Publications

Back to Publications

Can the FERC Lead Us out of the Hotel California?

Pete Schenkkan, Natural Gas Transportation and Marketing (2001)

California refused to substantially lift its retail rate freeze to pay these wholesale prices. This drove the largest retail electric utility in California into bankruptcy, and piled up billions in wholesale electricity bills that remain unpaid. As the risks and then fact of non-payment grew, in-state and out-of-state generators dropped out of California markets, resulting in blackouts especially in January and March 2001. The State of California became the nation's largest wholesale power buyer: California spent, or committed to spend, billions on spot market power, and more than $40 billion in bilateral contracts extending over the next 20 years. California took over the CASO to enhance the State's buying leverage, and abolished retail electric choice to insure that retail ratepayers would be available to repay bonds to be issued to pay the State's wholesale power bills.

Presumably, Don Henley had something other than the electricity market in mind, but “The Hotel California” fits:

“Last thing I remember I was running for the door I had to find the passage back to the place I was before Relax said the nightman We are programmed to receive You can check out any time you like But you can never leave”

— Don Henley and the Eagles, “The Hotel California”

This paper addresses the causes of the California wholesale electric market crisis, the dama