By now everyone (save perhaps those fateful few interviewed on the Jay Leno show) knows California has an electricity crisis
From the May 2001 CEI UpDate
By now everyone (save perhaps those fateful few interviewed on the Jay Leno show) knows California has an electricity crisis. Blackouts, brownouts already, with summer still ahead. Why is this happening? To understand the situation, consider how supermarkets meet California’s food needs. As the population grows, stores get crowded, lines start forming, eventually someone builds a new store, and the process starts over again. Why didn’t this process work for electricity? California built supermarkets–why didn’t it build power plants?
There are too many reasons to fully explore here, but one merits specific attention: the environmentalist mantra that “less is more,” that energy conservation would somehow make it possible to light more homes while generating no new power. Energy diets became popular, no surprise, given California’s lead in the fad diet world. Energy gurus such as Amory Lovins became the Pied Pipers of this delusive concept. To Lovins, energy was already overly abundant in this most wasteful of nations. We simply used it inefficiently. Our wiring was too small, our homes too leaky, our lights too bright, and, of course, our cars too big. A simple redesign, a few technology changes, a slight shift in lifestyle, and we would easily conserve ourselves into energy abundance. California rode down that road aggressively. The state’s energy gurus pushed eagerly for everyone to go on an energy diet, voluntary of course.
In California, Lovins’s beliefs dominated. And politicians loved them. No longer did they need to take tough positions, pro or con, on the always contentious issues of damming rivers or siting controversial power plants or transmission lines. They could simply rely on electricity made ever more abundant by conservation. A demand side policy would solve all our problems; the supply side could be ignored totally.
In the late 1980s and early 90s, that fantasy seemed plausible. Decades of electricity regulation had encouraged over-investment and thus excess capacity. Expansion made no economic sense; it was easy to champion conservation. Moreover, regulations could even make such championing profitable. Under regulation, costs incurred in luring customers into using less energy–insulation subsidies or rebates for purchases of efficient appliances, for example–could be added to the rate base and passed along to the consumer. Or at least they could if the regulators agreed, and in Green California they always did. Much of the nation became enamored of such demand side management policies, but California was foremost. Indeed, California does use less electricity per capita than almost any other state. If energy diets would resolve America’s problem, California would demonstrate that fact.
But the world was changing throughout the 90s. Older plants began to phase out, and economic and technological growth accelerated. Silicon Valley exploded and e-commerce moved from concept to reality–a reality powered by electricity. California was using more and more electricity, but it wasn’t producing any more within the state and wasn’t expanding capacity to import it. Moreover, the botched “deregulation” plan blocked cost increases from reaching the consumer. That same “deregulation” plan made it impossible for electricity suppliers to make long-term purchasing arrangements in an increasingly volatile electricity market.
Then Governor Gray Davis came on the scene. He inherited a dark situation. And he did everything in his power to make it much blacker. He has taken over one major private utility and bankrupted another. He harangues the populace daily about the need to conserve electricity while slowing the price adjustments which would ensure such conservation. Indeed, he’s criminalized wasteful electricity use by businesses (“Drop that electric drill, Buddy, and put your hands in the air!”). And now he’s declared war on out-of-state electricity suppliers, the only group which can supply California’s short-term energy needs. Nothing like bombing your own supply lines to create chaos.
Had California blocked the construction of supermarkets over the last decade and responded to the resulting shortages by placing price controls on food and suing farmers, there would be food-outs throughout the state and hungry people waiting in lines everywhere. In that world, any politician who sought to reassure by passing out Richard Simmons diet books would be lynched. Yet, that is the “solution” still being promoted by Amory Lovins and company in California and elsewhere. Indeed, only a few months ago, one major group, the Energy Foundation, took out full page ads arguing The Last Thing California Needs is More Power Plants!
California sought to solve its problems by going on an energy diet–and it failed. The result has not been economic health but rather energy anorexia.