This is a brief explanation of problems confronting the electric utility industry in the West and the possible effects on Utah. First unfortunately, some of the horror stories coming out of California are true. California was on the brink of blackouts this past summer and has actually had them this winter. Two of its major utilities are nearly bankrupt. To understand the cause of these problems, one must understand the nature of the electricity market.
Electricity is a unique commodity.
It has no real substitutes, it cannot be stored, the supply and demand varies by hour and season, and immediate price signals from supplier to final customers do not exist. Given these characteristics, the wholesale electricity market can be extremely volatile with dramatic price fluctuations. A kiloWatt-hour will power a 100 Watt light bulb for 10 hours. Utah Power residential ratepayers currently pay about 6.3 cents per kWh. About 3 cents of this are attributed to the actual generation of electricity.