FERC
OVERSIGHT OF ENRON
RANGED FROM
"NAIVE" TO "NEGLIGENT"
AGENCY FAILED TO ANTICIPATE CHANGING MARKET
WASHINGTON
- Governmental Affairs Committee Chairman Joe Lieberman, D-Conn.,
Tuesday said an exhaustive committee investigation has concluded
that federal energy oversight of Enron Corp. was "an
embarrassing and unacceptable" failure of government that
came at the expense of energy consumers, Enron employees, and
Enron investors.
The
Federal Regulatory Energy Commission, which had responsibility
over Enron’s energy business, more often than not trusted
Enron’s assertions about its business affairs, failed to
anticipate and prepare for changes in the energy market, reacted
belatedly to many serious offenses, and made no effort to
address the gaps, flaws, and inadequacies that allowed Enron to
escape scrutiny.
"Again
and again, FERC failed to ask critical questions about Enron’s
business practices—questions that might have exposed the
fissures in Enron’s fiscal foundation sooner and spared
investors, employees, and consumers some of the pain they have
endured," Lieberman said.
His
comments came during the latest in a series of hearings held by
the Governmental Affairs Committee on what federal and private
sector watchdogs did and did not do to expose and prevent the
questionable business practices of Enron in the months and years
leading up to the company’s collapse.
"FERC’s
slipshod analysis is especially indefensible because Enron was
not simply another player in our energy markets," Lieberman
said. "By the time of its collapse, Enron had grown to
become the seventh largest company in the nation—the largest
electricity and natural gas trading company—and a company that
made no secret of its ambitions to grow even larger."
The
investigation, conducted by the majority staff of the Committee,
found the most egregious examples of lax FERC oversight in four
areas: the company’s treatment of certain wind farms and their
special rate status; the operation of Enron Online—Enron’s
electronic trading platform—which it now appears Enron may
have leveraged to its unfair advantage against customers in the
marketplace; the handling of transactions between Enron and its
affiliated companies; and Enron’s actions during the West
Coast energy crisis last year, which raised electricity prices
in California, Oregon, Washington, and other Western states by
billions of dollars.
"In
these four cases, FERC’s oversight ranged from naive at best,
to negligent at worst," Lieberman said. "Oftentimes,
FERC seemed to view itself not as a regulator but as a
facilitator—not as a market cop, but as a market cheerleader,
which left consumers without protection."
Particularly
"ironic and irresponsible," Lieberman said, is that
FERC exhibited no vigilance to ensure that everyone obey rules
of fair play in the deregulated marketplace that FERC itself had
helped to create.
"No
matter how passionately we believe in capitalism as the best
system for economic growth and opportunity, the invisible hand
cannot do it all," Lieberman said. "Markets have no
conscience. To ensure markets of integrity, as well as
efficiency, as well as profit, that invisible hand needs to be
assisted by the firm hand of government oversight in the name of
ethics.
"Can
deregulated markets be left to police themselves, or does
government need to become more vigilant in ferreting out abuses
than it has been? The results of this investigation answer that
question definitively: unregulated and unprotected energy
markets are a recipe for disaster for consumers and businesses
that need to buy energy."
Senator
Lieberman Statement
Committee
Staff Investigation of
FERC's Oversight of Enron Corp.
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