Does the appearance of memos detailing how Enron scammed the electric-utility system in California mean that the nation can forget about the vice president’s energy strategy, which tries to solve a problem it is now certain does not exist as portrayed? Will the answer of more oil drilling, more oil production and more electric transmission change now that the question has changed?
Probably not. Increased production creates its own demand, so the strategy of more always makes sense, except, naturally, for conservation. And besides, the administration has known for months that Enron manipulated the California market by creating false crises, sending prices up tenfold and leading state officials to order rolling blackouts. The memos released this week simply show how it was done and how Enron employees must have a sense of humor to devise funny names for devious tactics.
“Fat Boy” used an Enron subsidiary to draw less than a scheduled load, producing a payment to Enron the parent from the system for the surplus power generation. “Ricochet” sent power out of state to a third party at one price, with Enron selling back the power to California at a higher price. “Get Shorty” depended on creating a demand for non-firm service during a time of congestion, benefiting from congestion pricing and then cutting the power once the congestion charges were paid. There’s more – “Death Star” and “Load Shift” and “Wheel Out” – but they all took advantage of the complicated structure of electricity generation and transmission and profited through a deregulated market.
Besides problems like weather, Enron often said the energy shortage in California was caused by inadequate deregulation and, it turns out to be right – a more adequate reform would have caught Enron before it wrecked California’s economy to the extent it did. Law enforcement must decide whether the Enron scammers can be brought before a criminal court; Congress already is doing a nifty job in the public humiliation of Enron’s top officials. But the question of what this disaster means for electricity deregulation, especially deregulation within a national energy strategy has yet to be answered or even seriously asked.
It should be because the lack of an intelligent strategy designed to invest in the development of and to use a wide range of energy sources efficiently means that one well-heeled corporation can influence political leaders to its own advantage and to the disadvantage of nearly everyone else. Without a strategy, emergency measures such as the price caps in California evolve from a way to manage a crisis to a permanent policy. And the ever-shifting strategy of more – more power, more independence, more transmission, more market freedom – becomes acceptable in the absence of anything more thoughtful.
The combination of Enron’s influence on the White House, its misbehavior in California and the likelihood that if it could figure out how to game the system others could also means that the energy situation probably is worse than the mere congestion problems the company helped create. It is a problem that won’t be solved by the current strategy of more.