With the recent settlement with Reliant Energy this month, California’s Attorney General has so far recovered $5 billion of charges by wholesale energy providers obtained through illegal manipulation of the markets in 2001. He is seeking $9 billion. That’s Billion with a “B”.

This amount doesn’t include the charges obtained through legal manipulation (i.e. not reflective of fundamental supply and demand) of the markets.

As the California markets unravelled in 2001, the State itself had to step in literally overnight, shovelling 2 to 4 million dollars an hour into the coffers of the IPPs, to the keep the economy afoot since the large utilities were unable to buy the power for the next day due to credit issues and the IPPs weren’t in a lending mood.

I know this since it was people from my firm working 18 hours days in the cramped state offices helping to keep the economic wheels turing. I was sitting in my office in Tektite when this happened. A few months later I had hightailed it back to California to help out - been here since.

There is no perfect market design. Is the Philippine Energy Regulatory Commission up to the task of proactively staying on top of things as we move into a brand new area of competitive electricity markets? Is the government ready to backstop?

Back in the 80s and early 90s when the ERB spent 98% of its time regulating oil prices, the Board consisted primarily of ex-oil industry execs, believe it or not. There is now a uncomfortable trend for current Commissioners to be ex-Napocor execs, believe it or not. Will they simply trust the IPPs to do good?

I made a presentation in Manila in December 2001 on the Crisis. Pretty boring; but the last slide - Lessons Learned - is important.

Perhaps EPIRA’s restructuring is taking us in the right direction, but the lesson from California is that the government better be carrying a big stick.