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GAO-01-870R 1 (2001-06-29)

handle is hein.gao/gaocrptanps0001 and id is 1 raw text is: SGAO Accountability * Integrity Reliability United States General Accounting Office Washington, DC 20548 June 29, 2001 The Honorable Stephen Horn Chairman, Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations Committee on Government Reform House of Representatives Subject: California Electricity Market: Outlook for Summer 2001 Dear Mr. Chairman: The electricity industry is restructuring throughout the United States and in other countries around the world to be more competitive. However, some restructuring efforts have exhibited problems during this transition. Beginning in May 2000, restructured electricity markets in California experienced unprecedented disruptions. Since that time, California and the West have witnessed extraordinarily high wholesale prices and sharp limitations on the availability of electricity. In California, these high prices have led to financial problems for the state's utilities, widespread power outages, and rate increases. In other states across the West, the high prices have also led to impacts including rate increases for consumers. These price and reliability problems have persisted through the winter and spring and are expected to worsen during the summer of 2001. Concerned about the availability and reliability of electric power in California, you asked for our assessment of the outlook for California's electricity supplies this summer. We briefed your staff on the results of our work on May 10, 2001. This report summarizes those results. Background: Restructuring Is Changing Electricity Markets in California and Across the United States The electricity industry and its markets are undergoing substantial change in California and across the United States. Historically, the U.S. electricity industry has been highly regulated. The federal government has regulated interstate wholesale sales and transmission of electricity, while the states have regulated retail markets by planning for demand growth, reviewing and approving costs, and establishing rates of return with public involvement throughout the process. Under this system, federal regulators approved wholesale electricity prices while state regulators set retail electricity prices. In contrast, with the movement to restructure the electricity GAO-01-870R California Electricity Market

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