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Enron Vision Proved Costly to Firm, State

Energy: Wild promises of the savings from deregulation helped bring it about. In the end the state paid heavily for new system, and Enron was left a small player.

January 28, 2002|NANCY VOGEL | TIMES STAFF WRITER

SACRAMENTO — Despite the hundreds of thousands of dollars Enron spent trying to influence California's energy debate in the 1990s, including timely donations to key politicians, its most lasting accomplishment was almost intangible:

It helped persuade state officials that electricity ought to be subject to market forces.

"The idea that you could commoditize everything and trade everything--and that government was foolish and wasteful and ineffective compared to the market--that faith was the one they had really imparted to everyone," said V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies. "It was intellectual domination, in part because nobody wanted to defend the status quo."

Enron invested more time and money in the debate than any other energy company, say lawmakers, consumer advocates, utility officials and others who in the 1990s helped shape the new competitive electricity market. But, they say, more often than not the company failed to win what it sought.

Today, as the firm faces bankruptcy, congressional hearings and criminal investigations, its role in California is relatively small. It plans to build a power plant near Sacramento, and it continues to supply electricity to some large businesses and college campuses.

In June 1994, with California debating how to deregulate its electricity industry, a top Enron official promised California "enormous" savings if companies like his could compete for the state's utility customers.

Jeffrey Skilling, then chief of Enron's natural gas group, tossed out a figure of $8.9 billion a year. Then he told the Public Utilities Commission just what that could buy.

"You can triple the number of police officers in Los Angeles, San Francisco, Oakland and San Diego," Skilling said, "and you could double the state of California construction budget for hospitals.

"And you could double the number of teachers in Los Angeles, San Francisco, Oakland and San Diego," he went on. "You could pay all the interest on the California state debt."

"The stakes are huge," Skilling told the PUC, "and every minute that we delay bringing competitive markets to California allows the meter to keep ticking."

The company didn't make its case with words alone.

In April 1994, for example, Enron gave $10,000 to Republican Gov. Pete Wilson just one day before his appointees on the PUC issued a historic document declaring their support for deregulation.

In the following years, as debate solidified into concrete proposals, Enron's contributions to politicians and its stable of lobbyists expanded.

By 1998, the company's donations to California politicians topped $100,000. That included $25,000 to Gray Davis' successful campaign for governor and $20,000 to his Republican opponent, Dan Lungren. State Sen. Jim Brulte (R-Rancho Cucamonga), the author of the 1996 deregulation law, got $4,000.

The company gave $172,000 to the state's politicians in 2000 and $78,500 last year.

Thousands Spent on Payments to Lobbyists

From 1991 through 1996, Enron's payments to lobbyists ranged from $30,000 to $70,000 each year. By 1998, it was paying nearly half a million dollars for lobbyists working the Legislature and PUC.

The company also gave $100,000 to the host committee for the 2000 Democratic National Convention in Los Angeles, for which then-Mayor Richard Riordan, now a Republican candidate for governor, was the lead fund-raiser. Last May, then-Enron Chairman Kenneth L. Lay met with Riordan to talk about the company's solutions to the state's energy crisis.

For all that, though, many observers say Enron influenced California deregulation most by way of Washington, not Sacramento.

"The entire electric restructuring agenda on a national level was an Enron agenda," said state Sen. Steve Peace (D-El Cajon), who led the Legislature's effort in 1996 to shape deregulation. "They had such control and influence over [federal regulators] that that in turn put California in a place where we had no choice."

The PUC, under pressure, set out in 1993 to overhaul its 80-year-old system of regulating the monopolies of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

Enron jumped into the fray.

"The fact that Skilling was in PUC meetings was an indication of how important we thought this was," said Dave Parquet, an Enron vice president who has been with the company in California since 1993.

Few Other Companies Follow Enron's Lead

Few other energy companies followed.

Most of the ones that would later come to dominate the California market--Reliant Energy, Duke Energy and Mirant Corp., for example--did not hire lobbyists or begin giving campaign contributions until after 1997, when they bought the power plants that PG&E, Edison and SDG&E were forced to auction under deregulation.

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