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Managerial Economics - Deregulation of Electricity Markets Essay Example

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Managerial Economics - Deregulation of Electricity Markets

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Managerial Economics - Deregulation of Electricity Markets. Industry groups threatened to move interstate”. The deregulation was intended at cutting the cost based inefficiency and the main objective was efficient costing and pricing.However, California committed a tactical mistake in selling utilities ‘ large electricity generation facilities to private brokers that were, often, not located within California. As Beder (2001) explains, “The final plan, approved in September 1996, involved the utilities sold off their generating plant to ensure there was plenty of competition between electricity suppliers. More competition was supposed to mean lower prices. The generating plant was bought by private companies, often based in other states. The plan also included a rate freeze until March 2002 or until the utilities had paid off their past debts, whichever came first.

However, the owners of the generating plant, the suppliers, had no constraints on what prices they could charge utilities, the retailers, for the power generated”. The control of production facilities and the removal of rate freeze in 2002 almost left the entire electricity market in the hands of such a monopolistic lobby which now manipulated supplies in high demand months of summers and jacked up the prices. These suppliers were ostensibly operating much above the P=MC level; however, interestingly it was not very clear if they had been actually able to gain a grip of MC to an efficient level. There were blackouts in peak summer months and prices rose sharply over any previous levels. As Badham & Han (2007) state in respect of deregulation blues and the subsequent correctives by the US administration, “The Californian Energy Crisis resulted in blackouts, price spikes, bankruptcy and the reintervention of the State in a privatized, deregulated market. The Clinton administration exercised its emergency power in December 2000 to compel sales of electricity and gas to the IOUs. President George W. Bush ordered relevant Federal agencies to speed up a review and licensing of new power plants in California in February 2001.  . Managerial Economics - Deregulation of Electricity Markets.

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preview essay on Managerial Economics - Deregulation of Electricity Markets
  • Pages: 4 (1000 words)
  • Document Type: Essay
  • Subject: Business
  • Level: Undergraduate
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