The
California electricity crisis, also known as the
Western U.S. Energy Crisis of 2000 and 2001, was a situation in which
California had a shortage of electricity caused by market manipulations, illegal
[citation needed] shutdowns of pipelines by Texas energy consortiums, and capped retail electricity prices.
[5] The state suffered from multiple large-scale
blackouts, one of the state's largest energy companies collapsed, and the economic fall-out greatly harmed
Governor Gray Davis's standing.
Drought, delays in approval of new power plants,
[6] and
market manipulation decreased supply. This caused 800% increase in wholesale prices from April 2000 to December 2000.
[7] In addition,
rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers.
California had an installed generating capacity of 45GW. At the time of the blackouts, demand was 28GW. A demand supply gap was
created by energy companies, mainly
Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price.
[8][9] Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry's revenue margins, causing the bankruptcy of
Pacific Gas and Electric Company (PG&E) and near bankruptcy of
Southern California Edison in early 2001.
[10]