Californiaʹs dysfunctional electricity market: policy lessons on market restructuring

The restructured electricity market in California has been behaving oddly, and badly since summer of 2000. Electricity prices have been exorbitantly high, and highly volatile. Despite the high prices, the three investor-owned utilities are in dire financial shape because they cannot pass on the high costs of wholesale power to their customers due to a rate freeze. Many policymakers in the US and elsewhere want to know what went wrong in California—trying to avoid a similar fate as they proceed with their own market liberalization plans.