The Houston Chronicle
SAN FRANCISCO – If there’s one market that might applaud the mounting financial woes facing energy giant Enron Corp., it’s California, whose power sector was shattered by the market deregulation that Enron tirelessly champions.
Last summer, angry Californians tossed a pie at former Enron Chief Executive Jeff Skilling during a speech in which he blamed state regulators for causing the energy crisis.
California officials, led by Gov. Gray Davis, blasted Houston-based Enron and other out-of-state power companies for creating the emergency, accusing them of manipulating the market and jacking up prices.
But with Enron now facing a credit crunch and a full-scale probe by U.S. regulators into questionable financial dealings, California officials are holding back their harshest criticism, saying instead there are lessons to be learned from Enron‘s predicament.
And some of Enron‘s toughest critics, among them Davis and Loretta Lynch, president of the California Public Utilities Commission, would not discuss the company’s woes.
“You reap what you sow, but I don’t think anyone wants to pile on them right now,” said a state government source.
Many Californians cited ongoing business and creditor links with Enron as reasons not to hurl stones at the energy giant.
Enron is by far the nation’s largest trader of electricity and natural gas, with energy analysts estimating it is involved in some 25 percent of the daily trade in those markets.
Transactions on the company’s widely watched Internet-based EnronOnline trading system are currently estimated to average $ 3 billion to $ 4 billion a day.
“Business cycles come and go,” said Greg Pruett, spokesman for San Francisco-based energy company PG&E Corp., whose Pacific Gas & Electric unit, California’s biggest utility, filed for federal bankruptcy protection in April in the wake of the energy mess.
“We are wrestling with our own situation, and you can appreciate what Enron is going through,” Pruett said.
California’s power agencies, forced into buying emergency electricity for the state earlier this year when the state’s investor-owned utilities ran out of credit and cash, said they have financial ties with Enron.
“Their situation is not ringing alarm bells for us,” said Gregg Fishman, a spokesman for the Independent System Operator, which manages the state power grid.
The Independent System Operator owes Enron money for purchases of daily power supplies but Fishman declined to say how much.
Aside from a 30-day supply contract earlier this year, Enron does not have any current power deals with the state’s Department of Water Resources, said Oscar Hidalgo, spokesman for the agency that negotiates long-term agreements.
One top California energy regulator, however, said Enron‘s troubles offer an important lesson for energy markets.
Carl Wood, a CPUC commissioner, said the deregulation of markets for basic services like electricity “threatens as much financial volatility and instability as we have seen in the telecommunications and the dot-com industries.”
“Enron is the flagship for deregulation, but there are definite dangers of venturing into unregulated market behavior,” Wood said. “Enron itself apparently is becoming a victim of sorts.”
“The unregulated energy industry rises faster, but it also falls further,” said Doug Heller of the Foundation for Taxpayers and Consumer Rights, an advocacy group in Santa Monica, Calif.
“It’s OK for a free market to operate for things like computers and other goods but energy is different. Regulatory structures are needed to protect customers,” he said.