Direct Access: Electricity Deregulation in California

It’s been twenty years since California became the first state to enact legislation to deregulate the retail electricity market.  However, California’s experience with electricity restructuring over the last twenty years has been as volatile as electricity itself. 

Over the next four blog posts, we will examine California’s successes and failures as the state pioneered electricity deregulation.

First in the Nation:

In 1996, the California Legislature unanimously approved Assembly Bill 1890, making California the first state to deregulate retail electricity in the investor owned utility territories of San Diego Gas & Electric, Southern California Edison and Pacific Gas & Electric Company. 

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Electric deregulation, known as direct access in California, was part of a larger nationwide trend that took hold during the 1970s and included the deregulation of railroads, airlines, telephone service and banks. While the regulated market was a profitable business for California's utilities, an opportunity existed to increase profit potential by expanding business into other areas, such as energy trading and operating power plants in other parts of the country. Consumers, especially large industrial consumers, saw a chance to pay less in energy bills once the market opened up to competition from many energy service suppliers, such as Direct Energy Business.

Initially, electricity deregulation in California was a success. Wholesale prices were low, consumer rates were steady and the new structure appeared to be working.  More than two hundred energy service providers contributed to bring electricity alternatives to approximately 16 percent of California's customer base. 

However, that would all change with the Energy Crisis of 2000.

In part two, we will examine how a sudden and unexpectedly hot summer, as well as wholesale market manipulation, would cause a rapid rise in the wholesale electricity costs and temporarily cripple California’s electricity production. 

If you're interested in learning more about deregulation, download our complimentary eGuide: The Dollars and Sense of Deregulation. Also, Don't forget to follow Direct Energy Business on LinkedIn, Twitter and Facebook!