A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000

2 FERC (1998) gives a detailed account of price spikes in Midwestern markets in 1998.Price spikes in the Eastern US during 1999 were related to reliability problems of various kinds (DOE, 2000).Prices in California remained remarkably high in October and November and then reached unprecedented levels during December 2000.The latter part of this period was also accompanied by an order of magnitude increase in gas prices, the evaporation of imports from the Northwest, a large fraction of California's generating capacity was unavailable to supply due to planned or forced outages, some of which were mandated by environmental regulators, new regulatory interventions, and utility credit problems that may have made some suppliers reluctant to supply voluntarily.It is clear that by late 2000, the normal functioning of the wholesale electricity markets had completely broken down.The analysis reported here does not cover the post-September 2000 period, however.