This chapter told the story of how the 2000 California energy shortage was aggravated by price deregulation.
a. Suppose you are an entrepreneur who is interested in building a power plant to take advantage of the high prices for energy. Seeing rising energy costs, would price deregulation make it more or less likely you would build a new power plant? Why?
b. It’s very difficult to build and operate a new power plant largely because new plants have to comply with a long list of environmental and safety regulations. Compared with a world with fewer such regulations, how do these rules change the average total cost of building and operating a power plant? Why?
c. Do these regulations make it more or less likely that you will build a new power plant? Why?
d. Do these regulations increase or decrease the market power of power plants that already exist?