WASHINGTON, Feb. 13, 2002 -- Congress can do a valuable service by focusing on the true lessons from the Enron bankruptcy, and by supporting ongoing market reforms to help the industry become more efficient for power customers, the head of a international energy company testified today.
"Enron did not fail because it was in the energy business," said Richard C. Green, chairman of Kansas City, Mo.-based UtiliCorp United, addressing the House Subcommittee on Energy and Air Quality on behalf of the Electric Power Supply Association (EPSA). "Enron failed because of the way it did business."
"The market continued to deliver power and gas to our customers. There were no significant swings in price. There were no interruptions," Green said.
"It is a testament to the strength of the energy markets that, in only a few short weeks, the industry could adjust to the collapse of a significant player with little effect on the customer," he said. "The market offered choice and diversity. Cautiously, companies began to adjust their positions and move business to alternative companies and electronic trading platforms."
Green also testified that he is concerned about questions in the use of derivatives and accounting disclosures of derivatives. Historically, these financial tools have played a significant role in advancing other industries by removing exposure to the fluctuating prices.
"I would agree with Energy Secretary Spencer Abraham's remarks, recently appearing in The Washington Post, that the pioneering work being done in energy trading, particularly derivatives, played a central role in providing market liquidity and risk allocation during the Enron collapse," he said. "It is imperative that the value of derivatives themselves not be confused with questionable accounting practices and inadequate financial reporting."
Green recommended that Congress or appropriate governmental agencies address several key areas raised by the Enron collapse -- such as protection of employees to diversify their 401(k) holdings, the strengthening of standards for disclosure of special purpose entities and off-balance sheet financing, and the standards for the independent oversight of external auditors.
Green also commended the Bush Administration, Sen. Jeff Bingaman, D-N.M., Rep. Joe Barton, R-Texas, and the Federal Energy Regulatory Commission for their support of proposals to encourage a more efficient marketplace for the benefit of consumers.
Representing the fourth generation of his family to help lead UtiliCorp United and its predecessor, Missouri Public Service Co., Green said pro- competition reforms should not lose support because of Enron's unrelated mistakes, nor should there be a retrenchment to cost-based or other forms of rate regulation of the nation's energy markets.
UtiliCorp United is an international electric and gas company with energy customers and operations across the U.S. and in Canada, the United Kingdom, New Zealand and Australia. Its Aquila subsidiary, an EPSA member, is one of the largest wholesalers of electricity and natural gas and providers of risk management services in North America, the U.K., and continental Europe. As of Dec. 31, 2001, UtiliCorp had total assets of approximately $12 billion and
EPSA is the national trade association representing competitive power suppliers, including independent power producers, merchant generators and power marketers. These suppliers, who account for more than a third of the nation's installed generating capacity, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.