Big Government Hurts US Again ...

Government often assigns misleading labels, and a prime example is California's so called "deregulation" of their electrical power system.  A honest description would be "re-regulation" - that's short for revised regulation.  California certainly did not privatize their power grid over to the free market, and the Associated Press tells what happened:

http://wire.ap.org/APpackages/california_power/

To begin, the requirement that the private power monopolies turn over operations to newly-created non-profit companies sounds more like a socialist solution than a free-market solution.  The intent was to separate power suppliers from the public, and to install a reseller as a middleman.  Further, the California legislature REQUIRED these new resellers to purchase power on the open spot market @ auction prices !!!

Modern businesses involved in exchange of commodities trading nearly always hedge risk by procurement via long term contracts.  Baseline needs are filled this way, and only peak demands are satisfied by the spot market.  The amount of power not tied up in long term contracts is the market's "float", and that is generally a small percentage of the overall supply.  The legislatures were either very dumb, or else they deliberately set up non-profit companies with the intent of throwing them to the wolves.

A decision made when the spot market prices were low turned out to be a very bad idea when the spot market prices jumped due to market forces such as supply/demand and the weather.  The government-mandated lack of adequate float in the power supply market would make the price then skyrocket.

Geeezzzz .... talking about DUUHHHHH !!!!  

Some folks would blame corporations for corrupting California's legislative process.  Even if corporations did lobby legislators to establish this monstrosity, it was still the legislators who took the action. Consider this: suppose a criminal offered to give me a million bucks if I were to shoot myself in the head. <Drum roll ...>  Ok .... I did it, I shot myself in the head. Whose fault was it? ... The bad man who offered the money, or myself - the fool who pulled the trigger.  California legislators were the fools who pulled the trigger ...

The botched regulatory environment artificially created weird spot prices.   In an environment with NORMAL competition, the competitors keep each
other's prices in check ... So, when government leaves us alone, prices remain stable and competitive.