Enron Drove Utility Deregulation: Dominated Radically Restructured Energy Markets
March 2002 IBEW Journal
For a decade Enron fiercely dominated a radically restructured U.S. energy market it helped to create. Enron amassed vast political powerand it wielded that power aggressively in its drive to force through rapid and radical deregulation.
Enron spent huge sums on political contributions and deployed legions of lobbyists to push deregulation of natural gas and electric markets at the federal and state level. It spread money around and was enormously involved in the political arena. Enron also effectively utilized a rotating door policy. Many of its lobbyists were former government officials; and, vice versa, numerous one-time Enron employees and consultants now hold public office.
Enrons mantra was unfettered markets and its goal was to eliminate regulatory oversight. The companys "financial successes were in no small part the byproduct of its political and regulatory campaigns to deregulate the marketplace," reported The New York Times.
The IBEW has long warned about the dangers of rapid, radical restructuring of the electric sectorand worked against Enrons predatory energy deregulation at the expense of reliable, safe and affordable electricity. Despite Enrons demise, the legislative, regulatory and political battles over deregulation will no doubt continue.
"The IBEW fought Enron face-to-face for 10 years in state and federal venues over deregulation," said James Dushaw, IBEW Utility Department director. "Enron was a ubiquitous, powerful presence in every state and certain provinces in Canada, wherever energy market restructuring was at issue. And in Washington, it literally sat with the President, interviewed his nominees and generally walked with a swagger rarely seen in democracys capital."
Enron was a big player in passage of the 1992 National Energy Policy Act, which vastly restructured the wholesale electrical utility industry and set the stage for an attempted introduction of retail wheeling. Since that Act, utilities have undergone massive change including mergers, buyouts and downsizing. "The industry has regressed in providing reliable service under deregulation," Dushaw said. "And other unnamed victims of Enron include consumers who have paid through their utility bills and communities that have lost jobs."
Enron was formed in 1985, when InterNorth bought Houston Natural Gas. In the early 1990s Enron transformed itself from a small gas pipeline company into a global player in commodities trading. It bought and sold contracts for natural gas, electricity and increasingly diverse derivatives as if they were pork belly futures. Enron built a finance and trading empire, eventually revealed to be a financial house of cards supported by shell companies sporting names like Jedi and Chewbacca, expropriated from the characters of the movie "Star Wars." Like the film, Enron turned out to be a fantasy. Unfortunately, however, Enrons failure is all too real.
The industrys smaller players regarded Enron as a mega-predator, bent on fencing out or devouring competitors. "Enron took on the utility industry and was an aggressive, intimidating force," Dushaw said. "Enron tended to roll over its opponents and competitors because of its political and financial power."
At its peak Enron was the largest energy marketer in the United States and handled nearly one-quarter of the nations energy trading, chiefly as a middleman. Enron inserted itself "in the middle of transactions that had been going on quite nicely without its help for about a century," reported Customers First!, a Wisconsin coalition (which includes the IBEW) committed to preserving reliable and affordable electricity. "This supposed torchbearer for deregulation simply added another layer to the transaction," observed Customers First!
In every deregulation battle, the IBEW has consistently maintained that people must come firstworkers and consumersand has argued for the importance of reliable service, especially the need for companies to retain a skilled, well-trained workforce.
Enron and its executives took a starkly different view. Former Enron executive Jeff Skilling, who resigned suddenly in August 2001, captured Enrons cavalier attitude when he said that success in a changing energy business required utilities to "depopulate and get rid of people." He added that people "gum up the works."
Despite Enrons fall, energy legislation is still pending in Congress. It remains to be seen what impact the Enron debacle will have on future energy deregulation measures. President Hill has assured that the IBEW will continue to speak out with a strong voice for working people and consumers on these issues.