I’m sitting in the United Club at LAX, waiting for my Red-eye flight back to Baltimore. My son’s high school graduation is tomorrow. It’s only Wednesday evening but it feels like a full week already. Gary Ackerman and I went on a Road Trip of epic proportions on which we met six members in one day in the LA area. Next day, three members in Orange County and San Diego, and on the next two members in the San Diego area before I dropped Gary at the Cross Border Express Airport on the border with Mexico. I then drove back to LA and am writing this blog while listening to the toddler next to me report on the comings and goings of the planes out the window.
This is my second effort to write a blog on this particularly sticky subject… the very real problems when policy makers intervene in markets. The reasons such a discussion is difficult in the context of the California electricity markets are emotional. First is the continuing psychic damage that was done in 2000-01. The second is that we want to electricity to be competitive but there is something about it that makes us want to “fix” it all the time. But the most damaging of all is a popular narrative that firmly states that the 2000-01 crisis was all about manipulation. That narrative is damaging because it leads to the entrenched belief that regulatory intervention is necessary to protect from the manipulation, and by extension a painful crisis, from happening again.
Before I start in on the latest frustration along the path to market formation in the wider West, let me pause and explain recent developments to my friends in the Western Interconnection. Most of the trade press and the attention of FERC and the rest of Washington barely noticed the surprise of Xcel’s pulling out of Mountain West. Rather, the folks in the East are consumed by the cries of anguish emanating out of First Energy, Murray Coal and whether the DoE and DoD might invoke a Cold War legal mechanism to save coal and nuclear units in the East. This is the regulatory version of “East Coast bias” that many Pac-12 fans have asserted ESPN and other sports outlets have for things that don’t happen in a convenient time zone.