By Gavin Benke
The infamous company is a cautionary tale as we grapple with the aftermath of catastrophe in Texas
As the deep freeze begins to lift and the lights come back on in Texas, millions of Texans are now contending with both a water crisis and outrageously high power bills. For some, the fiasco has revealed the dangers of a deregulated energy system, like the one we saw collapse in Texas. Yet, the usual champions of free enterprise are already warning against regulation — especially when it comes to climate change and energy policy. Rep. Dan Crenshaw (R-Tex.), for instance, falsely blamed Texans’ misery on policies intended to promote cleaner sources of energy. However, the story of Enron’s push for energy deregulation in the 1990s — and its consequences — should caution us against continued enthusiasm for deregulated energy or being scared by such warnings.
Lawmakers have long been attuned to the potential for boondoggles when it came to the nation’s power supply. During the 1920s, concerns about vertically integrated energy monopolies that controlled all elements of the power generating process led to New Deal initiatives such as the Public Utilities Holding Company Act (PUHCA). That law split up energy combinations and introduced price controls and other measures to regulate local utility monopolies.
Eventually, though, energy (like other industries) moved toward deregulation beginning in the late 1970s. Believers in the free market, including Texas energy executives like Enron’s Ken Lay, drove this change, actively pushing for deregulation in the 1980s and 1990s.
Infamously, Enron was a Houston-based energy company that pioneered the use of financial instruments in the natural gas business but collapsed in 2001 after years of accounting fraud came to light. Yet long before Enron became synonymous with white collar crime, the company’s leadership was deeply invested in energy deregulation. After finding success operating in the natural gas market (which had been deregulated in the 1980s), the company’s leaders, Lay and Jeff Skilling, turned their attention to electricity deregulation.
As Californians endured rolling blackouts and ballooning electricity prices (which translated directly into profits for Enron), the company’s government affairs team prepared a public relations effort to “stabilize the fallout from California, promote competitive markets and improve public perceptions.”
In truth, though, the damage was already beyond repair. Article after article in California newspapers blamed the West Coast energy crisis on what was going on in Texas. One San Francisco Chronicle story presented Lay as an ominous presence staring “out from his plush, 50th-floor office” with “Houston’s downtown skyscrapers jutt[ing] like sharp teeth against the overcast sky.”
Skilling traveled to San Francisco to defend electricity deregulation in a speech that was titled, “The Arrogance of Regulation.” Californians did not respond well to the argument. Perhaps expressing the desires of many, one Oakland resident managed to smash a pie in Skilling’s face.
Enron was never able to realize the goal of nationwide deregulation. The U.S. electricity system remains a patchwork of different regulatory systems across different states.
Yet, the legacy of Enron’s push lives on in Texas.
Read the full article in The Washington Post