The Pew Charitable Trusts

A year ago, electrical power in California was in short supply in some areas and exorbitantly expensive because of an unrestricted wholesale market dominated by the now-bankrupt Enron Corp. and a handful of other energy brokers. Since then, the state worked itself into a power glut thanks to conservation efforts, moderate weather and state and federal intervention aimed at preventing further service disruptions.

However, consumer advocates worry that the glut could lead to a power plant construction slowdown and retard the development of alternative energy sources. They fear that California could face another power shortage if the state's high growth development continues. They also say pricey state-negotiated power contracts will end up making residential consumers pay more for electricity than they should.

"Once again the little guy, meaning the general consumer, gets burned. That'll be the legacy of the California energy crisis -- the little guy is left holding the bag," says Doug Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Heller blames the state's big utility companies, some of which are now bankrupt, and energy brokers for causing the state's energy problems. "They put greed ahead of the public good, " he says.

Heller and other consumer advocates also say Gov. Gray Davis and his administration made a bad situation worse by locking the state into costly power supply contracts for years to come.

The Davis administration insists that the electric power contracts it negotiated last year offered the least costly and best approach to avoiding future power shortages. But some Davis aides acknowledge that consumer pressure, not to mention the politics of the governor's re-election bid in 2002, may force the administration to demand that some of the deals be renegotiated.

A recent analysis by California's Department of Water Resources, which oversees the generation of hydroelectric power in the state, warned that rate payers could be saddled with nearly $4 billion in excess power costs over the next 10 years under the terms of current contracts. Heller's group and other consumer advocates say that figure will be closer to $20 billion if all the contracts are honored by the state.

California's electric deregulation troubles are forcing state and federal officials to deal with wholesale market and electric transmission problems that have been long ignored.

Robert Burns, a senior analyst with the National Regulatory Research Institute at Ohio State University, said California's troubles show that "wholesale (electricity) markets must work before retail deregulation can work."

Burns says resolving transmission problems across the country will go a long way toward getting electric power where it should be, hopefully at more reasonable prices. But he says it will also take the construction of more electric generating plants and more reliance on long-term power contract agreements to help stabilize the market.