Collapse will not halt pressure for change
Financial Times (London)
Enron‘s collapse is unlikely to reverse the steady march towards a deregulated US electricity market, but it provides new ammunition for opponents who fear that consumers will get crushed by energy giants.
The electricity crunch in California this year was the first serious blow to deregulation. Almost half the states had deregulated or were on the way until rolling blackouts and soaring electricity bills raised red flags in the states yet to act.
In Washington, neither house of Congress has yet passed the legislation Enron badly wanted to build volumes in its trading business.
At the end of last week, members of the Federal Energy Regulatory Commission were signalling the conviction that the fall of the energy trading giant was unrelated to deregulation.
“The markets worked quite well,” said Nora Brownell, an FERC commissioner. “There was little volatility even after the (EnronOnline) screens went blank . . . If you could tell me why this failure is related to competitive markets, I’d be happy to listen.” Patrick Wood, FERC chairman, said Enron‘s failure was “a human tragedy but it is not an impediment to transparent power markets. In fact it makes the case to hasten their day.”
The FERC is expected to do just that this week. State officials who have been in talks with Mr Wood expect the commission to move forward with plans to require all transmission owners to join four large regional transmission organisations.
Mr Wood has told states the action should not be viewed as “a raid” on their jurisdiction but as “a necessary step to provide some needed certainty for investment in this crucial industry”.
The outlook for Congressional action on deregulation will become clearer during investigations into Enron announced last week by the energy committees of both houses of Congress.
The Republican-led committee will investigate Enron‘s accountants while Democrats in the Senate say they will examine the impact of the failure on the gas and electricity markets. But allegations that Enron overcharged in California when the state’s economy, its elderly and ill were at risk will not be overlooked.
Consumer advocates are already gearing up for the attack. “California rate-payers will pay billions too much for power over the next decades to foot the bill for price-gauging by Enron and its protegees,” said Doug Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.
“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 produce en route.”
Jeff Bingaman, chairman of the Senate energy committee, said his panel was “keenly aware” of the need for more oversight and market monitoring.
Although the pace of deregulation has slowed, it cannot be reversed, said Bill Brier of the Edison Electric Institute, which represents investor-owned utilities. To have half the states regulated, and half not “creates problems from the business standpoint”, he said. “We need the same rules throughout the country.”