California
To California’s Energy Policy-Makers: Control the CAISO and Give Us Electric Rate Relief
Power corridor in California’s Central Valley. Photo: Jeffrey St. Clair.
Suppose it is really hot. You go into a store to buy a bottle of water that usually costs you a dollar. To your shock and dismay the store charges you twenty dollars. You feel ripped off and you want to complain. The California Attorney General tells you to complain to him because this type of commercial behavior is an illegal unfair practice, price gouging, and profiteering. This is so outrageous that it almost never happens.
But with electricity, a service equally essential to each of us, this sort of price gouging and profiteering is a regular occurrence, justified and even encouraged by energy policy-makers at the CA Independent System Operator (CAISO) and the Federal Energy Regulatory Commission (FERC), who control the price formation of most of our electric energy. The CAISO is a California non-profit corporation created during de-regulation to manage that part of the grid owned by investor-owned utilities.
The worthies at CAISO and FERC subscribe to a theory that electricity prices should escalate to astronomical levels – untethered from actual costs of production like fuel, operation, maintenance and reasonable profits — to reflect “shortages” in supply of this essential service. We used to call it extortion.
In this theory – so-called “scarcity pricing” or “shortage pricing” — powerplants and the energy they produce appear and disappear like Cheshire cats in response to “price signals,” as stressed grid operators scramble in high drama to meet the requirements of providing electricity on hot days outside its “organized” market; and prices escalate into the stratosphere. We have heard described in cinematic detail the activities of grid operators at the CAISO on September 6, 2022 when the state appeared to narrowly avoid rolling blackouts by asking us to voluntarily conserve and cook in the dark, while CAISO exported thousands of megawatts of power and prices escaped the pull of gravity. A recent bill in California’s Legislature describes these efforts as “inspirational,” although there is nothing inspirational about charging what the traffic will bear no matter how painful to the payers.
It needs to be understood that this “theory” has no basis in law; it is a fabrication of seller-side interests who, as insiders, are positioned to get captured staff and decision-makers to go along. A similar move is being made to inject the academic notion of “opportunity costs” as a justification for astronomical prices into price formation in organized markets overseen by FERC.
There are several problems with the “scarcity pricing” theory from the standpoint of California’s hard-pressed ratepayers, and from the standpoint of California policymakers concerned with the affordability crisis we all face. First, it is “goddammed expensive,” in the memorable phrase of David Freeman. It provides incentives to create artificial shortages. Second, it ignores the physical reality of the electric grid, which consists of real powerplants and transmission and distribution lines connecting them to load (end users). They are not dreams. An estimate of the amount of electric generation plants located in California (a physical inventory based on reports filed by every powerplant owner with the US Energy Information Agency (EIA Form 861)) puts the nameplate capacity at 86,000 megawatts, 60% more than needed to serve the highest recorded load (52,000 MW on September 6, 2022, which included 6000 MW of exports.) (See the public-source database GridClue.)
There was never a physical shortage in 2020 or 2022. There were sophisticated forms of economic and physical withholding to create the appearance of shortage. The “search” for megawatts was a phantasm, concocted to justify the profiteering. And the in-state inventory does not count thousands of megawatts located outside of California owned by California entities or under federal contracts with California entities dedicated to serving California native load. The fiction of shortage, the drama of tight supplies justifying extreme prices — that powerplants appear and disappear in response to price signals, are only “visible” to the CAISO grid operators when they bid — is a matter of bad policy convention and bad practice. They are correctable and correction can save ratepayers lots of money.
The bad policy and bad practice are very recent. The California Energy Crisis of 2000-01, an outgrowth of California’s failed de-regulation experiment, was in part ended by FERC when it established a rule in the West that capacity had to be made visible (posted) and had to be offered to supply California load. FERC eliminated the Must Offer and Must Post requirements in October 2016. The Cheshire cat powerplant and its price-signal catnip date from that point.
Another problem with this theory is that it does not consider behaviors that create artificial shortages: economic and physical withholding for the purpose of raising prices that were at the heart of the 2000-01 Energy Crisis. They are making a comeback in the present, now that Must Offer and Must Post have ended. The physical inventory described above (based on name-plate capacity) depends on the condition and operability of the powerplants. California enacted a statute in 2001 that gives the CAISO and the CPUC powerful authority to prescribe and enforce operation and maintenance standards for all California powerplants. We ended physical withholding as a matter of law and policy.
The CAISO and the CPUC failed to sustain this effort. As a result, in the August 2020 Blackout the powerplant fleet operated at an abysmal level of availability, and specific large powerplants on the margin failed to operate at all. Powerplant performance improved in 2022, after the CPUC ordered expensive and secret new contracts to make the powerplants more contractually “visible” and available. Why pay extra for performance required by law anyway? Not because we like to, but because we let them.
Further, the CAISO promoted “exports” of power out of California at times of maximum stress in both 2020 and 2022, at the expense of serving California native load (customers). In both of these instances the CAISO admitted after the fact that software “glitches” had contributed to “erroneous” exports and asserted that that the glitches have been corrected. (Most recently on October 13, 2022) The possibility that export practices had been strategic for the purposes of raising prices during the 2020 Blackout was suggested by the CAISO market monitor at FERC in October 2020, but later dropped and not included in any of the “root cause” reports to the California Governor and public. Why the omission?
In the 2005 documentary film about Enron, The Smartest Guys in the Room, the architect of the CAISO, David Freeman, recounts a conversation with Ken Lay, Enron’s Chairman:
“I remember the conversation I had with Ken [Lay, Enron Chairman]. At the end of it he says ‘Well, Dave, old buddy, let me just tell ya….It doesn’t really matter to us what kooky rules California puts in place. I got a bunch of really smart people down here who will figure out how to make money anyhow.”
We are watching this happen again in real time.
The fiction that powerplants appear to disappear and re-appear in response to and justifying extreme prices is the product of the CAISO’s approach to grid dispatch. It is based on a computer algorithm (the so-called “organized market”) that dispatches powerplants in response to bids (offers to sell) that establish a “market clearing price” tht is paid to all market sellers without regard to their actual costs or bids at 5-minute intervals in an overlapping set of “auctions” of real and virtual supplies. If this seems to you like a weird, convoluted and expensive way to operate a complex machine of physical powerplants (sources) connected by wires to end users (sinks), it is. If it occurs to you that strategic bidding behavior by both “supply’ and “demand response” can influence how high the “market clearing price” will go, it does. The “single clearing price” assures that Californians will always pay the highest possible price, including the extortionate prices reflecting “scarcity” pricing.
The CAISO, captured by energy sellers, prioritizes its financial and “market-making” role (enabling profit maximization by sellers and speculators) over its operational role to manage the grid reliably for the people of California. Its fallback position on reliability – pay-for-protection (in technical terms an increase operating reserves (the margin of safety) by 50 percent at a significant (but still secret) cost) – was adopted by CPUC in 2021 in a sad repetition of the pattern of the 2000-01 Energy Crisis. The CAISO thus creates both the affordability and reliability crises we face. And addresses it by locking in elevated prices.
California has the highest electric rates in the continental United States. Scarcity pricing at the CAISO is not the only reason but it is an important one that is driven entirely by policy, and can be corrected by policy.
What can we do? We can begin to hold the CAISO to be accountable.
First, we can end scarcity pricing and replace it with hard price caps. This would repudiate speculation in energy services and the philosophy of shortage pricing — and the resulting extreme prices — replacing them with a price formation regime that returns to transparency, enforceable availability, and cost-based prices including reasonable, not speculative, profits.
Second we can begin to manage the grid based on maximizing end-user based resources (roof-top solar paired with storage, for example); and optimizing, for reliability not profits, the inventory of existing central station electric generation resources to meet California’s native load, taking into account our intention to simultaneously grow load to electrify transportation services and building environments and to decarbonize supply sources. This includes both enforcing current powers regarding operation and maintenance and constructing the new renewable powerplants and transmission connections we need in an orderly, transparent and affordable way under state law. This is already happening in those portions of California’s grid that are not controlled by the CAISO, like the Sacramento Municipal Utility District (SMUD) and Los Angeles Department of Water and power (LADWP).
Third, we can empower the consumer advocates like the Office of Public Advocate at the CPUC to participate effectively and continuously at the CAISO to keep it focused on serving Californians when it gets down into the details.
These are beginning baby steps. However, the seller side is already moving to negate them as possibilities. Through a process called the West Wide Pathways Governance Initiative, jump-started last year by California agency heads appointed by Governor Newsom, efforts are being made to preserve the CAISO algorithm and to turn over the power to initiate price formation decisions, including reforms to eliminate scarcity pricing, to a new entity unresponsive to California. This will be another battle.
Thousands of immigrant drivers whose commercial driver’s licenses are set to expire next month were left bewildered and disappointed when news spread that California was planning on reissuing the licenses — only to learn federal regulators had not authorized doing so.
Amarjit Singh, a trucker and owner of a trucking company in the Bay Area, said he and other drivers were hopeful when word of California’s intentions reached them.
“We were happy [the California Department of Motor Vehicles] was going to reissue them,” he said. “But now, things aren’t so clear and it feels like we’re in the dark.”
Singh said he doesn’t know whether he should renew his insurance and permits that allow him to operate in different states.
“I don’t know if I’m going to have to look for another job,” he said. “I’m stuck.”
Singh is one of 17,000 drivers who were given 60-day cancellation notices on Nov. 6 following a federal audit of California’s non-domiciled commercial driver’s license program, which became a political flashpoint after an undocumented truck driver was accused of making an illegal U-turn and caused a crash in Florida that killed three people.
The nationwide program allows immigrants authorized to work in the country to obtain commercial driver’s licenses. But officials said the federal audit found that the California Department of Motor Vehicles had issued thousands of licenses with expiration dates that extended beyond the work permits, prompting federal officials to halt the program until the state was in compliance.
This week, the San Francisco Chronicle obtained a letter dated Dec. 10 from DMV Director Steve Gordon to the U.S Department of Transportation stating that the state agency had met federal guidelines and would begin reissuing the licenses.
In a statement to The Times, DMV officials confirmed that they had notified regulators and were planning to issue the licenses on Wednesday, but federal authorities told them Tuesday that they could not proceed.
DMV officials said they met with the Federal Motor Carrier Safety Administration, which oversees issuance of non-domiciled commercial driver’s licenses, to seek clarification about what issues remain unresolved.
A spokesperson for the Department of Transportation, which oversees the FMCSA, would only say that it was continuing to work with the state to ensure compliance.
The DMV is hopeful the federal government will allow California to move ahead, said agency spokesperson Eva Spiegel.
“Commercial drivers are an important part of our economy — our supply chains don’t move and our communities don’t stay connected without them,” Spiegel said. “DMV stands ready to resume issuing commercial driver’s licenses, including corrected licenses to eligible drivers. Given we are in compliance with federal regulations and state law, this delay by the federal government not only hurts our trucking industry, but it also leaves eligible drivers in the cold without any resolution during this holiday season.”
Bhupinder Kaur — director of operations at UNITED SIKHS, a national human and civil rights organization — said the looming cancellations will disproportionately impact Sikh, Punjabi, Latino and other immigrant drivers who are essential to California’s freight economy.
“I’ve spoken to truckers who have delayed weddings. I’ve spoken to truckers who have closed their trucking companies. I’ve spoken to truckers who are in this weird limbo of not knowing how to support their families,” Kaur said. “I myself come from a trucker family. We’re all facing the effects of this.”
Despite hitting a speed bump this week, Kaur said the Sikh trucking community remains hopeful.
“The Sikh sentiment is always to remain optimistic,” she said. “We’re not going to accept it — we’re just gonna continue to fight.”
Two Republican candidates are leading the latest poll in California’s gubernatorial race amid concerns that Democrats could be locked out of the general election in the solidly blue state.
Newsweek reached out to the California Democratic and Republican parties for comment via email.
Why It Matters
California is a solidly Democratic state that rarely elects Republicans to statewide office. However, Democrats are facing a potential challenge in next year’s gubernatorial race. The Golden State uses a unique “jungle primary” system where all candidates, regardless of their party, appear on the same ballot and the two candidates who receive the most votes advance to the general election. This means there is a possible, even if unlikely, scenario where two Republicans could advance to the general election and lock Democrats out of the race.
A string of recent polls suggests that could be a possibility in the race next year to replace retiring Governor Gavin Newsom, a Democrat, who cannot run for a third term due to term limits.
What To Know
California’s gubernatorial race has drawn the interest of several well-known Democrats in the state including Representative Eric Swalwell, former Representative Katie Porter, former Secretary of Health and Human Services (HHS) Xavier Becerra, businessman Tom Steyer, former Los Angeles Mayor Antonio Villaraigosa, Superintendent of Public Instruction Tony Thurmond and former Controller Betty Yee.
By contrast, two well-known Republicans—Riverside County Sheriff Chad Bianco and commentator Steve Hilton—are in the race.
The math problem for Democrats would be if the high number of Democrats split the vote in a way that allows Bianco and Hilton to narrowly advance to the general election. Early polls show that as a possibility, though there is still time for Democratic voters to coalesce around specific candidates before June’s primary.
On Thursday, pollster Civic Lens Research released a survey showing Bianco and Hilton advancing to the general election. Hilton led with just under 18 percent of the vote, while Bianco followed with about 14 percent.
Swalwell placed third with about 12 percent support, while Porter and Steyer followed with 9 and 7 percent support, respectively. Still, many voters are still unsure of who they are going to support—and could be decisive in the race. Thirty-one percent said they were undecided in the poll.
The poll surveyed 400 likely California primary voters via a web questionnaire sent by text message between December 14 and 16.
Other polls have also showed a Democratic lockout as a possibility. An Emerson College poll, which surveyed 1,000 likely voters from December 1-2, showed Bianco leading with 13 percent, while Hilton and Swalwell were tied at 12 percent. An FM3 poll showed Hilton lead with 18 percent, followed by Bianco and Swalwell at 17 percent. It surveyed 821 likely voters from November 30 to December 7 and had a margin of error of plus or minus four percentage points.
Zev Yaroslavsky, a former member of the Los Angeles County Board of Supervisors and director of the Los Angeles Initiative at the University of California, Los Angeles, told Newsweek polls are “largely reflecting name identification and party identification.”
“Voters are not focused on the June primary yet,” he said. “With only two Republicans in the mix along with half a dozen or more well-known Democrats, it is not surprising that most of the candidates are bunched up.”
Democratic and undecided voters are likely to “consolidate behind one or two prominent candidates” by the spring, Yaroslavsky said, noting that other candidates will either drop out or “just be relegated to electoral irrelevancy.”
“The top Democrat will assuredly receive far more than 13% in June. Republicans have a ceiling of what they can hope to get in California, and when Democratic and independent voters coalesce around on or two candidates, at least one of the leading Democratic candidates will come in first or second and advance to the general election. At that point, it’s the Democrats’ to lose,” he said.
What People Are Saying
Corrin Rankin, chairwoman of the California Republican Party, told Newsweek in November: “Poll after poll shows Californians are tired of the decades of failure and corruption by Democrats, and they are turning to Republicans for real solutions and leadership on issues like affordability, public safety, and homelessness.”
Rusty Hicks, chair of the California Democratic Party, told Newsweek in November: “We look forward to electing another Democrat as California’s next Governor in 2026.”
What Happens Next?
The primary is set for June 2, 2026, so candidates will spend the first half of next year making their case to voters to convince them they are the best option to lead the nation’s most populous state.
California
California orders Tahoe Truckee schools to leave Nevada sports over transgender athlete dispute
The California Department of Education is requiring the Tahoe Truckee Unified School District to follow state law in another clash over transgender athletes in youth sports in the state.
Currently, student-athletes in Tahoe Truckee Unified play sports in Nevada because of how close they are. But Nevada now bans transgender athletes in girls’ sports, which is against California state law.
So after decades of playing in Nevada, California’s Department of Education is requiring the Tahoe Truckee Unified School District to compete in California to comply with state laws that allow student athletes to compete based on their gender identity.
David Mack is the co-founder of Tahoe Pride and describes the new youth sports divide in the Tahoe region.
“So no one’s happy, it’s really sad, it’s quite tragic in that way,” Mack said. “People feel really upset that the school moved so fast on this. They feel blindsided, they feel not listened to, and then other people, like the trans kids, are getting steamrolled over like they’re not recognized in this argument.”
Nevada state lawmakers passed a law in April requiring a mandatory physical signed by a doctor to deem the athlete male or female based on their birth sex.
“This is a politically manufactured issue to try to divide people,” Mack said.
The Tahoe Truckee Unified School District is responding to the California Department of Education with a solution that the district legally join the California Interscholastic Federation in 2026, but continue to play in the Nevada Interscholastic Activities Association through 2028.
When asked if transgender athletes would be able to compete while operating in the NIAA, the district said it’s “still in the early stages of this transition, and many details are still being developed.”
In an October letter addressed to the California Department of Education, the school district’s attorney, Matthew Juhl-Darlington, said the Tahoe Truckee Unified is “not aware of any transgender youth who have expressed interest in participating in its 2025-2026 athletic programs.”
“While the NIAA recently updated its polices to define ‘male’ and ‘female’ based on sex assigned at birth and not as reflected in an individual’s gender identity, as required under California law, the District is interpreting and implementing this policy in a manner consistent with California’s legal requirements,” Juhl-Darlington said in the letter.
California Republican Rep. Kevin Kiley is opposed to the state order, arguing the weather conditions in Tahoe need to be considered.
“So in order to compete in a California league, you have to deal with this snowy weather and the travel dangers and so forth,” Kiley said.
The school board was expected to explain its solution to both join California’s CIF while playing in the NIAA through 2028 to parents and students Wednesday night at a board meeting.
So far, the California Department of Education has not said if it will accept this as a solution.
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