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Enron's Swoon Imperils Grand Experiment
Wall Street Journal ^ | November 30, 2001 | Rebecca Smith, WSJ Staff

Posted on 11/30/2001 2:10:53 AM PST by snopercod

Edited on 04/22/2004 11:45:44 PM PDT by Jim Robinson. [history]

It was one of the great fantasies of American business: a deregulated market that would send cheaper and more reliable supplies of electricity coursing into homes and offices across the nation.

But look what's happened instead. Enron Corp., the vast energy trader at the center of the new freewheeling U.S. power markets, now faces collapse amid a blizzard of questionable financial deals. And California, the first big state to deregulate its electricity market, has watched its experiment turn into a disaster, with intermittent blackouts and retail power rates as much as 40% higher than they were a year ago.


(Excerpt) Read more at interactive.wsj.com ...


TOPICS: Front Page News; News/Current Events
KEYWORDS: calpowercrisis; calpowergate
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We can only hope that the Davis administration people who invested in energy stocks this summer lost a bunch of money.
1 posted on 11/30/2001 2:10:53 AM PST by snopercod
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To: *calpowercrisis; *calpowergate; randita; Ernest_at_the_Beach; Robert357; SierraWasp; Carry_Okie
bump
2 posted on 11/30/2001 2:12:13 AM PST by snopercod
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To: snopercod
First the federal governmnet deregulated the airline industry, and now we're spending $billions to bail the industry out.

Then the federal government deregulated the energy industry, and now it's costing taxpayers/investors $billions of dollars.

What's next to deregulate, the military?

One must admit there are certain areas where government control is best.

3 posted on 11/30/2001 3:14:57 AM PST by Tuco-bad
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To: Tuco-bad
NO, everything you cited involved some degree of
ongoing government interfearence.

look at california energy, they deregulated the cost
of the energy but not the price companies could charge
consumers. They elimante the unweildy regulatory body and
then impose laws which hamstring competition.

The airline bailout is an excuse. (the airlines needed some 9/11 assitaince, but the bailout was something they wanted from before and were lobying before 9/11) These mismanaged airlines
should be in chapter 11 reorganization. and if they fail
they should close. (see their stocke prices) Deregulation has been a benefit to
the consumer in the airline industry. (lower ticket costs and more choices)

The new "security" air line bill is just a pass the cost to
the consumer scam. Watch all the security agents will be
retired overweight cops, mental job wanabees, given as
political favors by puff dashel and his mob, or places you put bad
federal agents. The lawyers will have a field day
tapping into the overzelous wacko searches.
Don't believe me, next time you go to any public
place/building with security and see
who you have as asecuity agent.

4 posted on 11/30/2001 3:41:09 AM PST by aabbccddeeff
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To: Tuco-bad
Question: Why did deregulation fail in California but succeed in Pennsylvania?

Might it have something to do with the fact that Pennsylvania actually deregulated, while California tried to regulate in a different way while calling it deregulation?

Might it be because the Governor of Pennsylvania was one of those greedy pro-business/pro-oil company Republican types while in California, it wasn't?

5 posted on 11/30/2001 3:59:27 AM PST by Hugh Akston
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To: Tuco-bad
Great idea actually. Deregulating the Military, that is. Actually a founding princible: check out the history of letters of Marque and Reprisal.
6 posted on 11/30/2001 4:23:13 AM PST by bvw
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To: aabbccddeeff
The new "security" air line bill is just a pass the cost to the consumer scam. Watch all the security agents will be retired overweight cops, mental job wanabees, given as political favors by puff dashel and his mob, or places you put bad federal agents.

I'm not disagreeing, but the true purpose of the "security" bill is to ensure that American citizens provide the security, not a foreigner (80% foreigners at Dulles Airport), who might harbor anti-American feelings.

7 posted on 11/30/2001 4:24:08 AM PST by Tuco-bad
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To: Hugh Akston
Why did deregulation fail in California but succeed in Pennsylvania?

Yeah, sure! How did it suceed in Pennsylvania?

8 posted on 11/30/2001 4:25:33 AM PST by Tuco-bad
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To: Tuco-bad
We get good service, we have choices, and rates are down.
9 posted on 11/30/2001 4:27:39 AM PST by Hugh Akston
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To: Tuco-bad
First the federal governmnet deregulated the airline industry

Oh is that so? Last I heard the Federal Government pretty much has control over everything and everyhow in the air biz, excepting perhaps lease and capital. Maintainence and personnel standards are set by the Feds, monitored by the Feds. Air Traffic Control is Federal. Security is now Federal.

What exactly is deregulated?

10 posted on 11/30/2001 4:28:36 AM PST by bvw
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To: Tuco-bad
First the federal governmnet deregulated the airline industry, and now we're spending $billions to bail the industry out.

Riiiiggghhhht. It was deregulation. Nothing to do with September 11th.

And those darned World Trade Center buildings just fell down by themselves, too. OH, WHEN WILL WE FEDERALIZE THE CONSTRUCTION INDUSTRY?!?! (wringing hands, gnashing teeth, rending shirt)

11 posted on 11/30/2001 4:31:00 AM PST by Lazamataz
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To: Hugh Akston
We get good service, we have choices, and rates are down.

SHUT UP! SHUT UP! SHUT UP!

Regulation is the only answer! Facts mean nothing here! Regulation is the key! </Tuco-Bad>

12 posted on 11/30/2001 4:32:28 AM PST by Lazamataz
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To: snopercod
What we have here is "vocabulary abuse".

Not all forms of "deregulation" are equal.

The terms of debate must include precise and accurate descriptions of the various state schemes that contributed to this mess.

The good news- overall macro economics will still kick in at some point.

People who need power will acquire it by other means as the price of centralized power floats to unacceptably high levels.

Nowhere is it written all power must be centralized to be efficiently produced and distributed.

13 posted on 11/30/2001 4:34:04 AM PST by Copernicus
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To: Tuco-bad
One must admit there are certain areas where government control is best.

Let's see, Enron's upper management and major shareholders were crooks, and California's socialist energy scheme collapsed.

Your hero Clinton was on the watch while Enron's management was playing number games to rip off it's other shareholders, why doesn't he get any credit?

I have actually seen other examples of this: Companies doing great under Clinton because they could cook the books all they wanted and get away with it, but when Bush took charge all the shenanigans had to stop.

I wonder how much of the miracle economy was due to just that kind of game and how much the current recession is just the chickens coming home to roost.

14 posted on 11/30/2001 4:37:20 AM PST by hopespringseternal
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To: Lazamataz
Heck, we even have an energy provider whose pitch is not low prices or anything like that, but rather that they are environmentally friendly. Even the greenies get some benefit from the arrangement.
15 posted on 11/30/2001 4:43:13 AM PST by Hugh Akston
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To: Hugh Akston
We get good service, we have choices, and rates are down.

Well now that the energy scam companies (i.e., Enron) are under public scrutiny, that just might stay down, but don't bet the mortgage on it.

16 posted on 11/30/2001 7:02:56 AM PST by Tuco-bad
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To: hopespringseternal
I wonder how much of the miracle economy was due to just that kind of game and how much the current recession is just the chickens coming home to roost.

Did I ever say different?

17 posted on 11/30/2001 7:05:47 AM PST by Tuco-bad
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To: Tuco-bad
Republian Governor in Pennsylvania. Democrats are failures everywhere.
18 posted on 11/30/2001 7:07:31 AM PST by bmwcyle
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To: bvw
What exactly is deregulated?

Not much. Even if classic deregulation does exist, there are pockets of regulation that no one seems interested in. Like the Wright amendment that keeps commercial flights out of Love Field (Dallas) bound only to one of 4 contiguous states. That's absurd. Southwest Airlines would probably offer a $60 super saver 1 way from Dallas to DC or Boston.

19 posted on 11/30/2001 7:10:57 AM PST by 1L
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To: Tuco-bad
Public scrutiny is a very good thing. Caveat emptor.

Government regulation is a very bad thing.

If a scam company falters here and has to raise rates, they lose customer share to their competitors. Long term, the well run companies end up with the largest market share (because they keep their customers and they add the customers from the poorly run companies that end up having to raise their rates).

20 posted on 11/30/2001 7:14:38 AM PST by Hugh Akston
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To: Tuco-bad
The main reason that we had lower energy prices in California was threefold: 1) we had one of the coolest summers in decades, and 2) Energy consuming businesses cut operations, left, or stopped planned expansion (we call that a recession Tuco dear), and 3) Davis bought so many power contracts that he later had to sell the excess and those sales drove the price down further.

You are demonstrating the usual idiotic socialist reasoning that goes about two inches deep into a subject and therefore assumes sufficient knowledge to make investment decisions for everybody else. Meanwhile you apparently never considered that the airlines are a heavily subsidized business and might lose to economic substitute goods such as fiber-optic teleconferencing if regulations were removed. Why is that a bad thing?

21 posted on 11/30/2001 7:20:33 AM PST by Carry_Okie
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To: Hugh Akston
Overstatement alert on my part. Government regulation in most cases is a bad thing.
22 posted on 11/30/2001 7:21:13 AM PST by Hugh Akston
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To: Tuco-bad
Tuco;

Long time no see.

Hugh do alarms go off on your pc when Tuco chimes in?

23 posted on 11/30/2001 7:31:17 AM PST by CPT Clay
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To: Tuco-bad
Did I ever say different?

I thought government regulation was going to save us all. Why didn't it save us from Enron and Gov. Davis?

24 posted on 11/30/2001 7:34:30 AM PST by hopespringseternal
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To: Tuco-bad
"First the federal governmnet deregulated the airline industry, and now we're spending $billions to bail the industry out.

Then the federal government deregulated the energy industry, and now it's costing taxpayers/investors $billions of dollars.

What's next to deregulate, the military?"

AmTrack (ooops, that one is highly regulated, and it is already costing taxpayers Billions).

25 posted on 11/30/2001 7:43:46 AM PST by Southack
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To: hopespringseternal
When the re-insurers fall?
26 posted on 11/30/2001 7:49:06 AM PST by bvw
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Comment #27 Removed by Moderator

To: bvw
When the re-insurers fall?

When that happens...the fit will really hit the shan. When companies can no longer off-load their real liabilities/exposure because the re-insurers aren't out there...there will be interesting times.

28 posted on 11/30/2001 8:03:34 AM PST by beowolf
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To: snopercod
Great article, not much to disagree with.

We can only hope that the Davis administration people who invested in energy stocks this summer lost a bunch of money.

Price: 22.04 Change: -0.34
11/30/01 12:31 PM (minimum 20 minutes delayed)

Stock Chart

From a high of 60 to nearly 20. They must have lost some money, certainly would not have made much unless they were holders before the crisis started!

29 posted on 11/30/2001 8:57:22 AM PST by Ernest_at_the_Beach
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To: Carry_Okie
Energy consuming businesses cut operations, left, or stopped planned expansion (we call that a recession Tuco dear),

Energy consuming businesses cut operations, left, or stopped planned expansion because of HIGH energy prices thanks to scams ENRON etc. were running (we call that CREATING a recession Carry_Okie dear),

30 posted on 11/30/2001 10:03:23 AM PST by Tuco-bad
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To: hopespringseternal
I thought government regulation was going to save us all. Why didn't it save us from Enron and Gov. Davis?

Becasue the energy market in California was deregulated.

31 posted on 11/30/2001 10:05:40 AM PST by Tuco-bad
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To: snopercod
And California, the first big state to deregulate its electricity market, has watched its experiment turn into a disaster

An absolute unmitigated lie. California has never deregulated the electricity market.

32 posted on 11/30/2001 10:07:40 AM PST by Demidog
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To: Tuco-bad
The energy market was not deregulated. Hogwash.
33 posted on 11/30/2001 10:08:25 AM PST by Demidog
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To: Southack
AmTrack (ooops, that one is highly regulated, and it is already costing taxpayers Billions).

Never said all government regulation was good.

BTW - Are you still in business, I hear that companies out outsourcing much of their IT budgets to India, and engineering budgets (e.g., Boeing) to Russia.

If that's true, many of our high-tech friends on the Free Republuic will soon be on the bread lines.

34 posted on 11/30/2001 10:10:14 AM PST by Tuco-bad
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To: Tuco-bad
Energy consuming businesses cut operations, left, or stopped planned expansion because of HIGH energy prices thanks to scams ENRON etc. were running (we call that CREATING a recession Carry_Okie dear)

BZZZZZT wrongo! Shows how much you have been following the California power crisis. The biggest scammers causing high energy prices were PUBLIC power agencies, DWR, Bonneville, and LADWP. Best that you go to the calpowercrisis and calpowergate lists and start reading the couple of hundred threads you have apparently ignored. Now, that is not to say that there has not been manipulation of the gas market, but then you would have to ask Bill Clinton why he set aside the Western Slope of the Rockies and closed it to gas exploration. Guess who that benefitted?

35 posted on 11/30/2001 10:30:02 AM PST by Carry_Okie
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To: Tuco-bad
Becasue the energy market in California was deregulated.

Lie all you want, it will always be a lie.

So what lie do you have to tell about SEC regulation of Enron not preventing its downfall?

36 posted on 11/30/2001 10:37:22 AM PST by hopespringseternal
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To: snopercod
Kind of odd to apply the energy de-regulation argument to fraudulant financial book-keeping, just because a company that did so was in the energy business.
37 posted on 11/30/2001 10:39:01 AM PST by lepton
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To: bvw
Great idea actually. Deregulating the Military, that is. Actually a founding princible: check out the history of letters of Marque and Reprisal.

Placing the profit incentive to find criminality with those who define criminality is a bad idea. Bounties work fine when those pursuing them don't get to create the call, and where those that create the call don't profit.

38 posted on 11/30/2001 10:42:47 AM PST by lepton
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To: hopespringseternal
So what lie do you have to tell about SEC regulation of Enron not preventing its downfall?

If the SEC let Lazio get away with insider trading, why should the SEC care about Enron?

39 posted on 11/30/2001 10:45:06 AM PST by Tuco-bad
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To: Carry_Okie
The main reason that we had lower energy prices in California was threefold: 1) we had one of the coolest summers in decades, and 2) Energy consuming businesses cut operations, left, or stopped planned expansion (we call that a recession Tuco dear), and 3) Davis bought so many power contracts that he later had to sell the excess and those sales drove the price down further.

You forgot: 4) Temporary higher prices supported increased well openings which increased supply. There are more than twice as many domestic natural gas taps as there were at the beginning of 2000.

40 posted on 11/30/2001 10:47:28 AM PST by lepton
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To: Tuco-bad
If the SEC let Lazio get away with insider trading, why should the SEC care about Enron?

Wait, you said regulation was good. If Lazio and Enron can get away with insider trading, what use is regulation?

41 posted on 11/30/2001 10:48:12 AM PST by hopespringseternal
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To: Tuco-bad
If the SEC let Lazio get away with insider trading, why should the SEC care about Enron?

Wait, you said regulation was good. If Lazio and Enron can get away with insider trading, what use is regulation?

42 posted on 11/30/2001 10:50:57 AM PST by hopespringseternal
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To: Tuco-bad
It's important to note that Enron isn't in trouble for what it did as an energy company, it's not even in trouble for not being profitable. They're in trouble for cooking the books. I'm not sure if it's in this WSJ article but it is in one I read this morning, their auditors were recommending adjustments to their profit and loss statement that were 50% of the net profits (as figured before the auditors showed up), Enron decided that those changes were not material (that's an accounting term but there are no real accountants out there that will tell you that 50% of something is not material). Now they've been caught, so the stock price is gonig through the floor, they're going to be fined up one side and down the other. But when the smoke clears they're still going to be a profitable energy company, just not as profitable as they've been saying they are.
43 posted on 11/30/2001 10:51:17 AM PST by discostu
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To: hopespringseternal
If Lazio and Enron can get away with insider trading, what use is regulation?

Good point, federal agencies (i.e., SEC) should do their jobs, or disband.

44 posted on 11/30/2001 11:06:08 AM PST by Tuco-bad
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To: lepton
Indeed, funny how that works. Higher prices brought more supply... gosh.
45 posted on 11/30/2001 11:06:19 AM PST by Carry_Okie
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To: discostu; CT; cdwright; Dog Gone; unixfox; StriperSniper
FYI bump.
46 posted on 11/30/2001 11:07:33 AM PST by NotJustAnotherPrettyFace
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To: discostu
But when the smoke clears they're still going to be a profitable energy company, just not as profitable as they've been saying they are

If your rignt at 29 cents a share, one could make a lot of money (think Penn Central).

BTW - I just put my mouth where my mouth is; bought 1 share of Enron.

47 posted on 11/30/2001 11:09:13 AM PST by Tuco-bad
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To: Lazamataz
Oh my god! Laz invoked the dreaded Tuco-Bad tag!
48 posted on 11/30/2001 11:22:14 AM PST by 6ppc
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To: Tuco-bad
Good point, federal agencies (i.e., SEC) should do their jobs, or disband.

Indeed. But that is the crux of the problem. If we could just legislate nirvana, we would be there.

Politicians and bureaucrats are cheap. The end result of populism always benefits the wealthy and powerful.

49 posted on 11/30/2001 11:37:33 AM PST by hopespringseternal
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To: Tuco-bad
"Are you still in business, I hear that companies out outsourcing much of their IT budgets to India, and engineering budgets (e.g., Boeing) to Russia."

Yup, I'm still in business and still expanding. Boeing is building their rocket engines here in Alabama, not Russia. Honda has just started making the Odessy minivan here, and Mercedes is greatly expanding their Alabama manufacturing plant. Southern Company is ramping up here in order to pick up the slack from ENRON's exit, and BellSouth is doing rather well. Placements at IBM have stopped, but requests from CSC are up once again (healthcare is booming around these parts). I've been getting a fair amount of bank business, too. AmSouth, SouthTrust, and Colonial Bank are benefiting from the current interest-rate environment.

Life is good.

50 posted on 11/30/2001 12:33:36 PM PST by Southack
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