Here is what we read in various newspapers/ reports these days about our mighty energy sector:
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*** After examining the records of just one set of offshore partnerships, Robert McCullough, an economics professor at Portland State University, found US$2.7 billion in unreported losses. The company was little better than a pyramid scheme, he said. Enron's debts are likely to expand dramatically once investigators have been able to go through all the company's off-the-books investments, according to an expert in forensic accounting due to testify before the US Congress.
The emerging shape of the Enron scandal is almost identical to one of 70 years ago, which prompted the setting up of the first regulators to govern the way companies report their performance, said Mr. McCullough. That regulation has been chipped away to the point where it is no better than it was in the 1920s, he said.
Enron's situation is uncomfortably similar to another case of misreporting in the late 1920s. Samuel Insull set up a network of holding companies to control the energy market, with each company controlling the voting stock of the next one lower in the pyramid. When it collapsed in the Great Depression following the crash of 1929, the US set up the Securities and Exchange Commission to regulate companies' financial reporting. "At the time, regulatory practices were set in force to avoid its repetition," McCullough said. "Their enforcement has been eroded over the intervening years, and today we are almost exactly reproducing that scandal."
*** The Senate is set to begin debating next week a Democrat-sponsored energy-policy bill with consensus language to repeal and reform the 1935 Public Utility Holding Company Act, also known as Puhca. Sen. Jeff Bingaman, D-N.M., the committee`s chairman, called the hearing to consider whether Enron`s use of thousands of subsidiaries to hide debt and possibly defraud investors merits last-minute changes to the Puhca-repeal language.
"As the story of the collapse of Enron developed...we have seen startling parallels to the events of the `20s and `30s that led to passage of the holding company act," Bingaman said, calling the behavior of Enron "eerily reminiscent" of the abuses that led Congress to pass the law 66 years ago.
While committee Democrats welcomed the hearing, Republicans flatly rejected the assertion that Enron`s collapse could have been prevented if the Securities and Exchange Commission (SEC) hadn`t exempted the Houston-based energy-trading company from Puhca regulation.
"I want to see how it was that Enron was able to fly under the regulatory radar screen," said Sen. Ron Wyden, D-Ore.
Senator Frank Murkowski, R-Alaska, the Senate committee`s ranking minority member, said that Enron`s demise was the result of bad business practices, improper accounting and the company`s lack of honesty, he said. ``Crooks rob banks regardless of the law.``
FERC General Counsel Cynthia Marlette said FERC continues to support Puhca repeal as a means of reducing barriers to the commission`s goal of creating more robust competitive energy markets. Consumers today may actually be harmed by Puhca`s restrictions, she said.
David Sokol, chairman and chief executive of MidAmerican Energy Holdings Co. said eliminating Puhca`s barriers to investment in the utility sector by companies with extensive holdings unrelated to energy would strengthen the U.S. electricity markets.
"There is a significant difference between financial entry and competitive entry," replied Scott Hempling, a Silver Spring, Md. lawyer.
"The acquisition of one monopolist by another is a change in control, not an increase in competition. To call this `entry,` and thus to criticize Puhca because it `blocks market entry,` is to misuse the term," he said. Hempling said that the SEC could have prevented Enron`s "ill-fated activities" if the agency had properly interpreted its duties under Puhca. The SEC showed "a disregard for the statutory language" in granting Enron exemptions from Puhca regulation, he said.
*** Enron`s use of partnerships not only hid the company`s losses and huge debts, it made a few company insiders very rich, very fast -with almost no financial risk, investigators said.
*** While George W. Bush was governor of Texas, he appointed at least two officials recommended to him by then-Enron Corp. chairman Kenneth Lay, according to correspondence made public Wednesday.
*** U.S. utility stocks were pounded on Wednesday by the concerns about accounting problems and credits downgrades that have followed the bankruptcy of Enron Corp. , once the nation`s largest natural gas and electricity trader.
Calpine Corp. , an independent power producer based in San Jose, California, on Wednesday became the latest utility to be hard hit by worries about its financial reporting. Shares of the company dropped nearly 23 percent after it said the Securities and Exchange Commission made an informal request for information regarding its financial disclosures.
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To remove the temptation from some otherwise smart and capable people and shift their focus and creative energy from easy money from energy trading into something hopefully better, let's bring that 5-10 kW ZPE "free" energy generator to the market SOON.
