Even the extra drain from Christmas lights threatened to bring down the grid. It will easily be a year before enough new power generating plants come on line to ease the state's electricity shortage. But California policy has caused many of California's problems.'' Among the most striking differences between California's model and those of other states was the creation of the state-sanctioned California Power Exchange. To limit the potential for market control by a few large players, state legislators forced all power buyers and sellers to do business through the exchange, which focused on short-term purchases. Other states allow utilities to enter into long-term contracts in order to reduce price volatility and support the construction of new generating plants.
Producers argue that frequent changes in policy have discouraged investment.
Since 1998, when deregulation began, California has changed the maximum wholesale price for power five times. Power producers say that price caps discourage capital investment and provide an incentive for local companies to sell their power to more profitable markets elsewhere. The McGraw-Hill Companies Inc. All rights reserved.