The Howlers will hate this one–the Wall Street Journal (story not available to non-subscribers) did a piece on the California Electric Market and Krugman picks up on it. I haven’t read the original story yet, but the problem has been obvious for some time. The deregulatory scheme used in California was horribly designed. The Dick Cheney complaints about price caps were nothing but a distraction from the real problem. Too much leverage was given to a small group of companies, long-term contracts were banned or heavily discouraged, and regulators forced the separation of utility branches all lead to a situation rife for problems. Price caps didn’t have a chance to create a problem.
The more important point is this is what happens in Crony Capitalism. I’m a huge fan of deregulation of energy markets. I believe that strategy is the most likely strategy to improve the use of renewable sources. Of course, ‘the reforms” by Gray the Blowhard reduce those incentives. Sidenote: Republicans–what was wrong with Riordan again? Oh, that is right he was reasonable. But Pete Wilson sold the regulatory process to the industry and they got exactly what they wanted. Crony Capitalism of the type we see with Cheney and White harnesses all the power of the market for the few at the expense of the many. Capitalism should be a liberating mechanism, but if the game is fixed, it loses its power.
Josh Marshall has a great article on the lack of competence in the administration. Either one is a genius and knows how to run a business and is fully knowledgeable of rebuilding Iraq’s oil fields and plundering Californial, or one is a boob hired for political connections. You can’t have it both ways.