Enron and its leaders utterly transformed the buying and selling of
electricity and natural gas, leaving a lasting legacy. That was not out of
altruism, of course – it made tremendous (mostly legitimate) profits. Tens
of billions of dollars in lasting benefits that trickle down to utility
customers were also unlocked by its innovations.
That is because risks were taken and infrastructure fully utilised that would
not have been otherwise for lack of financial techniques to do so. And,
though Enron is blamed for the fallout from energy deregulation, such as
California’s brownouts and soaring commodity prices, much of the fault lies
elsewhere – with shortsighted politicians, for example.
Smartest guys?
So were they really the smartest guys in the room? The evidence certainly is
mixed. A decade on, companies formed out of their unwanted assets – such as
EOG Resources and Kinder Morgan – are success stories while Messrs Lay,
Fastow and Skilling are dead, disgraced and incarcerated, respectively. And
companies such as Dynegy and Reliant that mimicked Enron’s swashbuckling,
asset-light strategy nearly went bust as a result.
But many veterans of the energy trading boom that Enron and its competitors
spawned have gone on to make fortunes in hedge funds or to run energy
trading desks at investment banks. Long after they retire, fat and happy,
the innovations they were part of will endure.
That is not quite up there with defeating fascism, and Enron’s crimes should
not be minimised either. It is a pity, though, that they are conflated with
benign market forces even a decade later.
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