California Deregulation Plan

Deregulation is the elimination of regulated rate tariffs on energy that is supplied. Deregulation ultimately spreads the risk of an energy crisis amongst multiple companies in a specific region then on one monopoly company. What it boils down to is, big money. Whether it is a natural gas company or a supplier of energy, the main goal is to make profit. Over the past years in California, it can be seen that many energy suppliers have been working to bring down the cost of making and providing energy while staying in line with the deregulation mandates, in doing so, they have made it almost impossible for themselves to make economic profit.

There are many reasons why electricity deregulation happens, and California has seen just about all of them. Many have put their money on the deregulation plan of the state. It is believed that this plan that was signed in 1996, by former Governor Pete Wilson, holds most of weight of the problem. The plan was intended to bring more competition into the state’s electricity industry. At the time the plan was signed, California’s major utilities sold several of their power plants to a number of electricity wholesalers. But the plan did not give power suppliers much of a motivation to inc

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These companies have become hesitant when it comes to selling power to the state’s utilities. In this part of California, power is produced by hydroelectric power plants. Not all of the electricity that is consumed in California is produced there.

In the past ten years, California has not seen any new major power plants being built. The plan requires, “ The creation of an ISO to operate the transmission system and a PX to operate a wholesale power market through which the IOU’s must sell to and buy from all power needed to serve their customers; divestiture of power plants by investor-owned utilities; recovery of stranded costs via a Competition Transition Charge on customer bills until 2002; a ten percent rate reduction and a rate freeze at 1996 levels for small and residential customers for the transition period of four years (through March 2002); continued energy efficiency and renewable energy programs funded by public purpose program charge on customer bills; and numerous protections from any detrimental effects of the restructuring aimed at small consumers and utility employees. The companies are fearful that the utilities will not be able to pay for the power they supply. There are many out-of-state suppliers that provide electricity to the state. ” Many parts of this plan have been closely looked at since the energy crisis began.

With the increasing demand for electricity, unregulated wholesale energy prices have increased dramatically. With a decrease in rain fall and snowfall the production of energy has also decreased. The problem here is that the price paid by a consumer is a much lower cost then what the supplier is paying for the electricity. ”

Virginia may face the problem of energy suppliers in competition for service. This increase in demand is largely due to the growth of digital and Internet companies that are headquartered in major California cities.

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. Or interruption in service may be seen when a supplier is changed.

Approximate Word count = 840
Approximate Pages = 3 (250 words per page double spaced)

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