The energy problems Californians have experienced in the past six months are just a foretaste of what’s expected soon. According to Fox’s KTVU News in San Francisco, this summer there could be 100 to 300 hours of blackouts, most occurring during the middle of the work day when demand for energy peaks. That would mean chaos for California and severe repercussions for much of the U.S.
California accounts of 1/6th of the U.S. economy. California produces most of the nation’s fruits and vegetables, and is the epicenter of America’s high-tech industry. Most micro-chip and computer manufacturers are in California, and California is also the hub for much of our trade to the Pacific Rim. Major energy problems in California would severely damage an already shaky national economy.
If the expected 100 to 300 hours of blackouts this summer occur, the effects on California residents and businesses could be disastrous: no traffic lights, elevators, ATMs, air conditioning, refrigeration, computers, hundreds of businesses forced into bankruptcy, hundreds of thousands laid off.
Even if it’s not that bad and blackouts are less severe, major problems could still occur. Food processors in California’s Central Valley, say it can take three days to clean up the mess created when machinery is stopped cold by an unannounced blackout. It can take four hours to get newspaper presses up and running after a shutdown. A cut off of traffic signals for even a few hours, can cause grid-lock the entire day. A few hours without power can also destroy days of production at high-tech plants. At plants which use volatile chemicals, there is even the risk of chemical explosions when power shuts down unexpectedly, according to company spokesmen.
California’s energy crisis is creating another huge problem: Skyrocketing electricity prices are bankrupting people on fixed incomes as well as scores of businesses. In San Francisco’s East Bay-area, the price of residential natural gas has gone up 5-fold since last year. Electricity has already gone up 40% and is expected to increase another 100% this summer. Many people on fixed incomes are being forced to choose between eating and paying their utility bills. The situation is so bad that on April 16th, officials in Contra Costa County, east of San Francisco, recommended creating "heat shelters” for senior citizens who face cut off of electricity and no air conditioning this summer.
Businesses that don’t have long-term power contracts are also being bankrupted. One Sonoma County rose nursery owner says he was forced to close his doors when he was warned that his electric bill would increase $20,000 in December 2000 to an estimated $310,000 in December 2001.
The cause of the energy crisis in California and throughout the nation is over-regulation, a powerful, environmental movement which has blocked construction of new power plants and transmission lines, and local opposition to new power plants. As a result, not a single major new power plant has been built in California in over 10 years, despite a 12% increase in population and a rapidly expanding economy.
California’s energy problems were severely compounded in 1996 under so-called "energy deregulation” that actually imposed draconian government controls on California’s power industry. Competition between power companies was allowed, but that change was accompanied by a long list of new and destructive regulations. The rates energy producers could charge were capped. Major utilities were forced to sell many of their plants to out-of-state producers (they’re now buying power from their old plants at 10-times the price they’re allowed to charge customers). Long-term contracts were prohibited with outside suppliers on the theory that competition would cause rates to plummet, and long-term contracts would be bad for consumers.
With all of the new regulations and draconian restrictions on profits and plant construction, few companies saw any reason to enter the California energy market. So instead of increased supply and falling energy prices, supply has been stagnant and prices have soared.
California’s two big energy producers - Pacific Gas and Electric and Southern Edison – were put in an impossible financial situation. Their cost of producing and buying power soared, but the rates they could charge were fixed. Local regulators actually forced these utilities to sell power for far below their cost.
The result: $300-$400 million a week losses for PG&E alone. In early April, PG&E declared bankruptcy and Southern Edison is tettering on the edge. At the same time, small independent power producers (called "Qualifying Facilities” or QFs) – which produce up to 30 percent of the power in the state – are being driven into bankruptcy, as PG&E and Southern Edison fail to pay them the millions of dollars they are owed. So energy supplies continue to fall.
The regulatory environment in California is so hostile to new plants, that one energy company executive says he can build a new power plant in Texas faster than he can get approval for putting up a flag pole in California.
Despite the fact that California’s energy crisis was caused by too much government regulation, the only solution leftist environmentalists and socialists can imagine is even more government. Many state Democrats are now calling for the state to seize the power plants and transmission lines. That would make things even worse. What utility executive in his right mind would build a power plant or new transmission lines in a state that forces utilities to sell power for below it costs and then threatens to seize its plants?
The real solution to our energy problems is simple: Get government out of the power business. Allow utilities to run their businesses and make a profit. Get rid of regulations which make it impossible to build new power plants. What we need is more freedom, not more government.
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