Enron for Dummies
Or How Greedy Corporate Types Screwed Millions
Out of Billions
by Michael I. Niman
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Enron emerged from the high flying 90s as
a star among new economy corporations. Like Nike and Tommy Hillfiger,
factory-less companies that contract out for products they subsequently
brand, Enron essentially produces nothing. Nike buys and sells
sneakers. Enron trades energy. Originally an oil pipeline company,
they shed most of their bulky physical assets during the high
flying 90s, transforming themselves into the ultimate weightless
corporation, buying and selling anything and everything ranging
from energy futures to internet bandwidth, while essentially producing
almost nothing. On paper they were worth more than GM, but in
reality the company held few assets other than a handful of generating
plants. Enron was a paper tiger.
Their product was also nonexistent. They
didn't invest, for example, in building a new energy grid or significant
new generating stations. To the contrary, they invested in the
concept of an energy shortage. They bought energy, eventually
taking control of approximately 25% of the nation's wholesale
electricity supply. They then reaped astronomical profits last
summer selling this electricity to brownout-plagued Californians,
with prices shooting up into the stratosphere. The irony is that
California s electricity continued to flow from the same generating
plants it always came from, into the same homes where it was always
consumed. Enron didn't t build new generators or power lines.
No. They simply inserted themselves, on paper, between the generators
and the consumers in what historians will no doubt record as a
brilliant and sinister paper shuffle. Electric flow stayed the
same. All that changed was the concept of what electricity was
and who could own and trade it. In the end Enron became the central
player in a gargantuan rip-off dwarfed only by the S&L crisis
of the 1980s.
California's soaring electric rates sent
its economy, the fifth largest in the world, into a tailspin.
Power starved manufacturers laid off thousands of workers. Scores
of small businesses, unable to keep up with their electric bills,
filed for bankruptcy. And working Californians were forced to
choose between food and electricity. Many chose food and conservation,
in effect boycotting overpriced power a move that added to Enron
s financial woes as electric demand and prices dropped.
Despite the personal pain and economic mayhem,
Enron s California fiasco violated no laws. Years earlier, California,
seduced by false promises of cheap electricity, adopted a Republican
energy deregulation plan that opened the door for Enron and its
imitators to seize control of California s power. When the good
ship Enron came crashing down, they were in the process of trying
to do to the nation what they did to California. Key to their
plan was a corporate accrual of political power unprecedented
in American history. A quick look at George W. Bush s White House
illuminates both Enron s power and their plans.
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