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How the White House Energy Plan Benefitted Enron  

Author:  | Economics, Emissions, Grid, Regulations, U.S.

Prepared for Rep. Henry A. Waxman
Minority Staff
Committee on Government Reform
U.S. House of Representatives
www.house.gov/reform/min

January 16, 2001

EXECUTIVE SUMMARY

This report, which was prepared at the request of Rep. Henry A. Waxman, examines the White House energy plan prepared by the White House energy task force under the direction of Vice President Cheney and compares the policies in the White House energy plan to those advocated by Enron. The analysis in the report is based on testimony of Enron officials before Congress, other public statements by Enron officials, Enron lobbying materials distributed to Congress, lobbying disclosure reports filed by Enron lobbyists, and news accounts of Enron positions.

The White House energy task force was formed on January 29, 2001, under the name the White House National Energy Policy Development Group (NEPD Group). The President released the White House energy plan that the task force developed on May 17, 2001. According to the Office of the Vice President, the task force met six times with Enron executives. The first meeting took place on February 22, 2001, about three weeks after the formation of the task force. On April 17, 2001, the Vice President met personally with Enron CEO Kenneth Lay to discuss the energy policy. The last meeting between task force officials and Enron executives apparently took place on October 10, 2001, less than one week before Enron announced the $1.2 billion reduction in shareholder value that precipitated Enron’s collapse.

The analysis in this report reveals that numerous policies in the White House energy plan are virtually identical to the positions Enron advocated. In total, there are at least 17 policies in the White House energy plan that were advocated by Enron or that benefitted Enron financially. These policies fall into four general categories: (1) policies that promote the deregulation of the electricity market; (2) policies that promote energy derivatives and commodities markets; (3) policies that expand natural gas and oil production; and (4) other policies that benefitted Enron.

In the area of electricity deregulation, the White House energy plan supports an expansive form of the controversial policy of “open access,” which guarantees energy traders like Enron access to the transmission lines of electric utilities. In 1999, Enron told members of Congress that this policy was Enron’s “single most important initiative.” The White House plan also supports the repeal of the Public Utility Holding Company Act (PUHCA), an action that would have enabled Enron to increase its ownership of electric utility companies. In February 2000, Enron lobbied Congress for “a provision granting FERC-certified transmission projects the power of eminent domain” so that power lines could be constructed more expeditiously. The White House energy plan endorses this policy, even though it conflicts with traditional state authority over transmission siting decisions. In addition, the plan includes several other deregulation initiatives supported by Enron, including one provision that would help energy traders like Enron gain new rights of access to the power lines maintained by the Bonneville Power Administration. …

Even in areas where Enron did not get every policy it advocated, the White House energy plan is helpful to the company. In the area of global warming, for example, the plan does not support the mandatory controls on carbon dioxide emissions sought by Enron. But the plan does direct federal agencies to identify “market mechanisms” to address global warming, which would help develop the type of market in carbon credits sought by Enron.

The policies in the White House energy plan did not benefit Enron exclusively. And some of the policies may have independent merit. Nevertheless, it is unlikely that any other corporation in America stood to gain as much from the White House energy plan as Enron.

II. RECOMMENDATIONS RELATING TO ENERGY DERIVATIVES AND COMMODITIES MARKETS

B. Emissions Credits

Enron Position. Enron has promoted commodities trading markets in a wide number of areas, from weather derivatives to forest products and from electricity to metals. In particular, Enron has lobbied extensively for government policies that would support new or expanded markets in areas such as carbon and air emissions credits, which are bought and sold by Enron Global Markets. For example, Enron supported development of an international market in carbon dioxide emissions under a climate change agreement.

White House Energy Plan. The White House energy plan recommended policies that would expand and develop several new markets for emissions credits. The White House energy plan does not endorse the Kyoto Protocol on climate change or mandatory controls on carbon dioxide, but it does recommend use of market mechanisms to address climate change. The plan states:

The NEPD Group recommends that the President direct federal agencies … to identify environmentally and cost-effective ways to use market mechanisms and incentives … and cooperate with allies, including through international processes, to develop technologies, market-based incentives, and other innovative approaches to address the issue of global climate change.”

As part of a proposal supporting legislation to reduce emissions from electric power generators, the energy plan recommended establishing “mandatory reduction targets for emissions of three main pollutants: sulfur dioxide, nitrogen oxides, and mercury,” and measures to “[p]rovide market-based incentives, such as emissions trading credits to help achieve the required reductions.”

The recommendation for emission trading credits is one of only three recommendations in the White House energy plan chapter on the environment, and it is the only one of the three that pertains to pollution from energy production.

IV. OTHER RECOMMENDATIONS THAT BENEFITTED ENRON

C. Promotion of Wind Power

Enron Position. Enron Wind designs and manufactures wind turbines, and Enron owns six wind power generation plants. Enron has lobbied aggressively for extension of the wind and biomass tax credit. For example, in the first six months of 2001, Enron paid outside lobbyists over $200,000 for work on wind power issues, in addition to conducting its own lobbying on these issues.

White House Energy Plan. Consistent with Enron’s position, the White House energy plan recommended extending the wind and biomass tax credit and taking other actions that would promote the wind turbine business. The plan states:

  • The NEPD Group recommends that the President direct the Secretary of the Treasury to work with Congress on legislation to extend and expand tax credits for electricity produced using renewable technology, such as wind and biomass. The President’s budget request extends the present 1.7 cents per kilowatt hour tax credit for electricity produced from wind and biomass.
  • The NEPD Group recommends that the President direct the Secretaries of the Interior and Energy to work with Congress on legislation to use an estimated $1.2 billion of bid bonuses from the environmentally responsible leasing of ANWR for funding research into alternative and renewable energy resources, including wind, solar, geothermal, and biomass.

Download original document: “How the White House Energy Plan Benefitted Enron

Also see:  “Enron’s Ken Lay asks for Texas Gov. Bush’s help in securing tax credits for wind”

This article is the work of the author(s) indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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