Editorial: Enron’s greed knew no bounds

Tuesday, May 14, 2002 | 8:54 a.m.

A year ago the West was battered by high electricity prices, a drumming that was particularly severe in California, which also reeled from rolling blackouts. California Gov. Gray Davis asked the Bush administration and the Federal Energy Regulatory Commission to intervene and put in place price caps to stop the hemorrhaging, but the Republican administration insisted that California's deregulated electricity market should correct itself. Energy trader Enron, a major GOP campaign contributor, claimed it wasn't responsible for the high prices, that it was the state law setting up deregulation that caused the energy crisis.

Well, internal Enron memos, made public for the first time last week, make it clear that Enron all along was manipulating the market. The documents not only revealed Enron's use of trading schemes to create artificial shortages in the electricity market, but the company also took advantage of the situation by commanding outrageously high prices. Other Western states also were affected by Enron's gaming of the market. As the Sun's Steve Kanigher reported last week, Enron's actions could have pushed up the wholesale prices that Nevada Power paid for electricity.

The memos also are an indictment of the Bush administration's hands-off policy to last year's energy crisis in the West. Ultimately, price caps were imposed by federal regulators in April last year, but Vice President Dick Cheney still was opposed to the restraints. "Price caps are not a help," he told the Los Angeles Times a short time after the Federal Energy Regulatory Commission implemented the controls. "They take us in exactly the wrong direction." Despite Cheney's statement, the price caps did play a role in lowering electricity costs. If anything, it was the Bush administration's laissez-faire approach that emboldened the energy traders, including Enron, to gouge electricity customers.

So what lessons should be gleaned from the Enron disclosures? For starters, deregulation should be put on hold -- for a long time. Going from a completely regulated market to one without substantial government oversight is a recipe for disaster, especially when it involves a commodity as essential to our daily lives as electricity. And federal and state regulators should be more aggressive in dealing with energy companies, investigating their practices more rigorously to make sure that they're not pulling an "Enron" on unsuspecting consumers.