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California energy crisis was a hoax

February 1, 2002 | Page 2

LAST YEAR'S energy crisis in California was a hoax orchestrated by the power industry. That's the conclusion of a Foundation for Taxpayer and Consumer Rights study released in January, one year after the first rolling blackouts began to hit.

The crisis came four years after California legislators voted unanimously to "deregulate" the state's electricity system--requiring utility companies to buy wholesale supplies of electricity on the "free" market. National power giants like Enron, Duke and Reliant recognized the opportunity to make a killing--and jacked up prices through the roof.

The explanation from power bosses and politicians alike was that there was a shortage of electricity in late 2000 and 2001--even though California was using less than in previous years, when prices had remained stable.

In late spring, Gov. Gray Davis committed the state to spending at least $43 billion in expensive long-term contracts for energy over the next 20 years. Suddenly, the "crisis" ended. "When they stole as much as they thought they could get away with, the 'crisis' mysteriously disappeared--leaving the people of California stuck with the tab," write study authors Harvey Rosenfield and Doug Heller. "It wasn't a shortage, it was a shakedown."

The rip-off was huge. Between January and October of last year alone, California consumers overpaid for electricity by $8.5 billion--and are expected to overpay by at least another $20.5 billion over the next decade. And that doesn't take into account money looted from the state treasury to pay off the power bosses.

Rosenfield and Heller estimate that, all told, the 1996 deregulation law cost $71 billion--or about $2,100 for every man, woman and child in the state.

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