Democratic senator says Enron collapse shows power markets need oversight

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Posted 8:08AM on Tuesday, January 29, 2002

WASHINGTON - The collapse of Enron Corp. shows that government oversight of competitive power markets is still needed, says a Democratic senator whose energy legislation will be taken up by the Senate in coming weeks. Sen. Jeff Bingaman, D-N.M., said an overriding question coming out of the Enron debacle is "whether there was a lack of adequate oversight or regulation" of the freewheeling energy markets that Enron helped to create. The Energy and Natural Resources Committee, which Bingaman chairs, was to examine at a hearing Tuesday the Enron bankruptcy's impact on energy markets and what the government can do to prevent a similar collapse. Among the witnesses scheduled to appear were Pat Wood, chairman of the Federal Energy Regulatory Commission, and James Newsome, chairman of the Commodity Futures Trading Commission. Both agencies deal with areas in which Enron, the country's largest energy trading company before its meltdown, was deeply involved. Enron's complex system of trading in everything from electricity and natural gas contracts to so-called derivatives -- financial contracts used to hedge or speculate on a commodity -- was conducted without close scrutiny from either federal or state regulators. Bingaman said in an interview that a top priority should be enactment of laws requiring disclosure of energy transactions by private energy companies. He said restructuring the electricity industry to end monopoly markets "does not mean deregulation." Some Senate Democrats, meanwhile, are expected to use the hearing to criticize the continued refusal by the White House to make public details of Vice President Dick Cheney's meetings with energy officials during development of the administration's energy blueprint last year. On Monday, President Bush said such disclosure would inhibit future open discussions on policy issues and hinder officials ability to "get good, sound opinions." It is known that Enron officials met at least six times with members of the Cheney energy task force and Enron chairman Kenneth Lay had a half-hour meeting with the vice president. Bingaman said Tuesday's hearing is hoped to allow senators to evaluate how well the energy markets are working and the impact Enron's disappearance has had on electricity and natural gas power trading and reliability. Since the Enron bankruptcy, energy companies -- especially their balance sheets and debts -- are coming under closer scrutiny from Wall Street and from credit agencies, said Mark Stultz, vice president of Electric Power Supply Association, which represents independent energy producers and traders. "There's an increased sensitivity and awareness," said Stultz in an interview Monday. But he said the markets have been resilient with trading volumes higher now than they were before the Enron collapse. Much of Enron's trading activities involved unregulated transactions -- over-the-counter energy derivatives that Congress exempted in 2000 from regulation by the Commodity Futures Trading Commission. The Senate panel will explore whether trading in these contracts should face the same regulations as other commodities. In testimony, Vincent Viola, chairman of the New York Mercantile Exchange, is expected to outline the objections the exchange raised over the decision to exempt these transaction in which Enron flourished. The New York exchange has the world's largest energy market. In other Enron-related developments: --Opinion polls suggest the Enron collapse could become a political liability to the Bush administration. In one poll, two-thirds felt the administration is either lying (9 percent) or hiding something (58 percent) when it comes to Enron. --A group of more than 400 current and former Enron workers sued several company officials and Arthur Andersen LLP in an effort to recover huge retirement funds lost when the energy-trading giant collapsed last year. --The Enron collapse has hit home in California. Six of the state's largest public pension funds reported losing a combined $250 million because it held now nearly worthless Enron stock.