Most of the problems with energy liberalization can be attributed to politicians bungling the process and ending up with something that is very far from a properly functioning market. That the messy result ends up performing worse than a government controlled market does not prove that a deregulated energy market is much better for the economy.
Exactly. "Deregulation" without the ability of actors within the system to set their own prices is pretty much a recipe for disaster. In a normal market you make more money by selling more product. In California the energy producers discovered that given their regulatory environment they could make more money by selling less product. The rest is history.
California's problems do show, however, that people shouldn't uncritically think that any sort of deregulation is good. Its always important to to think carefully about what sorts of incentive are being created in any deregulation.
