Erie Times-News (PA)

POWER FAILURE February 6, 2002
Tag: 0F191768A868BBDB
Section: General Business Page: 1


Staff writer


The financial collapse of Enron Corp. is viewed by many as a story of greed, shady dealings and lost fortunes.


But the company's troubles also are unleashing a debate in Pennsylvania about whether regulators have been too quick to set up an open market for electricity.


Opponents of electricity deregulation say Enron took advantage of loosened rules to build its fortune. In turn, the company ultimately grew out of control and failed.


Free-market advocates, meanwhile, say Enron's collapse points to the success of electricity deregulation  as the markets continue to function and prices remain competitive despite the loss of one of the nation's largest electricity players.


In the middle are consumers, who must sort out whether they are being helped or hindered by a movement that promises more choices and lower prices for electricity.


For David Hughes, executive director of Citizen Power, a Pittsburgh-based lobbying group, Enron's demise offers proof that deregulation doesn't work.


Hughes, an outspoken opponent of open electricity markets, said the company used the deregulated marketplace to create holding companies, avoid government oversight and manipulate the market.


Ultimately, Enron's model collapsed, but Hughes said a more regulated market would have prevented the company's uncontrolled rise and sudden fall.


"Deregulation means government gives up its authority to protect us, to ensure things like reasonable energy costs," he said. "Removing government protection in critically needed services like electricity is especially risky, as we saw in California last year. And, once government gives up control, it is very difficult, if not impossible, to prevent or resolve a crisis like the Enron collapse."


But while Enron gives deregulation opponents more grist for their attacks on opening the market, those who favor deregulation say the company's collapse is about improper accounting and corporate oversight  not a failure of utility regulators.


"This story, to me, is a living, breathing Shakespearean tragedy in every sense of the word," said Nora Mead Brownell, an Erie native who serves on the Federal Energy Regulatory Commission. "The real story is a company that grew too fast. They got greedy."


Brownell, a former member of the Pennsylvania Public Utility Commission and the board of directors of the Times Publishing Company, is a staunch advocate of open markets.


"When people suggest competition didn't work and that's what Enron is all about, au contraire. It did work," Brownell said. "The energy markets actually worked. There was very little volatility (when Enron ran into trouble). (The market) did what it's supposed to do."


John Hanger, another former PUC member, said Enron does provide a call for more oversight  but not from energy regulators.
Hanger said Enron might have skirted accounting and securities rules, but its actions did not take advantage of consumers.


"(Enron) has had absolutely zero effect, positive or negative, in Pennsylvania," he said. "The last five years have been the best five years for electricity consumers in Pennsylvania in the last 30 years."


Hanger said state-mandated rate caps have held consumer costs stable and the ability for competing companies to enter the market gives consumers more choices.


Hughes, however, said he worries that as Pennsylvania continues to move ahead with opening its market to competition, it increases the risk that another company could take advantage of the loosened rules.


"Enron was the poster child for deregulation," Hughes said. "You can't have it both ways."



PETER PANEPENTO can be reached at 870-1707. Send e-mail to