California Enron Energy Crisis Fiasco or Renewable Energy Transformation? by Yolanda Vanveen

California Enron Energy Crisis Fiasco or
Renewable Energy Transformation?

by Yolanda Wilson Vanveen
Today the California ISO operates the largest wholesale transmission grid in the West, providing open and non-discriminatory access supported by a competitive energy market and comprehensive planning efforts. Recognizing the importance of global climate change, the ISO is integrating the largest portfolio of green power in the country and is working to advance other clean technologies that will help meet electricity needs while paving the way for a more sustainable energy future. [1] This was not always the case.
Author Timothy Duane [2] blames the collapse of Enron Corporation, the bankruptcy of Pacific Gas and Electric Company and the rolling blackouts and price spikes of the California energy crisis of 2000 2001 on, "legislative and administrative failures to design regulatory institutions that adequately constrained opportunistic behavior." While I agree that deregulation allows legal opportunistic behavior it has also kick-started renewables and a new paradigm. Timothy Duane claims that regulation, therefore, has an important role to play for electricity. I agree that the best solution would be a return to the California model of the late 1980s and early 1990s, (originally started by Roosevelt) [3] which balanced concerns about system reliability and price stability against the inherent inefficiencies of relying only on central planners to determine the means of meeting demand. I also believe limited federal and state regulation is needed in the energy industry. No regulation encourages corruption. For example, the Solyndra Scandal has shown us that even solar has the potential for corruption so federal oversight and regulations such as the "No More Solyndras Act" [4] are needed if we are to end energy corruption. Duane claims that, "the Governor should have seized the former utility power plants (all "in state" facilities owned by "out of state" companies) under his emergency powers to stop the price gouging and rolling blackouts. State ownership would have temporarily stabilized the electrical system itself while offering breathing room to decide what type of long term institutional reform was appropriate." He fails to address the fact that most Governors in the United States have been "captured" by the fossil fuel industry since Roosevelt's administration ended. They depend on large fossil fuel industry campaign contributions to be elected. As renewables grow in power and as cities, corporations and universities continue to divest this will change.
Author James Sweeney disagrees with Duane on the issue of deregulation as the cause for the energy crisis yet also places the blame on the Governor and the CPUC. [5] He also does not consider the fact that most Governors are "yes" men and women to the oil industry. Many have spent time as a legislator on the Energy Committee which is completely captured by the oil industry. Sweeney points out that we can learn lessons from California's experience. "First, we should stop saying that deregulation doesn't work. The issue is not that deregulation does not work but that it should not be done the California way. Second, isolation of the supply side of the market from the demand side breeds disaster. Appropriate risk management and analysis are essential." I agree with Sweeney that ultimately, "any major restructuring of a system, whether it is a company, the military, or the electricity system, is bound to have problems in the beginning. Governors and legislatures need to act courageously and wisely and not driven entirely by political expediency."
Change in systems will cause chaos. Price regulation at the retail level and rigid regulation prohibiting long-term contracts at the wholesale level was needed. Had the State allowed retail prices to increase with wholesale prices the wholesale price increases would have been far smaller. I agree with both authors that California created the financial crisis for itself. With retail price controls, high wholesale prices, and utilities that had already sold off most of their generating assets, the utilities had to buy electricity from others. The energy crisis allowed California to let go of their dependence on the old fossil fuel paradigm and embrace renewables. They have benefited immensely from the crisis. Systems are now in place to create a reliable, affordable and sustainable energy future in California. While the East Coast has a natural gas albatross around their neck causing high prices, pollution and energy shortages, California is leading the country in renewables with low energy prices. Perhaps California had to go through a "crisis" to become a renewable energy leader. Who's next?

[1] CAISO (Retrieved 2015, February 14) Enhanced Grid Coordination Through Expanded Energy Imbalance Market http://www.caiso.com/Documents/EnhancedGridCoordinationThroughExpandedEnergyImbalanceMarket.pdf
[2] Duane, T. (2002) Regulation's Rationale: Learning from the California Energy Crisis, 19 Yale Journal on Regulation 471 http://learn.vermontlaw.edu/pluginfile.php/26897/mod_page/content/32/duane%20on%20california.pdf
[3] PBS Frontline Blackout Regulation Timeline
http://www.pbs.org/wgbh/pages/frontline/shows/blackout/regulation/timeline.html
[4] The Hill. Energy Environment House Passes No More Solyndras Act
http://thehill.com/policy/energy-environment/249555-house-passes-no-more-solyndras-act
[5] Sweeney, J. (2002) The California Electricity Crisis: Lessons for the Future
https://lmscontent.embanet.com/VLS/ENV5226/Module5/ENV5226_M5_CaliforniaElectricityCrisis.pdf


Classmate's comment:
"California's situation (early in the century) was not created by the source(s) of its energy, nor was it created by a grossly insufficient supply from the sources it did have."

Yolanda Wilson Vanveen response:
I am still pointing fingers at Enron so a specific corporation within an industry is at fault. I still believe it shows that the source of energy makes all of the difference. Hydro has never created an energy crisis. In fact hydro is the answer to an energy crisis. Ukrainian experts are using hydropower as an auxiliary resource. Hydro has been successfully compensating the increasing energy demand triggered by the lack of power capacity and fuel in the past months. High liquidity and sustainability are identified as some of the major advantages of hydroelectric energy. [1] The Northwest has not faced the same issues because it uses hydro. California had a shortage of electricity supply caused by market manipulations, illegal shutdowns of pipelines by the Texas energy consortium Enron, and capped retail electricity prices. They did not turn off any dams or solar panels. Today the cycle of filing bankruptcy and placing the money in offshore accounts continues in the oil industry as well as the solar industry as we have found with Solyndra. At the time of the California energy crisis there were no Solyndras. I agree that the crisis was avoidable. The crisis was intentionally created so that billions of dollars could be taken out of California and placed in Enron's accounts in Texas and overseas.
Some critics alleged that Davis was lulled to inaction by campaign contributions from energy producers. Conservatives argued that Davis signed overpriced energy contracts, employed incompetent negotiators, and refused to allow prices to rise for residences statewide. On May 17, 2001, future Republican governor Arnold Schwarzenegger and former Los Angeles Mayor Republican Richard Riordan met with Enron CEO Kenneth Lay at the Peninsula Beverly Hills Hotel in Beverly Hills. The meeting was convened for Enron to present its "Comprehensive Solution for California," which called for an end to federal and state investigations into Enron's role in the California energy crisis. On October 7, 2003, Schwarzenegger was elected Governor of California to replace Davis. [2]. I think that shows that the crisis was "resource based" and planned in advance just like the recent Solyndra.
You noted that "Government-ran facilities and institutions will always be inefficient and cumbersome." I disagree. Clark Public Utilities in Vancouver, Washington is efficient, affordable, reliable and sustainable with 70 percent of the energy coming from hydro power. I feel a bit biased toward hydro since I grew up along the Clackamas River which has multiple dams on it. I attended Girl Scout meetings and we sang Woody Guthrie songs that praise hydro power and the freedom it has brought us. Our rates are low and we have never experienced an energy crisis. We have been conditioned since early childhood to appreciate Franklin D. Roosevelt, hydro power, art and recycling. We are surrounded by beautiful lodges, visitor centers and hydro projects that remind us daily of the New Deal. There is no currently no federal funding for dam updates, monitoring or restoration of the Columbia River when small tributaries in Vermont have funding. The river has been ignored by every President since Roosevelt.
Roll On Columbia, Roll on Woody Guthrie
https://www.youtube.com/watch?v=20ZffI6by3A
I agree that greedy and power-hungry corporate entities will always find a loophole in the most carefully designed regulatory system so regulations are needed. I agree that government-ran facilities will ultimately be less costly (and painful) in the long term but I also believe there are options for collaboration with private funding sources. Private utilities in collaboration with public utilities on the west coast are expanding with hydro, wind, solar, wave, distributed grid and new technologies and are leading the way to a new paradigm.
[1] http://www.elp.com/articles/2014/11/ukraine-to-alleviate-energy-crisis-through-hydropower.html
[2] http://www.democracynow.org/2003/10/6/schwarzenegger_accused_of_involvement_in_9b
I thought I would share an excerpt of the poem! The Rime of the Ancient Mariner is the longest major poem by the English poet Samuel Taylor Coleridge, written in 1797–98 and published in 1798 in the first edition of Lyrical Ballads.
The Rime of the Ancient Mariner

BY SAMUEL TAYLOR COLERIDGE
The ice was here, the ice was there,
The ice was all around:
It cracked and growled, and roared and howled,
Like noises in a swound!

At length did cross an Albatross,
Thorough the fog it came;
As if it had been a Christian soul,
We hailed it in God's name.

It ate the food it ne'er had eat,
And round and round it flew.
The ice did split with a thunder-fit;
The helmsman steered us through!

And a good south wind sprung up behind;
The Albatross did follow,
And every day, for food or play,
Came to the mariner's hollo!

In mist or cloud, on mast or shroud,
It perched for vespers nine;
Whiles all the night, through fog-smoke white,
Glimmered the white Moon-shine.'

'God save thee, ancient Mariner!
From the fiends, that plague thee thus!—
Why look'st thou so?'—With my cross-bow
I shot the ALBATROSS.

PART II
The Sun now rose upon the right:
Out of the sea came he,
Still hid in mist, and on the left
Went down into the sea.

And the good south wind still blew behind,
But no sweet bird did follow,
Nor any day for food or play
Came to the mariner's hollo!

And I had done a hellish thing,
And it would work 'em woe:
For all averred, I had killed the bird
That made the breeze to blow.
Ah wretch! said they, the bird to slay,
That made the breeze to blow!

Nor dim nor red, like God's own head,
The glorious Sun uprist:
Then all averred, I had killed the bird
That brought the fog and mist.
'Twas right, said they, such birds to slay,
That bring the fog and mist.

The fair breeze blew, the white foam flew,
The furrow followed free;
We were the first that ever burst
Into that silent sea.

Down dropt the breeze, the sails dropt down,
'Twas sad as sad could be;
And we did speak only to break
The silence of the sea!

All in a hot and copper sky,
The bloody Sun, at noon,
Right up above the mast did stand,
No bigger than the Moon.

Day after day, day after day,
We stuck, nor breath nor motion;
As idle as a painted ship
Upon a painted ocean.

Water, water, every where,
And all the boards did shrink;
Water, water, everywhere,
Nor any drop to drink.

The very deep did rot: O Christ!
That ever this should be!
Yea, slimy things did crawl with legs
Upon the slimy sea.

About, about, in reel and rout
The death-fires danced at night;
The water, like a witch's oils,
Burnt green, and blue and white.

And some in dreams assurèd were
Of the Spirit that plagued us so;
Nine fathom deep he had followed us
From the land of mist and snow.

And every tongue, through utter drought,
Was withered at the root;
We could not speak, no more than if
We had been choked with soot.

Ah! well a-day! what evil looks
Had I from old and young!
Instead of the cross, the Albatross
About my neck was hung.
_____________________________________________________________________
Note from Vermont Law School Instructor:
Yolanda:
I think this may be the high water mark (so far) in your exemplary contributions to our shared discourse. Excuse the pun on your paean to hydro-electric power.
Thank you, first, for giving the Sweeney article its due. I think it offers an important alternative perspective to that of Tim Duane, great guy and former colleague that Tim most assuredly is. Tim, by the way, would love it that Samuel Taylor Coleridge appears in a thread discussing his article (and as an inveterate Californian whom we could not retain in Vermont he would appreciate that you assigned the albatross not to anything in California but to our region's embrace of natural gas). You may already know that Vermont is living proof of your assertion that hydro is the great power source; the bulk of our electricity is coming from Hydro Quebec under longterm contracts that have, of late, protected Vermont from some of the rate shock other New England states have experienced. (Our day is coming, though, since our HQ deals have adjustment factors that take account of market prices).
Your reference to singing Woody Guthrie songs about hydroelectricity sent me scrambling for insight because the only one I could think of was the one you mentioned (Roll on Columbia). It turns out Woody was paid $266 to write what proved to be 26 songs in 30 days for the BPA. Including Pastures of Plenty -- which is really about California and is, in some sense, a fitting soundtrack for any discussion of the California fiasco of 2000-2001.
Woody Guthrie "Pastures Of Plenty" (1941)
https://www.youtube.com/watch?v=zMvMtIYCPH4
It's a mighty hard row that my poor hands have hoed
My poor feet have traveled a hot dusty road
Out of your Dust Bowl and Westward we rolled
And your deserts were hot and your mountains were cold
I worked in your orchards of peaches and prunes
I slept on the ground in the light of the moon
On the edge of the city you'll see us and then
We come with the dust and we go with the wind
California, Arizona, I harvest your crops
Well its North up to Oregon to gather your hops
Dig the beets from your ground, cut the grapes from your vine
To set on your table your light sparkling wine
Green pastures of plenty from dry desert ground
From the Grand Coulee Dam where the waters run down
Every state in the Union us migrants have been
We'll work in this fight and we'll fight till we win
It's always we rambled, that river and I
All along your green valley, I will work till I die
My land I'll defend with my life if it be
Cause my pastures of plenty must always be free