Industry officials Thursday cautioned US government regulators not to couple the recent financial troubles of Enron Corp. with restructured energy markets.
“Our market is large and vibrant and while the shake-up of Enron is a shock, it is not by any means a hole that will sink the ship,” said the Natural Gas Supply Association of America.
Several congressional committees are investigating the collapse of Enron, once the world’s largest gas and electric trader, now on target to be the largest corporate bankruptcy in US history (OGJ Online, Nov. 30, 2001).
Given the scale of the collapse, President George W. Bush’s administration is weighing in. Meanwhile, the Department of Energy said its independent statistical agency, the Energy Information Administration, will also study the possible impact of Enron woes on energy markets. A Securities and Exchange Commission investigation of Enron’s off-balance sheet partnerships earlier in the fall largely precipitated Wall Street’s disenchantment with the company. Now more regulators are stepping in to clean up the pieces. The Department of Labor Tuesday said it was conducting a separate review of how the company handled employee retirement plans after the stock price sank to under $1/share from nearly $90/share early this year.
Industry experts also anticipate the administration may seek to coordinate various agency investigations through an interagency task force of some kind. None has been announced yet. But administration officials stress the main thrust of any investigation will be to see why Enron’s auditors apparently failed to require Enron to disclose important financial information that made the company look much more profitable than it actually was.
The new chairman of the agency that oversaw much of Enron’s business dealings in the wholesale energy market, the Federal Energy Regulatory Commission, has said he shares NGSA’s view, saying that the bankruptcy is a “human tragedy” but that it should not be an indictment of open markets.
FERC officials say they are still monitoring the market to ensure customer deliveries are met. But if there has been any good news to come from the Enron debacle, it is the clear evidence that competitive markets do work, recently installed FERC Chairman Pat Wood and Commissioner Nora Brownell have said in recent interviews. And there are enough market participants to move in where Enron has left.
That’s a view shared by NGSA.
“Today, there are a multitude of participants in the natural gas market. There are almost 8,000 producers transporting natural gas with the help of 165 pipeline companies, which deliver natural gas to homes through over 1,000 local distribution companies,” NGSA said.
“Importantly, over 300 marketers, not just one, make all this happen by providing energy products and services. Since the Wellhead Decontrol Act of 1989, natural gas has been bought and sold competitively.”
What worries industry more are calls in Congress to consider new regulatory controls over energy markets.
Lawmakers like Rep. Ed Markey (D-Mass.) say energy derivatives need to be more tightly regulated so regulators have a better handle understanding the risks associated with trading portfolios.
Whether Congress will take any action is uncertain, congressional sources say, although any new proposals would likely not be considered until next spring at the earliest. Congress is scheduled to leave for a month-long recess in mid-December.
Taking aim at the energy derivatives market is possible, although attempts to curb wholesale competition along the gas grid are far less likely, congressional sources said.
However, new proposals to encourage open access in wholesale electric transmission markets may face tighter scrutiny, they added.