Although California utilities took steps to expand the state's power generation capacity, their efforts could be too late to prevent severe power shortages and rolling blackouts this summer. According to a report released by Cambridge Energy Research Associates (CERA), Cambridge, Mass., the state's new long-term power contracts are setting the stage for future multibillion dollar cost problems.

The report entitled “Beyond California's Power Crisis: Impact, Solutions and Lessons,” predicts the western United States will experience 200 hours of emergency shortages in the coming year, including at least 20 hours of rolling blackouts this summer.

Further analysis of supply, demand, and price fundamentals in the years prior to the shortage shows California's industry structure produced a competitive outcome, with no evidence of the exercise of market power by generators.

Although steps have been initiated recently to increase power supply in the short term, the long-term market structure deficiencies have not been addressed.

The findings of the report were released at a briefing on the opening day of CERA's 20th Annual Executive Conference, Feb. 12-16, in Houston, where executives from North American Power, Western Energy, and CERA met to discuss the causes and implications of California's deregulation plan.