The crux of the current energy crisis lies in the conflicting
regulations governing wholesale markets and retail markets.
Deregulation lifted controls in the wholesale markets while
retaining price caps on retail rates. As a result, when prices
shot up on the wholesale market, utilities were unable to pass
on these rate increases to the consumer and were forced to take
a loss. This drove PG&E into bankruptcy in California. The
wholesale markets existed even before deregulation. However,
before access to transmission lines was opened, the trade was
constrained. Since then, the number of companies participating
in the market has grown considerably and trade takes place
similar to other commodity futures, with transactions typically
including daily, monthly, and long-term contracts for energy
supply. The regions for which these contracts are made are
delineated by the power grid and the major transmission lines,
regions which don't correspond exactly to state lines. For
example, Southern California is covered by