In short, utility companies stopped building power plants. The new breed of power marketers and independent power producers were keen to establish a generation asset base in North America. They targeted California. People required more power to run electronic gadgets and gizmos, not to mention their businesses, and enough power wasn't being generated to meet the demand. And we all know what happens when demand is high and supply is short.
Prices go up.
Utilities started paying more for wholesale electricity than anticipated, and due to rate caps on the prices they were allowed to charge their retail customers, they got squeezed. However, I've also got a business to run, so I'll leave those tough questions for the politicians. The fact is we've all got businesses to run. California's energy problems have forced CEOs to look at how we do business and how we plan for such unlikely circumstances. First, planning becomes paramount.