News Release

Behind the Enron Collapse

DOUG HELLER
Consumer advocate with the Santa Monica-based Foundation for Taxpayer and Consumer Rights, Heller said today: “Enron created itself through a growing corporate vision: If you want market share, create a market, even if there is no need for it. The ‘make a market’ mantra, in conjunction with Enron chairman Kenneth Lay’s longstanding ties to political leaders — Lay was one of President Bush’s biggest donors and was an energy advisor to Vice President Cheney — shifted the nation’s energy system from regulated monopolies to a deregulated, wholesale market-based system with few rules. Lay took in $141.6 million in salary, bonuses and stock in 2000 and another $20 million earlier this year. Meanwhile, California ratepayers will pay billions too much for power over the next decades to foot the bill for price gouging by Enron and its protegees. The moral for society should not only be that markets need rules and limits, but also that some things don’t need markets at all. Enron took over a system that reliably moved a public good — electricity — from power plant to home. It used deregulation to make money out of nothing, simply by adding cost to the product en route. Federal regulators should ensure that if Lay or other Enron executives deceived the public, they pay a price.”
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ARJUN MAKHIJANI
Makhijani, president of the Institute for Energy and Environmental Research, said today: “The collapse of Enron shows the weakness of having an energy market without regulatory oversight…. Enron’s collapse could mean the resolution of the dispute with the Indian government over a power plant in India that involved Enron charging unconscionably high prices. That’s been a major source of conflict between the U.S. and Indian governments.”
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TYSON SLOCUM
Research director of Public Citizen’s Critical Mass Energy and Environment Program, Slocum said today: “Although Dynegy’s acquisition of Enron was called off, Dynegy still is trying to acquire Enron’s most lucrative asset, the Northern Natural Gas line which runs from fields in Texas’ Permian Basin to 14 states throughout the Midwest, Southwest and West. According to news reports, Dynegy used $1.5 billion from its part owner, ChevronTexaco, to provide liquidity to Enron after the merger was announced. Now, Dynegy says it plans to claim 100 percent of the equity in Northern Natural Gas, which was used as collateral for the transaction. Business Week recently estimated the pipeline is worth $2.25 billion. Now ChevronTexaco can connect the dots between its nearly 3 billion cubic feet of daily domestic natural gas production and Dynegy’s 23,500 megawatts of electricity generation, since two-thirds of its electricity is generated by natural gas. This synergy of collusion will create America’s largest vertically integrated energy company, enabling Dynegy to charge its customers higher prices for natural gas and electricity, and force its power generation competitors to pay monopolistic prices for natural gas.”
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For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; David Zupan, (541) 484-9167