "The real crunch," Gov. Gray Davis admitted recently, "will be in May and June and late April." As can be gleaned from the Golden State chief executive's inability to order the months correctly, the situation has discombobulated just about everybody involved.
REASON National Correspondent Michael W. Lynch and Reason Public Policy Institute Executive Director Adrian Moore explain in "Power Tripped" (see page 32) how early accounts of the electricity "deregulation" cast the situation as yet one more example of the folly of laissez-faire economics. "Capitalism is falling apart," crowed left-wing Los Angeles Times columnist Robert Scheer late last year, barely suppressing his glee. Somehow, goes this line of thinking, the same market forces that manage to pack grocery stores with all manner of food just can't get the job done when it comes to keeping the lights on.
Such critics have gotten it almost completely backward: California's electricity market hasn't been deregulated at all, but re-regulated in a particularly pernicious way. When the state restructured things in the mid-1990s, it fixed retail prices while allowing wholesale prices to approach something like true market value. Mix that economic lulu with a bunch of other mandated restrictions on the generation and sale of power and the only question left to ask is why it took so long for the lights to dim.
Here's some more electricity-related bad news for Californians: As Marc B. Haefele ("Suing for Relief," page 44) and Diane Katz and Henry Payne ("Electric Go-Karts," page 46) point out, California legislators have been busy trying to repeal the law of supply and demand with regard to electric cars too. Mandates for electric cars have been in effect for years, to little effect, either in terms of sales or clearing the air. The latest rulings coming out of the California Air Resources Board, which oversees efforts to reduce air pollution, are likely only to make matters worse, and maybe make all cars a bit more expensive.
And here's some bad news for the rest of us: Many states' electricity "deregulation" schemes are essentially the same as California's, and several states have adopted zero-emission vehicle programs based on California's. So it may only be a matter of time before the rest of us find ourselves faced with the same problems.