California electricity crisis

Chronology
1996	California begins to modify controls on its energy market and takes measures ostensibly to increase competition.
September 23, 1996	The Electric Utility Industry Restructuring Act (Assembly Bill 1890) becomes law.
April 1998	Spot market for energy begins operation.
May 2000	Significant rise in energy price.
June 14, 2000	Blackouts affect 97,000 customers in San Francisco Bay area during a heat wave.
August 2000	San Diego Gas & Electric Company files a complaint alleging manipulation of the markets.
January 17–18, 2001	Blackouts affect several hundred thousand customers.
January 17, 2001	Governor Davis declares a state of emergency.
March 19–20, 2001	Blackouts affect 1.5 million customers.
April 2001	Pacific Gas & Electric Co. files for bankruptcy.
May 7–8, 2001	Blackouts affect upwards of 167,000 customers.
September 2001	Energy prices normalize.
December 2001	Following the bankruptcy of Enron, it is alleged that energy prices were manipulated by Enron.
February 2002	Federal Energy Regulatory Commission begins investigation of Enron's involvement.
Winter 2002	The Enron Tapes scandal begins to surface.
November 13, 2003	Governor Davis ends the state of emergency.

The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001, was a situation in which the United States state of California had a shortage of electricity supply caused by market manipulations, illegal shutdowns of pipelines by the Texas energy consortium Enron, and capped retail electricity prices. The state suffered from multiple large-scale blackouts, one of the state's largest energy companies collapsed, and the economic fall-out greatly harmed Governor Gray Davis' standing.

Drought, delays in approval of new power plants, and market manipulation decreased supply. This caused an 800% increase in wholesale prices from April 2000 to December 2000. In addition, rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced a large number of retail consumers.

California had an installed generating capacity of 45GW. At the time of the blackouts, demand was 28GW. A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price. Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry's revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.

The financial crisis was possible because of partial deregulation legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.

The crisis cost between $40 to $45 billion.

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