Statements and Speeches

Hearing on Enron and Energy Markets
February 13, 2002

The Broken Promise of Deregulation

The Promise:

"[R]eform the electric power system . . . and give American consumers the equivalent of one of the largest tax cuts in history."

Ken Lay testifying before the House Commerce Committee's Subcommittee on Energy and Power (May 15, 1996)

The Reality:

"Despite predictions of huge rate reductions in states that restructured electricity service, consumers there are paying higher prices and receiving less reliable service than in those which have not restructured."

Consumer Federation of America, press release upon release of the report, "Electricity Deregulation and Consumers: Lessons from a Hot Spring and a Cool Summer," (August 30, 2001).

The Broken Promise of Deregulation

The Promise:

"It is time to bring competition to the electric business and, in the process, cut electricity rates by 30 to 40 percent."

Ken Lay testifying before the House Commerce Committee's Subcommittee on Energy and Power (May 15, 1996)

The Reality:

"In retrospect, claims of efficiency gains and price reductions of 40 percent or more for electricity restructuring seem silly. In fact, careful analysis showed that under the best of circumstance efficiency gains in generation could only be a fraction of that, while efficiency losses and new costs are far larger. It may well be that inefficiencies introduced into what had been a reasonably well-managed network have increased overall costs by over 10 percent."

Electricity Deregulation and Consumers: Lessons from a Hot Spring and a Cool Summer, Consumer Federation of America (August 30, 2001).

"[T]he typical homeowner in [Southern California] Edison territory now pays 18% more each month than in 1995. At no point during the deregulation process did residential consumers enjoy the sharply lower electricity prices that advocates of the policy had forecast."

Customers Keep Paying Price of Energy Deregulation Fiasco Power: Ratepayers never enjoyed the promised lower prices. Los Angeles Times (October 7, 2001).

The Broken Promise of Deregulation

The Promise:

"Customer choice will allow the introduction of ‘green' energy options."

Ken Lay testifying before the House Commerce Committee's Subcommittee on Energy and Power (May 15, 1996)

The Reality:

"U.S. energy regulators underestimated the amount of increased pollution that arose after wholesale electricity competition rules were adopted in 1996, according to a report sponsored by a North American environmental commission. . . . ‘Recent experience indicates that electricity competition is likely to increase air emissions from power plants. The several scenarios that FERC analyzed where air emissions were reduced slightly have turned out to be irrelevant,' the report found."

U.S. FERC Underestimated Power Sector Pollution, Dow Jones Energy Service (November 26, 2001).

"U.S. energy regulators underestimated the impact of wholesale electricity deregulation on power plant air emissions and generation growth, [the North American Commission for Environmental Cooperation] said on [November 26, 2001]. . . . [FERC] underestimated by nearly 8 percent the amount of carbon dioxide and other pollutants U.S. utilities emit under the worst-case scenario, according to the CEC study."

U.S. Power Deregulation May Cause Trade Woes, Reuters English News Service (November 26, 2001).

The Broken Promise of Deregulation

The Promise:

"American industry will become more profitable and become stronger competitors in the international marketplace."

Ken Lay testifying before the House Commerce Committee's Subcommittee on Energy and Power (May 15, 1996)

The Reality:

"The collapse of Enron Corp., so far a political, legal and investor crisis, is now imposing widespread costs on the U.S. economy, according to a range of companies, energy experts and bankers. . . . The very decline of Enron stock from more than $90 a share to 50 cents a share in a single year has taken a massive $67 billion of shareholder wealth out of the economy. . . . Also, other energy companies have suffered losses in the hundreds of millions of dollars because of their relationships to Enron, either through contracts or loans. . . . Joseph Tovey, a New York investment banker specializing in energy issues, said that 'at a wild guess I would say Enron's collapse adds [roughly $4 billion a year] to the cost of capital for the energy industry.' . . . Enron has even sullied the international reputation of U.S. capital markets."

Enron is Proving Costly to Economy, Los Angeles Times (Jan. 20, 2002).