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May 16, 2002 on 8:10 pm | In Main |Check out the affect of “media bias” on these two articles on Enron and the California energy crisis, first by the WSJ, and second by CBS Marketwatch. Personally, I think CBS and Gray Davis have it all wrong. The energy trading market was created entirely by the state regulators, not by Enron. This “market” is completely artificial. The way the electrical grid works is that enough power must be supplied for all of the electricity used. If insufficient power supply exists, the entire grid goes down. The key to cost efficient elecricity supply is to bring just enough power generation online to keep the grid running. The energy “market” is just paying for the peak power generation. The state utilities and regulators were trying to “game” the “market” just as much as Enron. The state regulators could easily have signed long term contracts, avoiding the whole issue. This is what Enron convinced many large business in California to do. If the regulators would have signed the contracts before it was obvious that California had insufficient power generation to meet the needs of the state, the whole crisis could have been avoided. The only thing Enron is guilty of here is just being more effective at trading than the regulators. Someone at Enron should go to jail for securities fraud, but if anyone should go to jail over the California energy crisis, it should be Gray Davis.
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