A "California-Style Energy Crisis"

The group Citizens Organized for Reliable Electricity [link], an organization funded almost entirely by Commonwealth Edison [link], has produced a television commercial [link], claiming that in order to avoid a "California-Style Energy Crisis" it is necessary to remove the price limits on electricity rates, and allow Illinois utilities to buy power on an open market. These statements are extremely misleading, as the reason for the California energy crisis was manipulation of energy markets by utility companies.

Electricity deregulation is an extremely complicated issue. This complexity allows electric utilities like Exelon (ComEd) and Ameren, the two largest power companies in Illinois, to deceive the public and politicians into thinking that furthur deregulation would be a good thing for everyone, when in reality, it would be a good thing only for Com Ed, etc. and their shareholders.

Before deregulation, electric utility companies were regional monopolies, meaning that one large company owned all of the electricity generation, transmission, and distribution within a geographic area. Prices were set by governmental agencies, so in order to maximize their profit, utilities had to minimize the cost to supply electricity to their customers. It was in the best interest of the company, as well as customers, for there to be a robust, reliable electricity delivery system.

Under deregulation, the large utilities are split up into separate generation, transmission, and distribution companies, and ultimately, the customer is supposed to have the freedom to choose from many different companies to purchase power. Deregulation is driven by a belief that a free market will ultimately lead to the best product, produced in the most efficient way, because such a product is the most profitable. In reality, because the the tremendous cost of starting an energy company, deregulation rarely leads to significantly increased competition, and the results are what was seen in California.

During California's energy crisis, Enron and other power companies manipulated the energy market to increase their profit. One scheme had Enron purchasing power at low, regulated prices in California, and selling it at higher rates outside of the state. As a result, there was not enough energy to supply California, and roaming blackouts resulted [link].

Ultimately, the energy crisis in California was the result of manipulation by energy companies. ComEd's claims of an impending California-style energy crisis are at best unfounded, and at worst, a threat of market manipulation by ComEd if it doesn't get it's way. Governor Blagojevich rightly opposes Com Ed's plan [link], and I encourage everyone to send him a letter, urging him to do everything in his power to stop ComEd [link].