2000–2001 California electricity crisis
The 2000–2001 California electricity crisis, also known as the Western U.S. energy crisis of 2000 and 2001, was a situation in which the U.S. state of California had a shortage of electricity supply caused by market manipulations and capped retail electricity prices. The state suffered from multiple large-scale blackouts, one of the state's largest energy companies collapsed, and the economic fall-out greatly harmed Governor Gray Davis's standing.
| Chronology | |
| 1996 | California begins to modify controls on its energy market and takes measures ostensibly to increase competition. |
| September 23, 1996 | Pete Wilson signs Electric Utility Industry Restructuring Act (Assembly Bill 1890) and it becomes law. |
| April 1998 | Spot market for energy begins operation. |
| May 2000 | Significant rise in energy prices. |
| June 14, 2000 | Blackouts affect 97,000 customers in San Francisco Bay area during a heat wave. |
| August 2000 | San Diego Gas & Electric Company files a complaint alleging manipulation of the markets. |
| January 17–18, 2001 | Blackouts affect several hundred thousand customers. |
| January 17, 2001 | Governor Davis declares a state of emergency. |
| March 19–20, 2001 | Blackouts affect 1.5 million customers. |
| April 2001 | Pacific Gas & Electric Co. files for bankruptcy. |
| May 7–8, 2001 | Blackouts affect upwards of 167,000 customers. |
| September 2001 | Energy prices normalize. |
| December 2001 | Following the bankruptcy of Enron, it is alleged that energy prices were manipulated by Enron. |
| February 2002 | Federal Energy Regulatory Commission begins investigation of Enron's involvement. |
| Winter 2002 | The Enron Tapes scandal begins to surface. |
| November 13, 2003 | Governor Davis ends the state of emergency. |
Drought, and delays in approval of new power plants, also decreased supply.: 109 This caused an 800% increase in wholesale prices from April 2000 to December 2000.: 1 In addition, rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced many retail consumers.
California had an installed generating capacity of 45 GW (gigawatts, or billions-of-watts). At the time of the blackouts, demand was 28 GW. A demand-supply gap was created by energy companies, mainly Enron, to create artificial shortages. Energy traders took power plants offline for maintenance during days of peak demand to increase the price. Traders were thus able to sell power at premium prices, sometimes up to a factor of twenty times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry's revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.: 2–3
According to the Federal Energy Regulatory Commission (FERC), the crisis was possible because of legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson that deregulated some aspects of the energy industry. Enron took advantage of this partial deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.
The crisis cost between US$40 and $45 billion.: 3–4