JBS Comments on California Power Crisis

By Paul Gipe

“Cost Curve Analysis of the California Power Markets,” JBS Energy, Sacramento, Calif. William Marcus and Greg Ruszovan, September 29, 2000.


This is a technical report by two economists on California’s power crisis during the summer of 2000. Marcus is a prominent consulting economist who has persuasively argued that energy conservation has been consistently undervalued in most countries, at least for the 15 years I’ve known of his work. Here’s a brief excerpt from their conclusion.– Paul Gipe


“. . . We cannot explain the price explosion with reference to the failure to build power plants in California or the spike in gas prices. This problem is not caused by the usual suspects. . .”

“. . . A significant price increase remains in Summer 2000 after controlling for both the level of demand and the level of gas prices. . . to more sinister practices (gaming of markets taken to a new level). The point that this analysis shows is that the summer 2000 prices cannot be dismissed as an expected market outcome. It needs further investigation.”

“. . . Distributed photovoltaic generation, with its relatively strong correlation with peak loads, (JBS Energy, 1996) could be particularly important in this regard. This finding that conservation not only benefits the conserver but everyone else should be come the cornerstone of a new public goods imperative and the associated rate design policy.”