Why were prices so high in San Diego in the summer of 2000?
When the retail rate freeze ended for the San Diego Gas and Electric (SDG&E) territory after summer of 1999, retail electric rates from SDG&E were tied exclusively to short-term wholesale market prices. The Summer 2000 rates rose dramatically because the local utility at the direction of California regulators relied exclusively on the wholesale spot market to provide for all customer demand, which was on the rise. Those volatile, often high-priced, short-term markets set consumer electric prices. In addition, the cost of making electricity increased dramatically between 1999 and today. Natural gas, used to power most plants in California, had more than doubled in price since restructuring began and the costs to purchase air emissions rights required to operate a power plant in the Los Angeles basin increased eight-fold. Finally, fundamental supply and demand issues drove prices upward. Net imports of power from neighboring states were far lower than in previous years, and demand grew b
