The New Power / 'THEY GET IT' / Enron displays political savvy in access to
decision-makers
Houston Chronicle, 04/15/01

THE NEW POWER / Enron / Making of the Market-maker / Pipeline operator
evolved into player that keeps raising bar
Houston Chronicle, 04/15/01

THE NEW POWER / Enron / Making of the Market-maker / With ups and downs,
Enron Broadband is a work in progress
Houston Chronicle, 04/15/01

THE NEW POWER / Enron / Making of the Market-maker / The project
Houston Chronicle, 04/15/01

SIGN OF THE TIMES / Glowing logo once hovered over the city that oil built
Houston Chronicle, 04/15/01

THE NEW POWER / Returns on investments too slow in developing nations
Houston Chronicle, 04/15/01

THE NEW POWER / Working environment now driven more by new ideas than old
doctrine
Houston Chronicle, 04/15/01

THE NEW POWER / Firm in a hurry to get into new downtown tower
Houston Chronicle, 04/15/01

THE NEW POWER / Current lineup
Houston Chronicle, 04/15/01

THE NEW POWER / Enron's chronology
Houston Chronicle, 04/15/01

GRASS-ROOTS BUSINESS
Oil-Patch Epicenter, Embracing the Web
The New York Times, 04/15/01

Sierra Pacific Suspends Quarterly Payout Because of Energy Crisis in Western
States
Dow Jones Business News, 04/15/01

India: Report cautions Maharashtra on PPAs
The Hindu, 04/15/01

Graft vs graft: Political scene in state hits nadir
The Times of India, 04/15/01

In an energy crisis, lean toward the green
The News & Observer Raleigh, NC, 04/15/01

A
The New Power / 'THEY GET IT' / Enron displays political savvy in access to
decision-makers
DAVID IVANOVICH, Houston Chronicle Washington Bureau
Staff

04/15/2001
Houston Chronicle
4 STAR
1
(Copyright 2001)

WASHINGTON - When then-candidate George W. Bush needed a plane to shuttle his
staff around on the campaign trail, corporations scrambled to offer up their
private jets.
The Bush camp was eager to fly the friendly skies of Enron Corp.
When former Secretary of State James A. Baker III was out of a job at the end
of the first Bush administration, Houston-based Enron had some consulting
work waiting.
And when then-President Clinton, ex-President Ford and golfing legend Jack
Nicklaus needed a fourth, Enron Chairman Ken Lay was available to play a
round of 18 holes.
Here, in a town where access to the political elite is everything, Enron is
master of the game.
Other companies contribute to political campaigns, hire former insiders and
hobnob with politicos, but few do so on a par with Enron.
"They get it," noted Andrew Wheat, research director for Texans for Public
Justice, an Austin-based watchdog group and frequent Enron critic. "They
understand how it works and . . . how things get done, both here and abroad.
"I can't think of another company in Texas that compares."
In part, Enron's political smarts are an outgrowth of the company's business
strategy, to be first in an emerging market even as the rules of the game are
being formulated.
The company's shrewdness also is a reflection of Lay's own personality, his
experience in government and his affinity for politics.
And now, thanks to his longtime association with - and munificent
contributions to - President Bush, Lay is the envy of corporate America.
Access to decision-makers in both parties, however, does not always translate
into favorable decisions. Enron's recent lobbying efforts have yielded rather
mixed results.
Consider:
The new Bush administration has taken a largely hands-off approach to the
electricity crisis in California, heeding the advice of power wholesaler and
marketer Enron. But Enron's broader objective, national deregulation of the
power industry, remains stalled on Capitol Hill.
Enron officials support the Republicans' vision of a smaller federal
government. But the Bush White House has proposed whacking the budgets of two
federal agencies Enron has relied upon repeatedly, the Export-Import Bank of
the United States and the Overseas Private Investment Corp.
Bush, much to Lay's surprise, pledged to try to force power plants to curb
their carbon-dioxide emissions, the main greenhouse gas implicated in global
warming. That policy could have created a vast growth market for Enron, whose
business benefits from construction of more natural-gas-fired plants that
emit less carbon dioxide. But last month, Bush flip-flopped on that promise.
According to all conventional wisdom inside the capital Beltway, Enron should
not be suffering political setbacks now.
Lay, a former Naval officer and one-time energy policy-maker during the Nixon
administration, is one of Bush's longest and staunchest supporters.
An ally of the elder George Bush, Lay worked closely with George W. Bush
during the Republican National Convention in Houston in 1992, when Lay
co-chaired the host committee. They met up again during the site-selection
process for the senior Bush's presidential library.
As the younger Bush became a force first in Texas and then in national
politics, Lay and other Enron officials emerged as perhaps the biggest
contributors of his political career. By July 1999, with Bush's run for the
presidency just getting under way, Enron officials had already contributed
more than $550,000 to him, according to the Center for Public Integrity.
Bush and Lay never became fishing buddies or bird-hunting pals. But then-Gov.
Bush did appoint Lay to head his governor's business council.
And he dubbed Lay with a series of nicknames, including "Kenny Boy."
Lay didn't forget Bush during the presidential race. He was one of the 214
Bush "Pioneers," supporters who raised at least $100,000 for the candidate,
and also ponied up cash for Bush's Florida recount battle.
For the inaugural festivities, Lay, Enron Chief Executive Jeff Skilling and
the corporation itself each contributed the maximum $100,000.
But Lay says he didn't contribute so heavily to Bush in the hopes of getting
something out of him. Instead, he believed in him as a candidate.
"He's smart," Lay said. "He's got good values. He's got family values. . . .
He's a man of character and integrity, just like his father."
Bush also shares Lay's vision of deregulated, competitive markets. "My basic
philosophy is very much in tune with his basic philosophy," Lay said.
After the election, Lay was frequently mentioned as a possible candidate for
both energy and Treasury secretary. He has also been advising the Bush team
on energy policy.
Lay's political star, however, didn't rise just with Bush's relocation from
Austin to Washington.
Despite his strong GOP credentials, Lay was a frequent visitor at the Clinton
White House, helping to host the Brazilian president, advising the Democratic
administration on trade policy and brainstorming on global warming.
Lay was on good terms with all three Treasury secretaries under Clinton -
Lloyd Bentsen, Robert Rubin and Larry Summers - as well as White House Chief
of Staff Thomas "Mack" McLarty and former Energy Secretary Bill Richardson.
To handle the day-to-day political work, Enron doesn't hesitate to hire some
of the heaviest hitters on the political scene.
The company's list of political consultants has included: Bill Paxon, a
former conservative leader in the House; Ralph Reed, one- time head of the
Christian Coalition; former Sen. J. Bennett Johnston, D-La., and Elizabeth
"Betsy" Moler, former chairwoman of the Federal Energy Regulatory Commission
and one-time deputy energy secretary.
The company's board of directors includes Wendy Gramm, former head of the
Commodity Futures Trading Commission and wife of Senate Banking Committee
Chairman Phil Gramm, R-Texas, and John Wakeham, Britain's former energy
minister.
Back in the early 1990s, within weeks of the end of the first Bush
administration, Enron hired Baker and former Commerce Secretary Robert
Mosbacher.
The move sparked controversy when Baker, who as secretary of state had helped
forge the international coalition that expelled Iraqi troops from Kuwait, was
visiting a liberated Kuwait lobbying on Enron's behalf.
Government watchdogs have long decried the "revolving door" between top
government jobs and the corporate world. Wheat of Texans for Public Justice
said Enron keeps that door "spinning."
More recently, Enron angered right-wing partisans on Capitol Hill when it
hired Linda Robertson, a former assistant Treasury secretary in the Clinton
administration and a Democrat, to run the company's Washington office.
Lay is not apologetic.
"We don't discriminate based upon color or creed or race or religion or sex,"
Lay said. "We also don't discriminate based upon political preference."
Unlike many other companies, which are shy of government involvement, Enron
does not hesitate to use the resources of the federal government to boost
exports and win contracts overseas.
Commerce secretaries, for example, routinely take U.S. businesses on
international road shows, hoping to use Uncle Sam's political influence to
win business for American firms. During the Clinton years, Enron executives
accompanied commerce secretaries on at least seven such trips, government
records show.
The Overseas Private Investment Corp. provides political risk insurance and
project financing to U.S. companies doing business overseas. Enron has been
one of the agency's biggest customers.
And since the end of the Cold War, U.S. diplomats have become much more
involved in advocating for American firms.
While other companies have been slow to seek out the State Department's help,
"Enron was in step with that change," noted McLarty, a former
natural-gas-company executive and an expert on Latin American trade.
Closer to home, deregulation of the electric-power industry tops the
company's domestic political agenda.
To date, electricity deregulation has progressed piecemeal, state by state.
Bills in Congress to deregulate the industry nationwide have gone nowhere.
Enron officials were able to enlist the support of the Clinton
administration, but the legislation failed to move on Capitol Hill, largely
because of personalities and turf issues.
"It didn't come to fruition, not because of Enron but because of a lack of
leadership on the issue, particularly in the House," said Moler, the former
Energy Regulatory Commission chairwoman. "Enron was very effective, even
though they didn't get the ball across the finish line, in terms of
advocating a pro-competition agenda."
Now, there's a new Congress and a new occupant of the Oval Office, a
pro-competition advocate who oversaw the deregulation of the Texas power
market.
But Enron's hopes of a national deregulation bill dimmed as the lights
flickered out in California.
While energy experts can think of numerous reasons why California's energy
crisis was largely of its own making, the rolling blackouts there have caused
other states to slow their deregulation efforts for fear of similar troubles.
Even politically savvy Enron may have a tough time pulling out a victory from
those ashes.

Photo: 1. Jim Crownover, left, and his wife, Molly, welcome former President
Bush and Enron Chairman Ken Lay at their home in February 2000. The United
Way of the Texas Gulf Coast honored the Alexis de Tocqueville Society during
a reception for major donors at the Crownovers' residence (p. 19); Mugs: 2.
Lloyd Bentsen (p. 19); 3. J. Bennett Johnston (p. 19); 4. Bill Paxon (p. 19);
5. Ralph Reed (p. 19)

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Enron / Making of the Market-maker / Pipeline operator
evolved into player that keeps raising bar
MICHAEL DAVIS
Staff

04/15/2001
Houston Chronicle
2 STAR
1
(Copyright 2001)

AT ENRON CORP., it came to be known as the "Come to Jesus" meeting.
This gathering in late 1988 had nothing to do with religion, but everything
to do with a leap of faith.
Top management, about 70 in all, met to find out where their company was
headed. They were told to expect a big change.
At the meeting led by Rich Kinder, who would soon become Enron's president,
they were briefed on the company's new strategy. Like the unredeemed at a
revival meeting, the leaders of the then-stodgy natural gas pipeline company
were told they had to change their ways.
Rather than stick to only the safe and highly regulated gas pipeline
business, Enron officials were about to stake their company's future on the
unregulated part of the business and look for opportunities worldwide.
"The decision was made that we needed to move quickly," said Ken Lay, Enron
chairman. "And if we were going to be a leader, we were going to have to go
after it. If not, other people would."
The gravity of the moment was not lost on those present. These veterans of
the regulated pipeline business were now working for a company that was
heading into uncharted territory. Many in the room would be gone from the
company within months, replaced by younger executives who were more open to
change.
"They may talk about it casually now, but at the time they were sweating
bullets," said Robert Bruner, executive director of the Batten Institute at
the University of Virginia, who teaches a case study on Enron's evolution to
executives.
The company has made its mark by being in the vanguard of change. Since that
fateful meeting in the late 1980s, it has shown over and over again that it
has a knack for knowing when to exit a declining market and move on to the
next one.
Now the the pipeline business has moved into the background at Enron. Enron
now profits mainly by making it easier to buy and sell things that otherwise
would be difficult to market - a process the company calls "making markets."
"They have shown they can trade almost anything and have a compelling need to
dominate any market they go into," said John Olson, an energy analyst with
Sanders Morris Harris in Houston. "They do it with a sort of Gulf War
military doctrine of using overwhelming force, technology and people, going
in with a blitzkrieg to get the best of the market and move on."
That statement could serve as a summation of Enron's business strategy during
its period of explosive growth that made it the first Houston-based company
to post annual revenues of $100 billion a year. Most of the time the approach
has paid off, with only a few major missteps.
Enron has been in the forefront of sea changes numerous times, and not just
in the energy industry.
When Houston Natural Gas was bought by InterNorth, creating Enron, it formed
the first nationwide interstate natural gas pipeline system.
The company created the first futures market for natural gas with its Gas
Bank - allowing users to buy and sell gas for future delivery - years ahead
of the first futures contract to trade on the New York Mercantile Exchange.
It also developed many of the methods of hedging natural gas costs that are
used today to reduce the risk of price swings.
Enron's pipeline was the first system to offer its interstate pipeline to
transport anyone's gas for a fee. Now, all interstate pipelines are run in
that fashion.
The company's $2 billion power plant project in India is the largest single
outside investment ever made in that country.
The company moved quickly to become a player when California lawmakers voted
to open that state to electricity supplier competition, and soon changed its
plans to limits its risks there. In 1996, Enron became the first natural gas
pipeline company to buy an electric utility, Portland General Electric in
Portland, Ore.
Enron OnLine, the company's Internet trading site at enrononline.com, has, in
only a year or so of operation, become the largest e-commerce site in the
world.
Now, Enron makes 80 percent of its profits from businesses that did not exist
in 1988, the huge wholesale markets that have developed for natural gas and
electricity-marketing, broadband, fiber-optic and energy services.
"It seems like they do everything," said David Nemtzow, president of the
Alliance to Save Energy, a nonprofit energy conservation group. "$100 billion
(in annual revenues) is nothing to sneeze at. Exxon Mobil was founded by John
Rockefeller, Enron's only been around for 15 years."
Enron still trails Exxon in size, since the biggest company in the oil
business had $233 billion in revenues last year, and it is not be as well
known as John D. Rockefeller.
But its influence is becoming almost as pervasive as his once was.
The company was one of the largest contributors to the campaign of President
Bush and Lay is considered one of the president's closest private-sector
advisers on energy policy. He is personal friends with both the president and
his father.
The company has equally strong ties to Democrats, including access to former
President Clinton.
But at the same time, Enron's role in deregulation in the United States and
globalization have made it a target for protesters who blame private energy
companies for the deregulation fiasco in California and U.S. multinationals
for a wide array of troubles overseas.
And the company which has been leader in this business, is regularly racing
against a pack of competitors, including Houston- based El Paso Corp. Reliant
and and Dynegy.
Kinder, who declined to be interviewed for this story, left when it became
apparent he wouldn't become CEO and started his own energy company Kinder
Morgan.
"You really can't copyright or patent this sort of stuff," said Jeffrey
Skilling, Enron's chief executive officer."This is like an arms race where
the arms are brains. You need smart people that are constantly thinking up
the next things the customer needs.
"What a change from the gas business 25 years ago, when the whole name of the
game was good regulatory lawyers," Skilling said.
Now, its future depends on a continuing willingness to take chances on new
things, and when things aren't working, to spend what it takes to change
them.
"Maybe that's a lesson we all learned: There is usually no second best; it's
winner take all and you better get in there and you better fight your best
battle because it's pretty hard to play catch-up," Skilling said.
...
Surviving the culture clash
The executives who were called to the Come to Jesus meeting already had
survived three years of tumult.
Even Ken Lay, who was behind that message, had his doubts about the whole
enterprise in the beginning. He was there because of a contract he had signed
that he likened to having his hands glued to the steering wheel.
The merger of Omaha, Neb.-based InterNorth and Houston-based Houston Natural
Gas created a company that was mired in debt and had to battle corporate
raiders. The employees from the companies that formed Enron clashed as well.
"That first year after the merger was kind of interesting," Lay said, in a
characteristic understatement. He described the corporate culture battle in
those early years as "bloody."
Bill Brendler, an organizational psychologist who was brought in to help
combine the companies' cultures, recalls going to Omaha after the merger and
not hearing anyone refer to the new company as Enron. All of the InterNorth
people were still calling the company by its former name.
"It was kind of gut wrenching to them, like they had been sold out," said
Brendler, who operates a consulting company based in Austin.
The merger had left the new company with a mountain of debt. It was one of
the first big junk bond mergers engineered by Michael Milken.
The company's financial woes got even worse around Christmas 1985, when the
Peruvian government nationalized all of the company's oil and gas properties
in that country, depriving Enron of its main sources of cash flow.
Then, in January 1986, oil prices collapsed from $30 per barrel to $10.
To add to the company's problems, it came under fire from raider Irwin
Jacobs, who led a group that held about 15 percent of Enron's stock.
In a bid to fend off Jacobs' group, Enron considered going private. They
turned to one of the most high-profile takeover partnerships of the time,
Kohlberg Kravis Roberts & Co., to look into financing a deal to buy all its
publicly traded shares. That deal came, "very, very close," Lay said.
Eventually, the company ended the takeover threat by buying back Jacobs's
shares.
All this was going on as the company's top management was in a state of flux.
Lay was named chief executive officer in November 1985 and elected chairman
in a February board meeting that he still recalls vividly today. Lay had
recommended that Bill Strauss, former InterNorth chairman and chief executive
officer, come on as chairman.
"I thought it would sort of pull the teams together," Lay said. "He could
give me air cover in Omaha."
In retrospect, Lay said, his recommendation probably heightened the battle
between the rival groups of employees. Strauss, too, soon realized that there
was room at the top for only one.
Before the company's February 1986 board meeting in Winter Park, Fla.,
Strauss had persuaded Lay to tear up his contract with a golden parachute,
which would have paid him handsomely if he left the company, in return for
incentives in stock options.
"He wanted to make sure I was committed to the company and I was because I
had no choice," Lay said. "They sort of glued my hands to the steering
wheel."
Strauss called the board meeting to order and resigned on the spot, stunning
Lay and everyone else in the room. He recommended the board elect Lay
chairman and CEO.
He then said, "I'll see you around," walked out of the room, drove to the
airport and caught a flight back to Omaha.
After about 30 seconds of silence, one of the former InterNorth directors
nominated Lay to be chairman, another seconded it and they voted on it.
"There I was," Lay said, laughing. "Just totally prepared for it."
...
Learning from near-disaster
Enron took the leap into the volatile world of deregulated energy markets in
spite of a trading fiasco that could have pushed the company to the brink of
bankruptcy.
In 1987, Enron was rocked by the disclosure that rogue traders at its Enron
Oil Co. had left the company holding the bag for about $1 billion in trading
liabilities. Before disclosing it to the market, the company worked the
trading loss down to about $142 million.
The experience was one Lay and others at the company would not forget. But
rather than losing faith in making markets, this was a lesson that shaped the
way the company is run.
"We learned a lot, certainly in a bad way," Lay said. "We put in place
probably the best risk management and control system, not just in our
business, but in any industry."
The company has become a leader in developing risk management strategies,
offering hedges on everything from weather derivatives to advertising space.
Many of these techniques were developed during the late 1980s with the
guidance of a former consultant at McKinsey & Co., Jeffrey Skilling.
It was Skilling, among others, who came up with the idea for Enron to create
The Gas Bank, a unique concept of packaging natural gas supplies so they
could be bought on a long-term basis for fixed prices to suit an individual
customer's needs.
"It was the first forward pricing structure for natural gas," Skilling said.
The idea was to gather gas supplies on one end of the pipeline, customers on
the other, and then put together deals to serve both sides' needs.
It worked like this. From the overall production of a well or field, the
company would sell parts of the production to different customers - an
industrial customer might buy a portion of the production for a year, while a
local gas distribution company might buy a share of the production for two or
three years, and a power producer might buy a 10-year supply. At the time,
power producers were desperate to get long-term, fixed-price supplies of
natural gas.
"It was very successful for us and it made it clear that there was a whole
new way of thinking about this business," Skilling said. "We were creating a
forward market in 1988," he said, describing that year as "a magical time."
The company began developing package deals for its customers. One of the
first major customers was Peoples Gas Co., the utility company that serves
Chicago, which traditionally had relied on a huge supply organization.
"They were buying capacity on pipelines and in storage fields, buying gas
from producers with a massive organization," Skilling said. "We went to them
and said, give us all of that stuff, we'll manage it for you. Then all you
have to do is call us in the morning and tell us how much gas you need and we
will have it ready."
From The Gas Bank, Enron eventually set up Enron Gas Marketing, and they
started bidding, mainly on spot transactions. It was the genesis of Enron's
massive wholesale trading operations today.
It was also around this time that the company began to move into energy
financing. After the bust of 1986, banks had pulled out of the energy lending
business and Enron believed it could make money by filling that void.
What had begun as a gas marketing unit also was now engaged in venture
finance. Enron Gas Marketing became Enron Capital and Trade Resources, with
Skilling at the helm. He later would become head of Enron North America, over
all of the company's domestic operations.
When Enron's natural gas wholesale business began, there were about 70
employees. Now, including power sales, there are 5,000.
"We always kidded that Enron Capital and Trade Resources sounded kind of
complicated, but no matter what we named it, within six months, everyone else
in the industry had one just like it," Lay said.
...
Portrait of Ugly American
Enron's foray into unregulated overseas markets has been largely successful,
but when it has gone bad, it has gone very bad.
The company has built some of the largest power projects and pipeline systems
in international markets over the past 10 years or so, but in the process it
often has been portrayed as the Ugly American corporation by critics who
accuse it of spreading around payoffs and showing little regard for human
rights or the environment.
Enron has responded that those allegations are unfounded, but has made
changes in its international business that have moved it away from those
confrontations.
It began testing its plan to build an international business in 1988, when it
established an operation to build gas-fired electric generating plants in the
United Kingdom as that country's electricity markets were privatized.
"We were beginning to get a little momentum from the standpoint of stepping
outside of our regulated business in North America and even stepping outside
of North America a little bit," Lay said. "But we still had to demonstrate
that we could do it without great risk. That was a fairly important part of
those early days."
As Enron branched out into international markets, the executive who took the
international reins was a woman who stood out in the largely male domain of
the energy business. Her name was Rebecca Mark.
Mark, who declined to be interviewed for this story, became one of the stars
at Enron after she successfully saw through to completion the company's
controversial Dabhol power plant project in India.
Enron bought a 65 percent share in the Dabhol Power Co. back in the early
1990s. Enron believed it could replicate the success it had had in England
with its massive Teesside power plant in the United Kingdom.
The political landscape in India, however, proved to be far more daunting.
The $2.9 billion project became a political nightmare for Enron. After a
change in the ruling party, the project was halted amid accusations that
Enron had a sweetheart deal with the previous regime to build the plant.
That standoff led to construction delays at the huge project that were
costing Enron a small fortune. Mark got the job of leading the effort to
renegotiate the deal to get the plant construction back on schedule.
In an interview she gave in early 1997, Mark said "People thought we were
pushy and aggressive. But think of the massive bureaucracy we had to move.
How do you move a bureaucracy that has done things one way its entire
collective life? You have to be pushy and aggressive."
Adding to the project's bureaucratic difficulties were mass protests from
nearby villagers. Enron was accused of human rights abuses because of the
tactics used by local police the company hired as security.
Human Rights Watch and Amnesty International accused Enron's security guards
of beating villagers who protested the project.
Enron said the accusations about human rights abuses in a report released in
early 1999 were false. In the wake of those allegations, Enron hired a human
rights director to handle concerns at its global operations.
Eventually, Mark renegotiated the deal and phase one of the plant was
completed and went into operation. This victory gained her international
attention and led to her being named vice chairwoman at Enron.
But she gained attention largely because of the business she had chosen for
her career. She was a single mother who had risen to the top in the energy
business. Enron liked to portray her as evidence that it was a new kind of
energy company in which everyone had a chance to prosper.
As a rising star, Mark was tapped to head up the company's effort to get into
the international water utility business.
It would prove to be her undoing as Enron shifted from owning lots of
physical assets, which was the side of the business where Mark had made her
name, and into its so-called asset-lite strategy.
The problems she dealt with in India have not been resolved; they have
resurfaced in another form. The company is not getting paid for power because
it's said to be too expensive.
Enron officials maintain that they are sticking behind the project, even
going so far as to warn Indian politicians that taking on Enron will be "like
playing chicken with a brick wall."
But analysts question how long they can last.
"Clearly India has been a political hot potato," for Enron, said Carl Kirst,
an analyst with Merrill Lynch Global Securities in Houston."They've continued
to put one foot in front of another against almost gale-force winds.
Sometimes it's not worth the uphill battle."
The company is reportedly looking to sell its stake in the Dabhol project to
either Reliance, one of India's largest industrial concerns, or China Light
and Power Co. There is some doubt as to whether the project would command
full value given all of the political problems at the plant.
An Indian observer is more blunt on the subject.
"India is not a place where their fortunes lie," says analyst Subhash
Agarwal, editor of India Focus, a political risk magazine.
...
The power of electricity
Once Enron had become a dominant player in the unregulated natural gas
business, the company set its sites on a new market: electricity.
It was in many ways much more of a gamble than the company's move into
unregulated natural gas markets. The electricity business was even more
entrenched in regulation than gas had been. And it was being deregulated in a
piecemeal fashion, state by state, instead of through a federal regulatory
process like the one that covered gas.
Yet when describing it, Lay makes it sound simple.
"We just took the model that Jeff and his team developed in the early 1990s
for wholesale North American natural gas and began to move it out to other
markets." Lay said.
In 1997, the company made its first major move on domestic electricity
markets when it bought Portland General Corp., the parent company of Portland
General Electric, the utility serving Portland, Ore.
The purchase gave the company a beachhead into the soon-to-be- opening
California market and a marketing arm on the West Coast.
Three years after buying Portland General, though, the nation's electricity
markets had changed to the point where Enron decided to sell the electric
company.
The company realized it no longer needed an electric utility to be a major
player. It was another of many lessons for Enron that making markets, not
owning physical assets, was where its future lay.
In many ways, Enron's experience in California has been a textbook example of
how they quickly move out of a market when an investment is not living up to
expectations.
In California, the company avoided getting involved in that state's energy
crisis because it chose not to buy power plants there, but rather stick to
offering services and selling power on the wholesale markets.
"Because it does not own generation in the region, Enron is not forced into
power trades with the utilities the way the California wholesale generators
have been," said Jeff Dietert, analyst with Simmons & Company International
in Houston.
The company realized soon after the California market opened in March 1998
that the legal framework was flawed and was a recipe for disaster.
"When we entered California, we were still trying to change the rules so
competition could take hold; we were not successful," Lay said. "At the end
of the day, it was set up in a way that the more you sold, the more you
lost."
But the recent filing of Chapter 11 bankruptcy by Pacific Gas & Electric Co.,
has drawn Enron into the crisis in a big way. The company disclosed last week
that it is owed $570 million by the bankrupt utility. Enron has been named to
the creditors committee for the case.
Rather than restrict their power business to individual states or regions,
the company last year decided the time had come for a national effort to
enter opening power and gas markets.
Enron formed a nationwide power and natural gas retail marketing company
catering to residential and small-business customers named The New Power Co.
The company is a joint venture of Enron, IBM and AOL Time Warner.
The concept of the joint venture is for Enron to provide natural gas and
electricity as a commodity, IBM to provide technical support and service, and
AOL to provide an Internet platform to market the service nationwide.
But less than a year after the company was formed, its concept is already
outdated. It has become apparent that the role that AOL was expected to play
in marketing the service is not needed; most of the sales so far have
happened over the telephone as a result of direct- mail solicitations.
"AOL is a problem," said Gene Lockhart, chief executive of The New Power Co.
"We are not a dot-com. About 70 percent of our sales come through traditional
channels."
The intended role of AOL in the joint venture "just hasn't worked," Lockhart
said. Now, the deal with AOL is being renegotiated as The New Power Co.
establishes relationships with other Internet companies.
Since its inception last year, The New Power Co. has grown rapidly and now
has about 650,000 customers in 15 states. The company expects to finish the
year with 1.2 million customers split about equally between natural gas and
electricity, said Bill Jacobs, the chief financial officer for the company.
The New Power Co. recently announced that it had signed up over 5,000
residential electricity customers in Texas as part of the state's pilot
program to test deregulation.
"I think Texas is a market we will be able to enter from day one," Lay said.
"Both with The New Power Co. for residential and Enron Energy Services for
large customers."
...
Broadening its horizons again
When Enron bought Portland General, it picked up a new line of business - a
telecommunications unit with only 25 employees that moved data over
fiber-optic lines.
From that tiny start, Enron is creating what it expects will someday grow
into a venture that could rival its natural gas and electricity businesses.
While electricity looked like a natural next step for Enron after natural
gas, the business of trading space on broadband lines appeared on its face to
be a different sort of animal. But after a second look, the company's traders
noticed that the broadband business looked a lot like natural gas markets in
the mid-1980s.
In both cases, owners of lines were paid to deliver something. But buying and
selling this valuable service was difficult because there were no
standardized terms and conditions for contracts and no opportunity to buy or
sell on a short notice.
For businesses to ensure they had all the broadband capacity they needed
during peak periods, they often had to pay for the capacity to send far more
data than they needed.
"We found even in the case of Enron, when we looked at our connections
between Houston and London, the average load factor was only about 15
percent," Lay said. "It's close to 100 percent during peak days, peak hours,
etc. But there were an awful lot of nonpeak periods when it was very low. We
couldn't do anything with that extra capacity."
All of these elements combined to make a very inefficient business - which to
Enron meant there were customers out there willing to pay someone to manage
their broadband requirements.
The broadband business reported a $60 million operating loss for 2000, and
the company has warned analysts that it will continue losing money for the
next two years or so as it builds its nationwide fiber-optic network.
The company's broadband business suffered a setback recently when its deal to
provide on-demand video with Blockbuster Video fell through. The cancellation
of the 20-year deal means Enron's broadband business will have to go after
smaller contracts, which could mean a longer time to expand the business.
Losing the Blockbuster deal, and a staff reduction that reduced the broadband
team by more than 20 percent, has not dampened company officials' enthusiasm,
though they admit the growth may take longer than expected.
"This is going to be a core business for us," Lay said. "With this business,
we will show that companies define themselves not by industry, but by skill
base."
...
Azurix turns into wash
Undoubtedly, the biggest blunder Enron has made as it has grown away from
being strictly an energy company was its misguided foray into the water
business.
It cost the company billions, confirmed the wisdom of the strategy to shift
away from hard assets, and cost Rebecca Mark her job.
Enron bought Britain's Wessex Water in 1998 for $2.8 billion to use as a
platform to launch a worldwide water business. The plan was to take over
formerly public water and wastewater facilities as they privatized as well as
manage such facilities. Enron thought it could once again turn a mature
regulated business into a growth machine.
The move ran counter to the way the rest of the company was going. Enron was
going to a strategy built around making markets, rather than ownership of big
assets. This allowed it to grow faster using less capital.
Enron turned to investors for capital to fuel its water venture, which was
led by Mark and named Azurix. It went public in June 1999, selling about
one-third of its shares to investors at $19 per share.
But Azurix soon ran into fierce competition. Giant multinational rivals such
as Vivendi and Suez Lyonnaise des Eaux outbid Azurix time and again for
projects, forcing Azurix to pay more for some deals than they were worth.
The real blow, however, came when regulators in England clamped down on water
rates, depriving the company of its main source of cash flow.
Azurix's shares plummeted 40 percent in December 1999 when the company said
it would not make fourth-quarter expectations and was laying off much of its
staff.
Enron decided last summer that it was time to stop the bleeding. Mark
resigned from Azurix and from her seat on Enron's board, severing ties to the
company she had helped create. A few months later, Enron announced a plan to
take the company private.
"I am not sure if the strategy was flawed or if it was never given a chance,"
Lay said. "Some of the operating assumptions didn't prove out, but this was
never meant to be a long-term business for us. We thought we could transfer
some of our skills into it."
Skilling, who was the champion of the company's market-driven business
strategy, is a bit more blunt about the experience.
"You win some, you lose some, " he said. "If you don't have some mistakes, it
means you're not trying. I wish it wasn't as big a mistake as it was, but you
can't win them all.
...
Making and creating markets
The mantra at Enron nowadays is, "We make markets."
The company is positioning itself to be a private-sector, online version of
the New York Mercantile Exchange, offering traders an Internet platform to
buy and sell a vast range of commodities as well as less tangible items such
as emissions credits and weather hedges.
Stock market observers are having an increasingly hard time figuring out how
to value Enron's shares, which sometimes trade in tandem with technology
stocks rather than energy stocks because of the growing broadband business.
The University of Virginia's Bruner said the question he is most often asked
when he teaches his Enron case study is whether the company can keep finding
new businesses to enter to sustain its strong growth. His answer is yes.
"I think their model can revitalize a wide variety of areas; I think Enron is
going to be around for a long time," Bruner said.
EnronOnline, the company's Internet trading platform is only about 18 months
old but did some $330 billion in transactions last year, easily making it the
largest e-commerce site in the world.
The company has taken its risk-management skills and approach to buying and
selling natural gas and electricity and moved it into the old-line businesses
of steel and paper.
"We make markets, but they have to have certain characteristics for us to be
interested in those markets," Skilling said.
The commodities Enron is interested in tend to have very complex, dedicated
delivery systems, such as gas pipelines or fiber-optic data communications
networks. It has to be a commodity with relatively long time frames involved.
Examples would be when a producer drills a well or someone builds a power
plant. Those are big capital investments with long-lived assets that are
associated with the commodity.
"They have morphed from saying they want to be the leading gas company to
being the leading energy company to where there is now no industry definition
that describes them," Bruner said.
Skilling does not believe Enron will be that much different of a company five
years from now, other than it likely will have expanded the roster of
commodities it trades.
But Lay still is expecting big changes. "It will be a totally different
company just like it is today versus five years ago," he said. "As we sit
here with what is on our plate today, we can see some very significant growth
with several years to come. I am sure if we look back five years from now
there will be at least one or two businesses with enormous potential in our
portfolio that we have not even thought of yet."

Photo: 1. From top left: Enron Chairman Ken Lay; President and CEO Jeffrey
Skilling; former Azurix Chairwoman Rebecca Mark; an Enron worker in Dabhol,
India (color); Graph: 2. Revenues and profits (b/ w, p. 6, BAR GRAPH);
Drawing: 3. Enron Center South: A look inside the new tower (b/w, p. 8)

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Enron / Making of the Market-maker / With ups and downs,
Enron Broadband is a work in progress
TOM FOWLER
Staff

04/15/2001
Houston Chronicle
2 STAR
1
(Copyright 2001)

IN LATE 1999, when Enron announced it would pioneer trading of a "new new"
commodity - Internet bandwidth - analysts and investors were only a little
skeptical.
Nevermind that buying and selling time on the vast, unruly tangle of the
Internet on a big scale was unheard of. Enron's reputation for making a
profit trading almost everything from pulp to plastics made this venture look
like a sure thing.
When entertainment giant Blockbuster Video signed a deal with Enron last
summer to provide video-on-demand service to consumers, creating content to
fill that giant data pipeline, investors bid up the stock to show their
confidence in its broadband vision.
But when the Blockbuster deal was canceled on March 9, Enron stock fell back
to earth.
Things got worse when Wall Street got reports that Enron Broadband Services
was reducing its staff by more then 20 percent - which have since been
confirmed by the company.
That news took a bit of the high-tech shine off the company at a time when
Enron also was getting some bad news from its international operations and
the market was losing its taste for high flying stocks.
Suddenly, Enron's broadband business, which helped fuel the stock's rise last
year, had become a drag.
The potential for broadband services and trading isn't being disputed, but
Andre Meade, head of U.S. utilities research for Commerzbank Securities, said
many analysts were too quick to accept Enron's estimates on the value of the
business when it was first announced.
"The market priced in an excessive valuation on the broadband business,
overreacting on something that was still relatively unknown," Meade said.
"Now it's overreacted somewhat to the Blockbuster news. I think it's dropped
lower than it should."
The trading side of the business appears to be exceeding expectations, but
Enron Broadband is still expected to remain in the red for the next couple of
years as it builds business.
"I think we realize it's still a work in progress," Meade said.
Enron Broadband first used its network for broadband hosting, letting a few
large customers, such as TV networks or financial services companies, buy
data line access on an as-needed basis for such things as Web broadcasts or
shipping large amounts of data across the country, said Ken Rice, chief
executive officer of Enron Broadband Services.
In the past, if a company wanted to do a Web broadcast between two cities,
for example, it had two choices: just do the broadcast and hope regular
Internet traffic wouldn't slow it down or interfere with the quality, or
reserve time on a data line months in advance and pay for several months
worth of service, instead of just the time needed.
"It seemed to be a business about the same size as natural gas, but growing
by 15 to 20 percent per year," Rice said. "By 1998, we decided that telecom
could be the company's core business."
Enron's bold predictions were embraced by investors and analysts who had
learned to give the company a lot of credit for its ability to successfully
execute its business plan. That faith helped keep Enron's stock buoyant in
the past year even as other companies with broadband businesses, such as
Williams Cos. and Global Crossing, saw their operations lose more than half
their value.
Enron built its own fiber-optic network, which now runs about 18,000 miles.
It used that to connect many other large networks around the world. To
facilitate those connections, the company has created more than 25 "pooling
points" where Enron's network interconnects with others, much like the Henry
Hub in Louisiana connects many natural gas pipelines.
It's at these pooling points where Enron can flip the switches on
increasingly short notice to turn on a section of the network dedicated to a
customer's needs. That lets Enron buy and sell just what the customer wants.
Enron also created software that allows customers to reserve and schedule
bandwidth and pick the quality of service.
The company has seen trading grow quickly, jumping from 236 broadband trades
in the fourth quarter of 2000 to more than 500 trades in the first quarter of
2001.
Enron also is moving closer to having the one tool that could really let
trading take off - standardized contracts. That can be a hard sell.
"Just as with the electricity and natural gas industries, a lot of the market
says it can't start trading until trading standards are set, but that's
bogus," Rice said. "We've come up with a couple of standard contracts
ourselves and believe the industry will adopt standards over time."
Meanwhile, the deal with Blockbuster to provide online delivery of movies was
supposed to be the cornerstone of a business in which Enron would deliver a
wide variety of content to homes and businesses.
The companies had tests of the new service running in four cities, which
appeared to be a success, but in early March the 20-year deal came to an
abrupt end.
Blockbuster was the first to announce the breakup, but Enron issued its own
release a few hours later, saying Blockbuster was unable to secure the
quality or quantity of movies from the studios needed to make the service a
success.
"Blockbuster had some relationships with the studios complete, but the
studios ultimately weren't too excited about giving them control of the
digital rights to films," Rice said.
Enron Broadband now is working directly with the studios and other content
producers to secure movie deals and expects to announce some of those
relationships soon. The company also announced a new content deal to offer
hundreds of video game titles online by June.
For investors and analysts, however, the misstep with Blockbuster took the
shine off Enron's apple.
"They really sold the Blockbuster deal as an anchor tenant for broadband and
as proof of their idea's success," said Jeff Dietert, vice president of
research at Simmons & Company International. "So when it fell through, the
one major item we could point to as a sign of a successful execution was
gone."
While Enron Broadband works toward earning its keep, Rice predicts broadband
will become a bigger and bigger part of Enron's overall business. The group
has started to trade online data storage - effectively offering companies an
alternative to buying more storage hardware - and is even beginning to trade
broadcast advertising time.
"I think eventually it will be on par with natural gas retail and wholesale,"
Rice said. "A lot of the guys in that division will say `no way,' but there's
no doubt to anyone it will be big."

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Enron / Making of the Market-maker / The project
Staff

04/15/2001
Houston Chronicle
2 STAR
1
(Copyright 2001)

Enron Corp. has gone from just another pipeline company to the largest - and
possibly the most powerful company - in Houston. This company's insatiable
appetite for change has led it to create a dizzying range of new businesses
and has spawned a surge of growth in its hometown. This package of stories
offers a look at this innovative and powerful worldwide business empire.
...
I N S I D E
CULTURE: Enron has become a spawning ground for fast-growing businesses
because it pushes bright newcomers to quickly show what they can do. But not
everyone fits into this pressured business environment: Page 6D.
HEADQUARTERS: Enron is in a hurry to get into its new downtown headquarters
building. The company will begin moving people into the lower floors this
summer, a year before the tower is complete: Page 7D.
EMPIRE: Enron is changing its worldwide focus to Western Europe and Japan as
it reduces its attention on developing countries, which provide a slower rate
of return on investments: Page: 8D.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

A
SIGN OF THE TIMES / Glowing logo once hovered over the city that oil built
ALLAN TURNE
Staff

04/15/2001
Houston Chronicle
4 STAR
33
(Copyright 2001)

For years, it hung over downtown Houston like some wacky corporate moon.
Giant blue letters - Gulf - in an orange neon disc announced to land and air
travelers that they were approaching the nation's oil capital.
It was called "The Lollipop." At 58 feet tall, it was the world's largest
rotating sign. And while the Gulf Oil Co. reveled in the giant corporate logo
atop its neo-Gothic office tower, critics called it an 83-ton monument to
tastelessness.
Today, as Houston reassesses its downtown architectural heritage and recasts
itself as a city it hasn't been in 50 years, the hotly debated landmark of
the 1960s and early '70s is largely forgotten.
Still, with nostalgia an undercurrent in the central city's reawakening -
Enron Field, loft apartments, refurbished office buildings and even a popular
new diner all feature a "retro" feel - there are those who fondly recall when
the downtown skyline was bathed in an orange glow.
"When I first came to Houston for the first time," recalled Gordon Campbell,
a former Gulf budget analyst, "I flew from Tulsa on the company plane. That
sign was one of the first things I saw. It really gave me a thrill."
"I was very passionate about it. . . . It was an icon," added one-time Gulf
chemicals division executive Charles Rhoads, who first visited the city as a
young Gulf employee in the mid-1960s. "It was the definition of the skyline
back then."
Undoubtedly the sign that had been atop what is now the Chase Bank building
was an eye-catcher.
With 4,700 square feet of display area illuminated by 7,350 feet of neon
tubing, the sign rotated at a steady 1 1/2 revolutions a minute.
"Airline pilots used it as a beacon," boasted Sherman H. Hink, chairman and
chief executive officer of Neon Electric Corp., the company that built the
sign. "It was advertising. As far as I'm concerned, bigger is better. The
object of any sign is to sell."
Built at a cost of $250,000, the sign took six months to erect. When it was
completed in the summer of 1966, it commanded immediate attention.
Signs of the Times magazine, a trade journal, featured the sign on the cover
of its September issue. Gulf Oil Co. issued postcards of it, noting on the
back that the "landmark will guide travelers and residents to the heart of
Houston."
"It was a fantastic sign," Hink said. "People loved this sign."
Or at least some people loved the sign.
"I don't want to be disrespectful," said Bill Roher, former president of
Gulf's chemicals division, "but I was somewhat aghast. I hadn't seen anything
that garish in any of of the cities I had been in. It wasn't the only sign.
Tenneco, all the other oil companies had signs emblazoned on their buildings.
But nothing like Gulf. We outdid them.
"It was very emblematic of the times. There were very aggressive advertising
people who felt that was one way to sell gasoline."
Former Houston Chronicle fine-arts editor Ann Holmes said the sign made the
the old bank building look like an oversized gas pump, to the amusement of
some.
"It became a joke and not a very funny one," she said.
Artie Lee Hinds, then and now a member of the Houston Municipal Art
Commission, recalled that members of the advisory body abhorred the sign.
"They didn't like it," she said. "It wasn't that the sign wasn't
good-looking. The art commission didn't want any signs on any buildings, and
this one was revolving around."
Members of the commission quietly urged Gulf management to remove the sign as
a public service.
Today, such a sign, which finally came down in 1975, never would pass muster
with a city ordinance that regulates sign height and size.
Critics never warmed to the Gulf sign as they did - begrudgingly, perhaps -
to the giant red neon Pegasus that revolved above the old Magnolia Oil Co.
headquarters in Dallas.
"The Pegasus is interesting," said Rice University architectural historian
Stephen Fox. "I don't think the Gulf sign was offensive in any way. But it
never claimed people's affection as a civic symbol the way the Magnolia
emblem did in Dallas. It basically was a transposition and magnification of a
Gulf filling-station sign. There was nothing special, nothing especially
Houston about it."
While the details of why the gargantuan sign was erected in the first place
probably are lost to history - many of those involved in the project are dead
- Fox suggested Gulf simply may have been trying to regain its lost
prominence on the Houston skyline.
When the sign was erected, Gulf, which traced its history to the 1901
discovery of oil at Spindletop, occupied a striking old bank building at Main
and Rusk streets.
Built in 1929 and standing 450 feet in height, it long had been the tallest
building west of the Mississippi River. In 1963, though, Gulf's tower was
eclipsed by the 600-foot-tall headquarters of the Humble Oil and Refining Co.
(now Exxon Mobil) at 800 Bell Ave.
The orange disc brought the Gulf Building's height to more than 500 feet -
still short of Humble's height but topping its rival in garishness and
illumination.
By the time Z.D. Bonner became president of Gulf Oil - United States in the
early 1970s, criticism of the sign had reached a crescendo.
"It certainly was not an asset," Bonner said. "We had very few people - aside
from those in the Gulf marketing department - who really liked it. And there
were mechanical problems with it. It had suffered wind damage."
When the massive porcelain panels were dismantled - a process Hink said took
about a month - workers were surprised to find they were pockmarked with
bullet holes.
"We got a letter of commendation from some civic association for taking it
down," Bonner recalled.
The sign was replaced with a helicopter pad, which remains atop the building.
Gulf Oil Co. lost its corporate identity in a mid-1980s merger with the San
Francisco-based Chevron Cos.
About the time the Houston sign was dismantled, Dallas' neon flying horse -
erected in 1934 for an oil convention - was donated to the city. It was
welded in place to keep it from toppling. In 1997, its neon lights went dark,
victims of the elements and neglect.
Admirers of the sign raised $600,000 from individual and corporate donors -
including Magnolia's descendant, Exxon Mobil - to replace the 15-ton sign
with a replica. The new sign was illuminated at the stroke of midnight on New
Year's Day 2000.
No such resurrection was in the cards for the Gulf sign.
Its porcelain panels were taken to Hink's workshop on the city's northwest
side. Hink kept the small "R" from the sign's trademark emblem for himself
and donated the rest to an employee who wanted to use the panels to build a
barn.
The barn was built, but the worker since has died, and Hink no longer
remembers where the farm was located.

Photos: 1. Sign maker Sherman H. Hink poses with a miniature Gulf service
station sign, model for the 83-ton neon sign that for nearly a decade rotated
atop the company's downtown office tower. At right is the giant sign's
trademark emblem - the only part of the controversial landmark that was
preserved; 2. Known as "The Lollipop," Gulf Oil Co.'s rotating orange, white
and blue logo towered above most other downtown buildings in the 1960s and
early '70s. It was removed in 1975.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Returns on investments too slow in developing nations
JENALIA MORENO, MICHAEL DAVIS, JANAKI BAHADUR KREMMER
Staff

04/15/2001
Houston Chronicle
2 STAR
8
(Copyright 2001)

JUST A FEW years ago, Enron Corp. focused its international operations in
developing markets such as Maputo, Mozambique, and Bombay, India.
Today, top executives for the Houston-based giant are more likely to fill
their passports with stamps from London, Tokyo or Sydney.
As in many other public energy companies, a keen interest in building
pipelines and power plants in Third World nations while earning a slow rate
of return has been replaced with a drive to deliver more money, faster to
shareholders, analysts said.
That's led to a for-sale sign on many of its international operations.
Enron and analysts believe the company's international fortune lies in
creating markets for gas, electricity and almost anything else that they can
profitably trade. Outsiders say building big power plants has been a
profitable line of business for them, but it ties up too much money.
"We're perfectly happy to make our way along by buying and selling from other
people who have power plants," said John Sherriff, president and chief
operating officer of Enron Europe.
More than a year ago, Japan opened up 30 percent of its electricity market to
competition. The island nation charges some of the highest power rates in the
world, and Enron is eager to get into that market.
Enron Chairman Ken Lay said he is hopeful, despite a relatively slow start,
because he senses a change in attitude on the part of Japanese business
leaders.
Enron already has set up a joint venture to market the power of some
privately owned power plants, and Enron's broadband network will be tied into
Tokyo by the end of the year. Hong Kong, Singapore and India will follow.
"There is a much greater sense of urgency to make changes and get their
economy competitive with the U.S. economy and other economies around the
world," Lay said.
Europe also is opening up its energy market.
Enron's annual report last year predicted: "In just a few years, the
competitive European wholesale power market will rival the size of the power
sector in the United States. Enron expects to assume the leading position in
Europe as it has done in North America."
In 1989, Enron chose Europe for its first international foray.
"We didn't really tiptoe into the market," said Sherriff. "We really came
into it in a big way."
Today, Enron employs 4,000 people in Europe.
Worldwide it operates in more than 30 nations.
"Our business model works best when we're pretty sure we're going to get
paid, where there's a rule of law, where there's a lack of bribery," said
Sherriff, explaining why the company does not operate in most Eastern
European countries.
Such ventures in developing countries could reap significantly higher returns
than power plants in India, where the company has faced everything from
accusations of human rights violations to bureaucratic red tape.
But analysts and critics alike question whether the move to the safer haven
of developed nations is because of a series of troubles with big energy
projects in developing markets. While outsiders have long followed Enron's
battles over its power electric plant in the Indian city of Dabhol, its
problems with the Asian nation go beyond that.
Plans for trading in bandwidth by building a broadband telecom network with
971,000 miles of fiber-optic cable connecting four Indian cities also have
been put on hold.
"Due to the lengthy delay and continued disagreement on critical commercial
and legal issues, Enron has determined that its involvement (in the
fiber-optic venture) is no longer financially viable," said John Ambler, an
Enron spokesman.
"Since we tend to focus on the more open and developed markets, it is too
early to determine whether the market will open in an acceptable time frame
in India," he added.
While analyst Subhash Agarwal, editor of India Focus, a political risk
magazine, sees Enron concentrating elsewhere, he says opportunities still
exist in India.
"They are clearly shifting away from asset-owning to trading in the energy
business, but a lot still needs to be done in India before they can freely do
that here," Agarwal said.
The problems they have faced in the electricity business help explain why
they are wary about such commitments.
Analysts said selling less-profitable assets is all part of Enron's strategy
of frequently changing its businesses, which has been a cornerstone of its
success.
"You're never going to win on every single investment, but Enron is usually
smart enough to know when to get out," said Rebecca Followill, an analyst in
Houston for Howard, Weil.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Working environment now driven more by new ideas than old
doctrine
MICHAEL DAVIS
Staff

04/15/2001
Houston Chronicle
2 STAR
6
(Copyright 2001)

FOR CLAUDE TELLIS, working at Enron Corp. has meant being able to develop an
idea, pitch it to his bosses and see it through to success.
Within a year of joining the company, Tellis was one of a group of employees
who put together Enron Investment Partners, a venture- capital fund that
specializes in bankrolling minority- and women- owned businesses. It started
with $40 million to invest, and that's expected to grow to some $300 million.
Tellis was given the chance even though his idea had nothing to do with Enron
's main businesses. He just had to prove that the concept was viable and then
be willing to work to make it happen.
Tellis explains it all by saying: "Enron is a meritocracy."
An open attitude toward new ideas is often cited as one of the key components
to the success of Enron as the company continually reinvents itself.
The associates program, in which Tellis operates, is one of the best examples
of this attitude. Recent MBAs are rotated through various Enron businesses
for two years, allowing them to decide where they might best fit in at the
huge company.
The person largely responsible for the program as it is today is Jeffrey
Skilling, recently named chief executive officer.
Although Enron has had programs for incoming MBAs for most of its history, it
was after the arrival of Skilling in 1990 that the associates program really
took off.
"We created a whole new culture," Skilling says. "We knocked down a lot of
walls, literally."
Skilling and others running Enron often single out employees such as Tellis
as being the future of the company as it chases an ever- growing number of
markets. Skilling has likened the recruiting to an arms race.
"We realized early on that the name of the game was technology and brains,"
Skilling said.
All of which sounds like a logical approach. But Tellis learned from hard
experience that the culture in other companies is not always so accommodating
to new hires.
After getting his undergraduate degree from Duke University, he was eager to
get into deal-making and went to work for one of the nation's biggest
business consulting firms.
"They told me to think outside the box, but the only box I was in was a Power
Point box," Tellis said, referring to the popular software used for
presentations. Rather than being put on deal teams, he was relegated to
putting together slide presentations for higher- ups.
He returned to college and earned his master's of business administration
from The Wharton School at the University of Pennsylvania. Soon after, he was
hired by Enron and joined the associates program.
The expansion of the associates program in the early 1990s was accompanied by
a change in the layout of Enron's offices to reflect a more open corporate
culture. Skilling wanted to express a sense of equal opportunity by
advocating an environment where everyone operated in an open office space.
Skilling also began to offer an axiom to new employees wanting to propose new
ideas: The quality of an idea is usually proportionate to its distance from
the 50th floor.
The 50th floor is where Enron's top executives, including Skilling, have
their offices.
The concept of an open office in the energy industry was revolutionary in the
early 1990s, said Bob Bruner, a professor at the University of Virginia who
has done a case study on Enron's evolution. Companies that operate in
regulated businesses tend to be very bureaucratic, and Enron was no exception
in its early days, he said.
"Enron had to become a new animal. This meant that it had to shed layers of
organization," Bruner said. "They shed lots of little things like offices
that went with titles and created the open- office concept."
Not all of the cultural changes at Enron have been met with a warm reception
from employees. A new evaluation system being used at the company is
considered by some to be divisive rather than supportive.
This so-called "horizontal" evaluation process has angered some employees who
think it pits employees against each other. Under the system, employees are
required to spend about two weeks out of the year ranking their fellow
employees in five categories.
The process has been referred to as "rank and yank," and can be brutal,
employees say - a corporate version of the television show Survivor in which
workers can gang up on others they may not like for whatever reason.
The new evaluation program is a good example of how Enron can be a tough
place to cut it for those not determined to work harder than the rest. It
also is regarded as an employer that can often overwhelm its workers'
personal lives. Ten- to 12-hour days are not that unusual at the company,
former Enron employees say.
Tellis normally puts in about a 10-hour day and frequently works weekends,
but when a deal is about to close, Enron's downtown office becomes his second
home.
No matter how warm and fuzzy the Enron culture is presented to the public,
the company clearly does not suffer fools gladly.
When asked what sort of day he typically puts in at Enron, Tellis cast a
nervous eye to the public relations person sitting next to him and asked, "Do
I have to answer that?"

Mug: Claude Tellis

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Firm in a hurry to get into new downtown tower
RALPH BIVINS
Staff

04/15/2001
Houston Chronicle
2 STAR
7
(Copyright 2001)

ENRON CORP. is in a hurry. That is evident to anyone watching workers
scurrying about to erect additional steel beams to the skeleton of the Enron
Center South tower emerging on the downtown skyline.
It will become even more evident this summer when Enron will begin moving
1,000 employees into the building before construction is complete. While work
continues above and below, Enron employees will be doing their jobs on the
tower's third, fourth and fifth floors.
The 40-story tower going up across the street from the 50-story Enron Center
North won't be complete until the summer of 2002.
Finishing the elaborate 40-story office tower can't happen soon enough for
William R. Donovan, the Enron vice president managing the construction
project.
Employees of the company, whose explosive growth made it the biggest in town
in terms of revenues, are tightly packed into the current Enron building and
have spilled over into other towers on the southwestern edge of downtown.
"We need the space. We have just about soaked up about every square foot of
short-term leased space within walking distance," Donovan said.
When the tower is finished, the imprint of the corporate culture will be
stamped into the new Enron Center South.
At the heart of the 1.2 million-square-foot building will be massive trading
floors that house the company's key business. These open spaces on the lower
levels will be home to traders buying and selling everything from electricity
to wood pulp, from natural gas to broadband communications capacity.
The importance of those traders, and the company's open culture, also will
shape the design of the offices of Enron Chairman Ken Lay and Chief Executive
Officer Jeff Skilling. Their offices will be on the seventh floor overlooking
the trading floors. Two curved grand stairways will connect their offices to
where the action is.
"I think it says a lot about how Ken Lay and Jeff Skilling view the
corporation," meaning they don't want to be sequestered away, said architect
Gregg Jones of Cesar Pelli & Associates, the New Haven, Conn., firm that
designed the new tower.
The company, which profits from the world's insatiable appetite for energy,
is going to occupy a new headquarters that will reflect Enron's emphasis on
energy efficiency, Jones said.
The south, west and east sides of the building will be adorned with metal
sunshades and fins that deflect the sun and lower energy costs.
"You will be shading an entire skyscraper," Jones said.
The building will be wrapped in bluish-gray glass that matches the Enron
tower across the street.
From aircraft flying above, the main tower of Enron Center South will appear
to have the same shape as the Enron Center North building - sort of an oval
shape with flattened sides.
The ovalish shape will be a decorative theme that is repeated in Enron Center
South in many ways. Tiny ovals will be etched into the glass of the windows
in the building; small oval holes will be punched into the sunshades and
replicated in the elevator doorjambs.
A curved sky bridge will connect the two buildings and the 15- level parking
garage that is under construction at the corner of Bell and Smith. From
above, the sky bridge will look like a ring around Saturn. The designers were
hoping the circular tube would create something more than than "just another
gerbil tube" between towers, Jones said.
With the new building, Enron is creating an urban corporate campus. It will
have a wide array of services for its employees, from child care to medical
care to on-site food services. The ground floor will have restaurants, retail
space and a 240-seat auditorium.
The company that is rushing to get into the new building already has
long-term plans for another building. Donovan said Enron owns a full block
downtown bounded by Bell, Leeland, Louisiana and Milam where the third tower
could be built, if needed.
Enron hired the Cesar Pelli firm to help make its statement on the Houston
skyline. The firm, led by Pelli, the former dean of the architecture school
at Yale University, designed the one of the tallest office projects in the
world, the Petronas Towers in Kuala Lumpur, Malaysia.
In Houston he designed a number of prominent buildings, including the St.
Luke's Medical Towers in the Texas Medical Center, whose twin spires look
like hypodermic needles to many Houstonians.
He also designed the Four Oaks Place office towers and Four Leaf condominium
towers near the Galleria.
In a few months, when the exterior skin of Enron Center South is applied, it
will give the tower a notable place in the downtown skyline.
"It's going to be very elaborate. It's not going be that minimalistic 1980s
architecture," Donovan said. "It's going to be a much, much more ornate
facade than I think downtown has seen in 50 years."

Photo: A view from Smith Street of the new 40-story Enron Center South tower.
Although construction will continue on some floors until summer 2002, the
company plans to move 1,000 employees into the building this year

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Current lineup
Staff

04/15/2001
Houston Chronicle
2 STAR
7
(Copyright 2001)

ENERGY TRANSPORTATION AND UPSTREAM SERVICES: This group was the starting
point for Enron. It runs its natural gas pipelines, storage facilities,
compression services and gas processing and treatment facilities.
ONLINE MARKETPLACE SERVICES: This unit is built around Internet marketing and
trading sites where a vast range of commodities are bought and sold. It also
includes services such as ePowerOnline, where users of Enron broadband
services can monitor their accounts, and Enron Direct, where European
customers can strike long-term wholesale contracts for natural gas and power.
ENERGY AND COMMODITIES SERVICES: This operation buys and sells such
commodities as power, natural gas, pulp and paper, coal, emissions credits,
plastics and petrochemicals, steel, crude oil and wind power.
BROADBAND SERVICES: This venture buys and sells capacity on broadband
networks so companies can buy time to ensure high-quality transmissions of
data across the country. This operation also includes a media services
business in which companies can hedge the costs of buying advertising space
and streaming media applications through which TV-quality video can be
delivered to large audiences live or on demand.
CAPITAL AND RISK-MANAGEMENT SERVICES: This group offers a wide range of
financial instruments such as hedges and swaps that allow companies to manage
the volatility of price swings for a commodity that they buy regularly. It
also includes a corporate finance arm.
COMMERCIAL AND INDUSTRIAL OUTSOURCING: Commercial and industrial outsourcing
includes Enron energy services, which supplies and manages energy usage for
large businesses. It also provides software for energy management as well as
on-site personnel to manage facilities for customers.
PROJECT DEVELOPMENT AND MANAGEMENT: This business develops, finances, builds
and manages such things power plants, pipelines, water, wind power, and oil
and gas exploration and production. These projects normally are done with
partners.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
THE NEW POWER / Enron's chronology
Staff

04/15/2001
Houston Chronicle
2 STAR
6
(Copyright 2001)

1985 - Houston Natural Gas merges with Omaha, Neb., -based InterNorth to
create the company that would eventually be named Enron Corp. The deal
integrated several pipeline systems to create the first nationwide natural
gas pipeline system.
1986 - Ken Lay, who had been chief executive officer of Houston Natural Gas,
is named chairman and chief executive officer. The company chooses the name
Enron after rejecting Interon.
1987 - Enron discovers that oil traders in New York have overextended the
company's accounts by almost $1 billion. The company ultimately worked this
loss down to $142 million. This leads to Enron developing a myriad of
services to help reduce the risk of price swings for everything from gas to
advertising space.
1988 - Enron opens its first overseas offices in England to take advantage of
the country's privatization of its power industry.
The company's major strategy shift - to pursue unregulated markets in
addition to its regulated pipeline business - is revealed to executives in a
gathering that became known as the "Come to Jesus" meeting.
1989 - Jeffrey Skilling joins the company and Enron launches its Gas Bank, a
program under which buyers of natural gas can lock in long-term supplies at
fixed prices. The company also begins to offer financing for oil and gas
producers.
1992 - Enron acquires Transportadora de Gas del Sur. It was Enron's first
pipeline presence in South America and the start of a push to expand on the
continent.
1993 - Enron's Teesside power plant in England begins operation, one of the
first big successes for the company's international strategy.
1994 - Enron makes its first electricity trade, beginning what will turn out
to be one of the company biggest profit centers in the next few years.
1995 - Enron Europe establishes a trading center in London, marking the
company's entry into European wholesale markets. Europe is now considered one
of the company's prime growth markets.
1996 - Construction begins on the first phase of the Dabhol power plant in
India. The $2 billion project would be plagued with political problems
throughout its construction and those problems continue today.
1997 - To expand its electricity business, Enron buys Portland General
Electric Corp., the utility serving the Portland, Ore., area.
Enron Energy Services is formed to provide energy management services to
commercial and industrial customers.
1998 - Enron acquires Wessex Water in the United Kingdom, which forms the
basis for its water subsidiary Azurix.
1999 - Enron forms its broadband services unit. The first phase of the Dabhol
project begins operations. One-third of Azurix is sold to the public in an
initial public offering. After an early rise, shares fall sharply as the year
goes on and the problems facing the company become apparent.
Enron Online, the company's commodity trading Internet site, is formed. It
quickly becomes the largest e-business site in the world. Enron Energy
Services turns its first profit in the fourth quarter.
2000 - Rebecca Mark resigns from her position as Azurix chairwoman and the
company announces a plan to take the troubled water subsidiary private.
Annual revenues reach $100 billion, more than doubling from the year before,
reflecting the growing importance of trading.
Enron Field is opened in downtown Houston. In addition to buying the naming
rights, Enron Chairman Ken Lay helped raise financial support for the
construction project.
2001 - Skilling is named chief executive officer. Lay remains chairman of the
board.

Photos: 1. Jeffrey Skilling; 2. Enron's power plant in Dabhol, India, under
construction in 1998; 3. Rebecca Mark in 1998 (p. 7); 4. Fans file into Enron
Field, a symbol of the company's prominence (p. 7)

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Money and Business/Financial Desk; Section 3
GRASS-ROOTS BUSINESS
Oil-Patch Epicenter, Embracing the Web
By JOEL KOTKIN

04/15/2001
The New York Times
Page 6, Column 1
c. 2001 New York Times Company

HOUSTON -- AS the daughter of an oil-field supplier in Lake Charles, La., two
and a half hours from this booming energy capital, Claire S. Farley says she
always knew she would end up in the business herself. Often the only woman in
her geology classes in college, Ms. Farley did eventually become one of the
few top executives in the energy industry who are women. She held several
high-level positions at Texaco, including president of North American oil and
gas production.
Today, Ms. Farley, 42, finds herself and the company where she is chief
executive, Trade-Ranger, in another pioneering role. Trade-Ranger, which
provides Internet-based business-to-business services to energy companies and
suppliers, is part of a growing information sector that is rapidly
transforming both the energy industry and this historically blue-collar city.
Energy companies have tended to be insular, Ms. Farley said, conducting most
of their basic research and development internally. But to take advantage of
new information technologies, she said, they increasingly look to new
businesses like hers. Trade-Ranger, whose clients include 15 major energy
companies, helps manage transactions between those companies and key
suppliers over an Internet-based global network.
It is a potentially huge business, she said, adding that global energy
companies spend more than $500 billion a year procuring most anything from
pipes to computer services. ''Fundamentally, the people in this business are
looking for information and economies of scale,'' she said, pointing to a
need to buy large quantities of goods and services at the best available
prices. ''Ten years ago, they would have done this themselves, but now they
are looking for people who can give them solutions.''
In a broader sense, Houston-based companies like Trade-Ranger and the
PetroCosm Corporation, a rival whose founders include Chevron, are part of a
rising tide of technology businesses connected to the energy industry. As
technology companies, especially Internet businesses, are collapsing in
places like San Francisco and New York, energy-related technology concerns
have not been as troubled by the collapse of the Nasdaq or weakening investor
confidence.
Trade-Ranger, founded last summer, has more than $90 million in venture
capital from energy companies like Royal Dutch/Shell and BP Amoco. That money
lets the company invest heavily in new technology.
But it is not just Internet companies that are thriving here. Other
technology companies -- in fields as different as geology and market analysis
-- are also growing rapidly.
That is a major departure from previous energy expansions, like the boom of
the 1970's, when growth came largely from manufacturing oil-field equipment
or dispatching riggers around the world. Barton Smith, an economics professor
at the University of Houston, said that much of what Houston needs today, and
is selling to the world, is technological and managerial expertise.
RECENT employment numbers reflect the trend. Over the last three years, the
fastest rate of job growth in Houston has been concentrated in business
services, as well as engineering, accounting, research and management
services. In contrast, the traditional energy sector, which includes oil
companies and businesses directly engaged in mining, gained only 10,000 jobs
last year, well below historical highs.
''Houston's energy economy is increasingly high tech,'' Mr. Smith said.
''It's white collar, not blue collar.''
Other evidence of a white-collar expansion can be seen in the office market.
New office towers, including headquarters for energy businesses like Enron
and Reliant Resources, have been rising downtown. Vacancy rates in the
central core, as high as 30 percent in the late 1980's, have dropped into the
single digits. Once a ghost town after hours, downtown is starting to become
a more popular destination, and increasingly a residential hub, for young
professionals.
The surge in technology-related employment is also spreading across the vast
greater Houston area, which is larger than all of New Jersey. Much of the
most recent growth has been beyond the city limits, a periphery that is home
to nearly 2.7 million of the region's estimated 4.6 million residents.
''The growth is becoming inevitable,'' said David Wolff, president of the
Wolff Companies, a developer in the energy corridor along the city's western
suburbs. ''The billings are increasing at all the energy companies -- that's
billions in new spending coming on line.''
THE new wealth has created a large middle class of accountants, lawyers and
other professionals, many of them directly or indirectly serving the energy
industry. More fashionable boutiques and high-end restaurants are opening
throughout the area, joining places like the Galleria -- west of downtown --
the shopping and office center where Trade-Ranger is based. ''Houston,'' Ms.
Farley said, ''is becoming chic.''
The shift away from a blue-collar base extends even into the industry's
historic core -- the wildcatters. Once identified with roughnecks and
seat-of-the-pants entrepreneurs, the exploration industry now relies more on
sophisticated sensing and computer-modeling technology than on elbow grease.
Companies like Davis Petroleum, which explores largely in the Gulf of Mexico,
depend increasingly on such technologies to uncover oil and natural-gas
supplies. The family-owned business, which has grown to 50 employees from 20
in the last five years, now includes 10 highly paid scientists. ''There's a
tremendous amount of data generated in this business and a huge paper
trail,'' said Gregg James Davis, the company's president. ''To be efficient,
you have to get down to the digits so you can make better guesses as to where
to drill.''
Deregulation of energy prices has also increased demand for sophisticated
trading information, said Jay P. Lukens, 46, president of the Lukens Energy
Group, which provides information and trend analysis on energy prices, as
well as advice for mergers and acquisitions for major utilities and
generators.
Founded in 1999, Lukens has grown to 20 employees, from 6, virtually all of
them with graduate degrees. The company uses the latest computer-modeling
technology for utilities and energy concerns, including the Williams
Companies, Alberta Energy and BP Amoco. Lukens's billings are rising to an
estimated $6 million this year from $2 million two years ago.
Mr. Lukens says, however, that his company remains an energy business at
heart. ''We have the software,'' he said, ''but what we are selling in
reality is knowledge of the market itself.''
Such expertise, Ms. Farley said, will give Houston a competitive edge. Even
if oil prices drop, major energy companies merge and most new drilling
continues to take place thousands of miles from the Texas coast, she predicts
that the city's new technology-oriented energy sector will continue to
expand.
''Houston now sells its expertise,'' said Ms. Farley, whose major investors
are from outside of Texas. ''Why not London or Los Angeles? Why, it's the oil
business -- it has to be in Houston. Everyone you know who's important in
this business passes through here. It's where the information is.''

Photos: Lukens Energy supplies software to companies like Aquila Energy, a
natural-gas wholesaler. Bryon Jobe, above, is lead operator in an Aquila
control room near Katy, Tex. Part of the distribution system is outside.
(Photographs by Phillippe Diederich for The New York Times)

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Sierra Pacific Suspends Quarterly Payout Because of Energy Crisis in Western
States
By Rhonda L. Rundle

04/15/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Staff Reporter Of The Wall Street Journal
Sierra Pacific Resources, which owns two Nevada utilities, said it suspended
its quarterly dividend, citing high power costs and other fallout from the
energy crisis afflicting the Western part of the U.S.
The utility holding company said it still hopes to complete a $2 billion
agreement to purchase Enron Corp.'s Portland General Electric unit. The
transaction, which will also include the assumption of $1 billion in debt,
has been delayed partly because of a new California law that has blocked
Sierra Pacific (SRP) from raising funds through planned sales of certain
power-generating assets.
Sierra Pacific has paid a quarterly dividend of 25 cents in recent quarters.
Suspension of the payout will save "less than $20 million -- but every dollar
counts at times like this," said Mark Ruelle, senior vice president and chief
financial officer. The dividend policy will be reviewed again at the next
board meeting, set for May 21, the company said.
Sierra Pacific, based in Las Vegas, said it is continuing several
cost-control programs that were recently undertaken to reduce expenses. The
cutbacks are mainly in the area of administrative expenses and include
elimination this year of incentive pay for executive staff.
Sierra Pacific, like utility owners in other Western states, has been hit by
rising energy costs. Sierra Pacific has said it incurred an unanticipated
expense of $889 million in 2000 to purchase fuel and electricity on the open
market. That produced a full-year 2000 loss of $39.8 million, or 51 cents a
share.
Copyright (c) 2001 Dow Jones & Company, Inc.
All Rights Reserved.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

India: Report cautions Maharashtra on PPAs
Mahesh Vijapurkar

04/15/2001
The Hindu
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) -
Asia Intelligence Wire

MUMBAI, APRIL 14. A caution that any effort to continue with the proposed
power purchase agreements (PPAs) with Reliance and Mittals for major projects
in Maharashtra "will only result in a problem similar to that of the Dabhol
Power Company (DPC) re- emerging in future" has been sounded by the Madhav
Godbole Committee.
The committee - major findings of which have been publicised - expressed
fears on "allowing these independent power producers to proceed, as currently
structured". The two projects, one in Patalganga and another in Chandrapur,
also have substantial import content.
These projects, the committee said, have to be "re- examined in accordance
with a Least Cost Plan and in any case, till such time the demand level in
the State permits full absorption of power" from these independent power
producers. It may be recalled that all arithmetic, including demand
projections by the MSEB, have gone awry in the Enron-sponsored DPC.
Neither of the two projects is contractually structured to meet the needs of
intermediate and peaking load in the MSEB or Maharashtra itself. The MSEB
needs to justify projections in more detail "before proceeding with these
projects", the committee said. The MSEB's power procurement policy till the
Maharashtra Electricity Regulatory Commission stepped in was not according to
a least-cost plan. In fact, the MERC's least-cost option unsettled the
purchase option from the DPC, forcing it to limit the maximum offtake to
around 50 per cent of the contractual obligation.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Graft vs graft: Political scene in state hits nadir
Ambarish Mishra

04/15/2001
The Times of India
Copyright (C) 2001 The Times of India; Source: World Reporter (TM)

MUMBAI: The opposition Shiv Sena-BJP combine, according to the Vidhan Bhavan
grapevine, is ready with a videotape showcasing the escapades of a prominent
minister in the ruling Democratic Front (DF) government.
``With videotapes here, there and everywhere, we will have to build a preview
theatre,'' remarked a senior official of the state legislature.
`Make hay with an allegation a day' seems to be the mantra in the corridors
of power. With DF ministers and the opposition Shiv Sena-BJP bigwigs choking
on allegations and running away at the mouth, Maharashtra's political sensex
seems to have hit an all-time low.
Charges and counter-charges, traded with the glee of a Dahyabhai from Dalal
Street, have been taking up a considerable portion of the budget session's
proceedings at a time when the state's financial health is precarious, to say
the least, with more than 20,000 villages reeling under acute water scarcity.
Also, the state administration is weighed down by a host of problems,
including the prolonged strike of resident doctors, a worsening law and order
situation and l'affaire Enron, not to speak of the bickerings within the
eight-party ruling combine.
``It is unfortunate that the assembly has been converted into an akhada. The
trading of charges has, apart from vitiating the political atmosphere,
lowered the prestige of the state legislature,'' said a former speaker of the
legislative assembly.
During the first two weeks of the budget session, which began on March 13,
the Sena-BJP combine went bang bang bang targeting minister of state for
public health Eknath Gaikwad, deputy chief minister Chhagan Bhujbal and chief
minister Vilasrao Deshmukh. The Sena-BJP leaders flaunted affidavits filed by
several youths in support of their claim that Mr Gaikwad's personal assistant
had demanded money, right in the presence of the minister, as a quid pro quo
for offering government jobs.
Closing in on the chief minister, prominent BJP leader Nitin Gadkari, while
speaking in the legislative council, accused him of having indulged in
``corruption'' while finalising the purchase of a spinning mill in Latur, the
CM's hometown.
The Vilasrao Deshmukh ministry retaliated against Mr Gadkari, who belongs to
Nagpur, with a threat to supercede the Nagpur municipal corporation on
charges of, what else, bhrashtachaar (graft).
Moreover, the ruling DF alliance accused leader of the opposition Narayan
Rane of having drained the state exchequer of a staggering Rs 124 crore by
gifting away a government plot to Esselworld in 1996 when Mr Rane held the
revenue portfolio in the Manohar Joshi cabinet.
As if this was not enough, the treasury benches okayed the suspension of BJP
MLAs. Although the suspension orders against five of the nine legislators
have since been revoked, the coup de grace has embittered the Sena-BJP
combine. ``The state government is plainly vindictive,'' declared BJP leader
Gopinath Munde. ``The opposition should learn to behave,'' retorted a DF
minister.
More fireworks took place in the assembly last week, belying hopes that the
house would take up issues of public importance for discussion and decision.
A judgment by the division bench of the Bombay high court last Monday held Mr
Rane guilty of condoning irregularities in a land de-reservation case. The
verdict brought cheer in the DF camp.
However, an unrepentant Mr Rane hit back with an allegation that Mr Bhujbal,
who holds the home portfolio, and his close relatives had demanded a tidy sum
from a senior IPS official in connection with his transfer.
The plot thickened with the allegation by senior BJP leader Gopinath Munde
that Mr Bhujbal had set free two COFEPOSA detenues for a hefty Rs 2 crore.
And on to a new allegation on Monday, when the state legislature resumes
business after a brief recess. ``Not a single charge is backed with foolproof
evidence. Tehelka.com seems to have fired the imagination of Maharashtra's
politicians,'' said the Vidhan Bhavan official, referring to the audiotapes
which Mr Rane flaunted in the house while making out a case against Mr
Bhujbal.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Editorial/Opinion
In an energy crisis, lean toward the green
Molly Ivins
Fort Worth Star-Telegram

04/15/2001
The News & Observer Raleigh, NC
Final
A27
(Copyright 2001)

BOULDER, Colo. -- At the annual World Affairs Conference at the University of
Colorado, the assorted experts from around the globe may sometimes be wrong,
but they are rarely in doubt.
This lends a happy, "But the emperor isn't wearing any clothes," simplicity
to much of the discussion. Shibboleths are ignored, obligatory bows to those
who are only partially informed are skipped entirely, and folks get right
down to the lick-log.
Thus, Harvey Wasserman, a longtime leader of the anti-nuclear movement,
cutting to the chase: "Anyone who advocates nuclear power as a solution to
our energy problems should be shut up in a padded cell."
Wasserman can, of course, discuss the details of nuclear plant design, risk,
insurance, regulation, waste disposal, etc., ad nauseam. It's just that he'd
rather not waste his time on the obvious.
One session I attended here not expecting to learn much new (but it's always
nice to have your prejudices confirmed) was titled "Our Fake Energy Crisis:
What Really Happened in California."
The aforementioned Wasserman waded in with a will, describing the dastardly
tale of ruthless utility companies determined to unload the "stranded costs"
of their monumental folly in building nuclear plants - $20 billion worth in
California's case - on the ratepayers. Given that utility lobbyists literally
wrote the California deregulation bill, it's quite a reach to blame it on
anyone else.
This is a familiar tale to those who have read beyond the basic coverage of
the California situation. Wasserman tells the story well, with a fine
contempt for the greed and stupidity behind it all and for the politicians
now seeking cover. But he presents a media mystery that has me stumped - one
of those cases of the media overlooking the obvious so completely that one is
bereft of a handy explanation.
Some parts of California are not suffering from power problems of any kind.
In Los Angeles and Sacramento, the lights are still on and the rates have not
doubled or tripled. As it happens, the people of Los Angeles and Sacramento
own their own power plants. This glaringly obvious fact has for some reason
escaped media attention, except in California.
The history of how utility ownership and regulation came about is crucial to
this story. Wasserman quoted a 19th century mayor of Cleveland, Tom Johnson,
who said, "If we don't control the electric utilities, they will control us."
As is often the case with business and government regulation, it was the
utilities themselves that asked for regulation, knowing full well that they
could easily dominate state public utility commissions. "Regulation" evolved
so that utilities were permitted to make 15 percent on invested capital - a
tidy sum.
This lasted until the early 1990s, when wholesale prices fell, tempting the
utilities into deregulation. They dumped the stranded nuke costs on the
ratepayers and made a promise in exchange - no rate increases - which they
promptly broke when wholesale prices went up. Ask the people of San Diego.
The performance of the suppliers in this case - Enron, Reliant, etc. - is
already the subject of public inquiry. But the California utility companies
were meanwhile shipping the recovered nuke costs to their parent companies.
("We're still checking the DNA on those parents," said Wasserman.) And then,
in a truly sublime move, the major California utility gave its executives
huge bonuses just before it went into bankruptcy.
Wasserman's suggested solution is that Californians should simply get
themselves out of the grid by setting up municipally owned power companies.
In rural areas, this can be done by counties or electric co-ops. He believes
that what held the old system together for so long was not government
regulation, which was always blatantly subject to manipulation by the
utilities (as anyone who has ever covered a PUC can tell you), but rather the
tension between the for- profits and the municipals.
In the current issue of Business Week, the cover story is on Exxon Mobil's
plan to take advantage of the "energy crisis." This would normally be funny,
given that Exxon is in the oil business and (as most people outside the Oval
Office are aware), the oil business has nothing to do with electricity.
However, Exxon's acquisition of Mobil, which is rich in natural gas,
unleashes a corporate behemoth of unprecedented size. Exxon also has a
corporate culture that would give nightmares to "Chainsaw Al" Dunlap of
business fame.
Here are some interesting facts from the Rocky Mountain Institute: The
cheapest source of new electricity is efficiency; the next cheapest is
burning soft coal, which is a gross polluter; and the next cheapest after
that is wind power - 2.5 cents per kilowatt- hour.

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