"You can't simply mandate that energy prices will be a certain amount if the power plants still have to buy natural gas and other power sources from the free market."

You can and that is what California did[1]. It lead to large scale blackouts, the first bankruptcy of PG&E, the successful recall of California's governor Gray Davis, and brought to light Enron's crazy company culture which lead to its bankruptcy.

[1]https://en.wikipedia.org/wiki/2000%E2%80%9301_California_ele...