In response to a comment (see below) by Jim Beyer,
As far as I understand, under Model 2, prices reflect the marginal plants costs, not the base load units costs; under Model 1, the usual mechanism is to transfer energy costs increases to the customer or the tax payer with a time delay. The timing is for a comprehensive national energy strategy.
As for your suggestions of the development of CHP, Model 1 and 2 are biased againt the development of the resources of the demand side.
Jim Beyer's comment:
I really don't think electricity prices are strongly tied to NG prices. I think there is something rather Californian about that way of thinking, because in the rest of the country, about 70% percent of electricity is generated from coal and much of the remainder from nuclear.
I won't dispute the problems with using coal w.r.t. GHG emissions, but in the short term, a shortage of NG shouldn't raise electricity prices too much -- at least not in California.