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.”