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California's Approach to Energy Crisis Isn't Working, CERA Spokesman Says

May 1, 2001 12:00 PM, By EC&M Staff

In an address before the U.S. House of Representatives Subcommittee on Energy and Air Quality, Lawrence J. Makovich, senior director of Cambridge Energy Research Assoc., claimed that actions taken thus far by California officials to remedy the state's energy crisis have not only failed to address its underlying shortage problem, but in some cases have made matters worse.

“The state is creating large problems for the future by financing current power purchases and pushing payments into the future,” Makovich testified. “California has signed the wrong kind of contracts by agreeing to pay for energy volumes at fixed prices in the future.”

Similar contracts mandated by the Public Utilities Regulatory Policy Act accounted for half of the multibillion-dollar “stranded costs” burden that California's 1996 electric power restructuring law was intended to solve, Makovich said.

“If this crisis drives California back to the heavy-handed regulation that launched deregulation in the first place, or to an expansive public power authority, then the state is likely to find its electric sector becoming increasingly inefficient and expensive,” he said.

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