An Econometric Analysis of Electricity Prices in California

Conclusion

These analyses confirm that virtually all variations in pricing during the period January 1, 2000 through June 20, 2001 can be explained by fundamental economic forces and specific regulatory policies in these markets. The markets created by the CPUC, the California Legislature, the CPX, then-Governor Davis, and the FERC profoundly influenced some of those forces. The reversal in prices after the market and regulatory flaws were eliminated is as important as the demonstrable price increases. For some, this econometric analysis may be complementary to the institutional discussion in Chapters 6 and 7, confirming their belief that the FERC refund and market manipulation proceedings may be misguided or at least excessive. Before addressing such matters, Chapter 12 introduces a new major concern: market manipulation. Here the question is not whether spot price movements can be predicted. The fundamental question is whether some market participants may have acted within or outside the market rules to manipulate the market to such an extent that the market clearing prices were not reasonably competitive.