Developers will not spend their money to build new supply projects if they cannot be assured of a fair profit in a truly competitive market. This situation forced utilities to depend on high-priced spot markets, with the costs ultimately passed along to customers. Bad governmental timing hurts. Legislators and regulators simply did not give the Golden State's competitive market enough time to develop. The transition period was too short.
Competitive markets work for all consumers by keeping prices down, but only with adequate supplies.
Nationwide, deregulation has prompted a building boom that may add as many as 177,000 megawatts of new capacity, more than triple the amount planned just two years ago. In Texas alone, developers in recent years have built units that can produce up to 10,000 megawatts. In all likelihood, the boom will eventually reach California, especially if price caps are relaxed and investment made more attractive. An encouraging sign was the California legislature's recent passage of a bill designed to accelerate plant construction. Unfortunately, most plants in California and elsewhere, are still on the drawing boards.