Wind whispers of Enron 

If you listen, you can hear Enron’s ghost carried on the wind.

It hovers over the 10,000 people gathered in Houston to tout the virtues of wind energy. The more the hype blows, the more Robert Bradley hears the voice of his old boss, Ken Lay.

Under Lay, Enron championed a host of government-supported “green” energy initiatives, all designed to help its businesses, from natural gas to electricity trading to wind farms.

“Lay got on the global warming bandwagon when it became a big issue in the summer of 1988,” said Bradley, who chairs the Institute for Energy Research, which is affiliated with Lindenwood University in St. Charles, Mo. “Enron already had a big play on natural gas, and that fit right in.”

Bradley spent 16 years at Enron, until the company filed for bankruptcy in late 2001. For seven of them, he wrote speeches for Lay, though Bradley said they disagreed on some issues.

Although Lay championed deregulation, for example, Bradley said the former Enron chairman wasn’t the free-marketer he claimed to be.

Enron in the late 1980s wasn’t big enough to compete with the major oil companies. Lay’s strategy, he said, was to get the government to force regulatory change, thereby creating lucrative markets for Enron. In other words, if you can’t beat ’em, change the rules.

Deregulation of the natural gas markets allowed Enron to become a trading company, dominating the market with its gas bank. Lay followed the same strategy in urging states to deregulate electricity markets.

Partial regulation

The electricity market in Texas, according to Bradley, shows how the thinking works. Enron, of course, was interested in the trading opportunities. But deregulation came with side effects.

While claiming to be deregulated – though many proponents now prefer the euphemism “restructured” – the market remains partially regulated, creating a huge profit-making opportunity for generators while leaving consumers with higher bills and more risk.

“It’s a market, but it’s a government-created market,” Bradley said. “It’s something very different than deregulation.”

Similarly, Bradley said Enron was a major backer of the state’s 1999 mandate calling for the development of renewable energy sources, including wind generation. The mandate also appealed to environmental groups, of course.

Sitting idle

We like the idea of wind power because it seems natural and clean. Windmills, after all, are part of our pastoral vision of Americana – power, nostalgia and patriotism rolled into one. What’s not to like?

Only the economics. Wind power, despite the government’s best efforts to create a market, continues to be dogged by the same problems it always has: high costs, limited reliability and bad location.

No wind, after all, blows forever, and when it does, it’s not blowing where people need power.

Even now, West Texas wind farms sit idle, awaiting new power lines to take high-priced power to the people.

“Wind technologies actually predate fossil fuels and have been experimental and uncompetitive in electricity generation for over a century,” Bradley said.

Deregulation has already given many Texas consumers – especially those in the Houston area – some of the nation’s highest electric rates. Now, we could wind up footing the estimated $6.4 billion bill for transmission lines to bring wind-generated power eastward.

When it gets here, its higher costs will flow right down the transmission lines and shock our pocketbooks, which already are singed by spiraling prices from conventional generation.

Proponents of wind power argue that fuel cost savings and other benefits will outweigh the higher costs in a few years, but their studies seem a little too rosy and their promises have a foreboding ring.

It sounds too much like the failed promises of lower bills used to hoodwink us on deregulation.

Texas as king

No matter. Thanks to the state’s mandate, Texas has become king of the wind. This week’s conference, though, is “an astounding example of what government intervention can do – create a whole, parasitic industry,” Bradley said.

In Texas, we’re planting turbines and harvesting the wind the way we used to put up derricks and pump oil.

Listen. Is it really the winds of change we’re hearing? Or just Enron’s ghost, laughing?

By Loren Steffey

Loren Steffy is the Chronicle’s business columnist.

Houston Chronicle

3 June 2008