invitation not to take him seriously. But his coworkers soon discovered that Peace had a real interest and aptitude in taking on the most intractable issues. There were whole continents of public policy where even the most hardened lawmakers didn’t dare to tread, areas that were so tedious and so complicated and so lacking in public exposure that they promised to swallow public-service careers whole. Regulating public utilities was one of these areas. Just the phrase “regulating public utilities” was enough to make a citizen change the channel or skip to the next news article. It was one of those ironic facts of America life: very few issues affected people more deeply than providing them with electricity, but very few issues drew less public interest.
For whatever reason, Steve Peace was profoundly interested in the topic. He learned the issue from top to bottom and from inside to out. If caught in the hallways of the state capitol, Peace could immediately be drawn into a heated and hours-long conversation about California’s utilities companies and regulatory structure. Because of this knowledge and interest, Peace was given more committee assignments and more responsibilities. He won a race to become a state senator, and became a leading authority on electricity and utilities.
This is how, in 1996, Steve Peace came to lead the state’s efforts to break apart the existing electricity industry and replace it with something new. Over a matter of months in 1996, he oversaw a grueling process—it would earn the nickname “the Peace Death March”—to produce a bill that was described as being as thick as a telephone book, which created the new markets for trading megawatt-hours.
When Peace held public hearings on the issue, he realized the audience for public policy debates was minuscule. But the hearings revealed a long and complicated history that reflected the changing nature of America’s economy. Back in the “hands-off” days of laissez-faire economics, in the late 1800s and early 1900s, California’s electricity was a free-market dream. Companies set up shop wherever they wanted and built big power plants and transmission lines to carry power. They charged a market price for electricity. But this turned out to be problematic. Electrical utility companies tended to be monopolies—there was really only room for one big company to operate in any given area, and it was expensive to build power plants and grids. The monopolies charged exorbitant prices for their power, because they could. They also refused to build transmission lines to rural areas or other neighborhoods where they didn’t feel like they could make a profit.
Electricity—and therefore modernity itself—was something of a luxury good. This was unpopular. People wanted the luxury of electricity, and the government responded to their wishes. This gave rise to a model that prevailed during the era of the New Deal consensus: the utilities remained monopolies with private owners, but they were tightly regulated and overseen by the government. Agencies like the California Public Utilities Commission were created to make sure that the utilities didn’t price gouge customers and that they offered reliable service.
This system worked so well that everybody forgot it existed. Rates remained reasonable, and the public commissions worked in the background to ensure it. Electrical power was extended into virtually every corner of American life and became something akin to a basic human right.
Then the age of volatility hit in the 1970s. Electricity prices rose along with those for oil during the era of the OPEC embargo. The bureaucrats who oversaw the electricity business didn’t know how to respond effectively. It seemed like they could never get the porridge just right; prices rose, and the utilities stumbled from one year to another without clear direction. The bureaucrats bickered. What price was “reasonable”? When was a rate increase “justified”? Public faith in the system diminished. At the same time, environmental laws made it harder to build new power plants. The American public put a premium on not living in the haze of a nearby coal plant and dying of respiratory illness at an early age while their children suffered from asthma. This slowed the construction of new facilities. Real scarcity of power emerged at times in California even as regulators managed to cut down electricity usage by encouraging conservation.
This stoked an effort to deregulate the industry in the 1990s. The idea was to replace highly regulated monopolies with competitive markets where people could buy and sell electricity freely. The power of the invisible hand would make electricity cheaper every day, and would give