My understanding of the problem in California is that state laws have both capped the prices to consumers while hampering the way in which the utilities, which distribute to the consumer, purchase power from the generators. The utilities are not allowed to enter into the type of long-term deals that would guarantee a stable source of power at set rates. Instead, they are forced to pay whatever the producer demands at the moment without being able to pass that cost along to the consumer.

It is the power producers that are gouging; in this "crisis" they have been charging way more than is called for by increased costs in production. Capping the cost from the producers to the distributors is what Gov. Davis is after. Although the producers have been crying that the increased rates are called for by their increased exploration costs, they have been posting record profits.

The deregulation of the energy producers has created this situation; the power producers are no longer compelled to supply power to the utilities in California - they can sell anywhere they want for any price they can get. This was done, supposedly, to create competition and to lower prices. The reality is quite different. The same thing is going on in the telephone industry. All hail the free market.