Abstract

The major problem in electricity industry is to meet volatile demand with a supply which necessitates considerable amount of fixed cost. In a stable, undistorted market, investors' risk premium is lower than in a market characterized by high regulatory and political risk. This argument shows that, without poorly structured regulation, the risks born by several supply and demand shocks can be eliminated by market mechanisms. Parallel to this, political considerations favoring some part of the community and isolating customers from what happens on the production side, might cause a big failure.This argument were tested in the summer of 2000. In those hot days, wholesale electricity prices in California were 500% higher than the same season before new regulatory system. This price peak was a surprise and called into question whether electricity restructuring would bring the benefits of competition promised to consumer. This difficulty not also threatened the US but also the other renovations of electricity regulation of other countries. On the other side of the ocean, Turkey is a country which is on the edge of deep revolutions in electricity. It may be considered that there are a lot of lessons to be taken from California Electricity Crisis for developing countries like Turkey. But it should be an apple-orange comparison without noticing different circumstances of California and Turkey. In this paper it is aimed to examine the conditions that mainly effectuate California Crisis and to evaluate those conditions for Turkey.Comparison of the electricity industry before the new regulatory system in California and Turkey's position today is given firstly. Later the regulatory systems adopted by California and Turkey are analyzed. Non-economic factors are examined in third part. Fourth part is about regulatory decisions which caused crisis. Finally, the lessons drew from the crisis for Turkish electricity industry are summarized.

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