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The Issue of Governance and the Role of the Regulator: Lessons from the California Deregulation Experiment

The Issue of Governance and the Role of the Regulator: Lessons from the California Deregulation... The deregulation of the California electricity industry began as a collaborative effort between the regulatory institutions, legislature, the regulated utilities and consumer stakeholders. However, the authorizing legislation failed to define the ongoing role and authority of the principal regulatory institution in the State—the Public Utilities Commission. As a consequence, roles and responsibilities were assumed largely by institutional initiative as opposed to a master plan with the result that competition for authority extended through State and Federal jurisdictions without formal resolution. Under the weight of an inverse relationship of wholesale to retail costs, the wholesale electricity market began to disintegrate. In response, the Federal Energy Regulatory Commission, the California Governor’s Office and the California Legislature began to exert or assert authority over operations and regulation of the market. The result was confusion, increased cost, limited response to extraordinary conditions and ultimately loss of regulatory control by the Public Utilities Commission. Options were available to forestall or avoid the eventual outcome but were not adopted or advocated in time. The lessons learned should help craft future deregulation efforts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

The Issue of Governance and the Role of the Regulator: Lessons from the California Deregulation Experiment

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Publisher
Springer Journals
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1023/A:1020878905042
Publisher site
See Article on Publisher Site

Abstract

The deregulation of the California electricity industry began as a collaborative effort between the regulatory institutions, legislature, the regulated utilities and consumer stakeholders. However, the authorizing legislation failed to define the ongoing role and authority of the principal regulatory institution in the State—the Public Utilities Commission. As a consequence, roles and responsibilities were assumed largely by institutional initiative as opposed to a master plan with the result that competition for authority extended through State and Federal jurisdictions without formal resolution. Under the weight of an inverse relationship of wholesale to retail costs, the wholesale electricity market began to disintegrate. In response, the Federal Energy Regulatory Commission, the California Governor’s Office and the California Legislature began to exert or assert authority over operations and regulation of the market. The result was confusion, increased cost, limited response to extraordinary conditions and ultimately loss of regulatory control by the Public Utilities Commission. Options were available to forestall or avoid the eventual outcome but were not adopted or advocated in time. The lessons learned should help craft future deregulation efforts.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Oct 12, 2004

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