California deregulation II: the sequel.(News)

California is a state of firsts: first state to deregulate its electricity industry and the first to abandon that free market experiment.

Now, having ousted Gov. Gray Davis in a recall vote, at least in part for his handling of the clcctricity crisis, California could be the first state to give deregulation a second chance, though there likely will be intense opposition from some quarters.

Nevertheless, some observers believe that one of Gov. Arnold Schwarzenegger's first political moves as the state's chief executive, second only to dealing with the state's financial crisis, will be an effort to push the state's electricity market closer toward deregulation.

Deregulation critics are reported to be unnerved by Schwarzenegger's proposal, according to a widely circulated AP news story, arguing it would expose California to major risks at a time the financially strapped state can't afford to gamble.

Support for SMD

The governor signaled his support for deregulation on his campaign website, where he said he would create a "'working wholesale power market'" based on the lessons learned from other Mates [which have deregulated]. He gave a further nod to the Federal Energy Regulatory Commission's (FERC) standard market design (SMD) as a guideline in the undertaking.

"California is one of several states that adopted electricity restructuring. However, only California's restructuring caused severe price hikes and energy shortages. It is time to learn from other successful restructurings enacted by Texas, the New England states, and the Mid Atlantic States of Pennsylvania, New Jersey, and Maryland. In addition, California should also look to the standard market design created by FERC." Schwarzenegger said.