Frontlines

Prices Hit a Pique

California pays the bill, but who gets the blame- the feds or the fundamentals?

What did they know and when did they know it? That's what California consumers are asking utility regulators and system operators, now that the heat of summer has made a shambles of the state's vision of electricity competition.

Yet the regulators and operators appear divided on just who to blame.

According to state Public Utilities Commission president Loretta Lynch in San Francisco, and Electricity Oversight Board Chairman Michael Kahn in Sacramento, California had lost control over its electric industry, having handed over the reins to federal regulators. But down in Los Angeles, the California Power Exchange was claiming to have put together a mathematical model capable of explaining most price fluctuations within PX markets. But the PX had tested its model only through March, before the summer heat really got cooking and power prices took off to levels politically untenable.

Nevertheless, they all should have seen this coming, and taken some preventive measures. Certainly one could predict chaos in a system designed to take commodity prices in a volatile wholesale market and pass them along directly to retail customers without any leavening.