Many are blaming deregulation for the perilous state of California's electric supplies. But economists say regulation, not deregulation, has been the culprit -- virtually assuring that supplies are inadequate to meet demand.

A major player in this scary scenario is the California Independent System Operator, or Cal-ISO -- the administrative body which is supposed to assure reliable electricity service.

• Cal-ISO has halved the maximum price utilities can pay for electric power -- lowering the ceiling on wholesale power to $250 a megawatt hour from $500, despite warnings the cap would cause power-plant investors to shun the state.

• There have been no major power plants built in California in a decade, due to stringent environmental rules and bureaucratic red tape -- even though demand has risen by 25 percent in the past eight years.

• Throughout most of California, consumers' electricity bills have remained stable and they are still enjoying a 10 percent rate reduction mandated by the 1996 deregulation law -- a situation which provides no incentives to conserve.

Policies discouraging new supplies while encouraging demand may result in the state being subject to blackouts -- perhaps as early as today, experts predict. San Francisco already experienced one "rolling blackout" in June.

Source: William P. Kucewicz (GeoInvestor.com), "Too Much Regulation Keeps California in the Dark," Wall Street Journal, August 7, 2000.

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