For January 21st.


Ken--
    For what it's worth, here's a  little perspective from some distance.

    A billion dollars here, a  billion there,  it's adding up to serious numbers.  But even worse is  the loss of what was once, not long ago, a great stock of trust and credibility,  both for Enron and Ken Lay personally.  Sunday's NY Times front page of the  Business Section story is about as bad as it gets, short of suspicions of  personal dishonesty or criminal culpability. Suspicion or innuendo that  maybe you didn't fully understand the deals must hurt as bad as any of the  barbs.  The old dumb-but-honest defense is not something you want to use in  this case, anyway.  And I doubt you could convince many people you didn't  understand it.

    The analogy of Clinton &  Nixon in their darkest hours comes to mind.  Nixon's "I am not a crook"  speech or Clinton's "I did not have sex with that woman" did not fix their  problems.  When things get this bad the best (maybe only) way to re-coup is  get really candid and lay all the cards on the table face up (with one important  caveat about which more later.) Humility, contrition & candor are the  antidotes for hubris, arrogance & deviousness, whether they were real or  just perceived.

    In whatever the right venue  is, and I'm unsure on that, I'd like to see you tell the world:

    This is what we  did.
    This is why we did  it.
    This is why we were confident  it was wholly proper.
    This is why it didn't come out  as well as we had hoped.
    This what we believe it  might cost us when all is said & done.
    And I will answer any  questions you have on any of this because we have to
      get it behind  us and get on with running an ongoing business.

    With the press on your case,  and the SEC, and Enron's high Bush-related profile, and its critical position in  the markets, and the tantalizing non-coincidence of Jeff's recent sudden  departure -- this is a story that has legs.  It's going to sell newspapers,  fuel gossip and energize competitors until the fire's out and the smoke has  dissipated. National TV coverage is a possibility even, but for anthrax and  Osama-gate.  For you to try to spoon-feed the pack on your heels will  just make the story last longer and get juicer.  Only a pre-emptive  total disclosure can quench it even half as quickly as you'd hope  for.

    BUT THE CAVEAT.  If  anybody is  exposed to personal criminal liability, then it ain't nearly so  simple.  In those circumstances, the best attorney you can get will have to  counsel every move.  And both the person and the corporation would need  their own separate lawyers because interests can diverge very fast.

    I don't think for a minute  that this is a real issue.  But I didn't think I'd see a  $15 stock  price either.  The enormity of this quake has shaken even those who only  wish you the best.  Imagine how good it makes the hyenas feel.

    As I said before, Lots of  luck, Buddy.  You need it worse that I ever thought you would.   Kindest regards to Linda, too.

Ross


WinInstall Will Run on Friday

A WinInstall screen will appear during your login on Friday, February  9,
2001.

WinInstall will then make updates to your computer including:
McAfee anti-virus software update

The WinInstall process will take approximately 1 minute to complete.  A bar
showing percentage of completion is displayed during the process.  Please
note that during the update, you should not disturb the machine.  Doing so
will only slow the update.

If you have any questions, please call the GPG Solution Center

                        ET&S Help Desk - 713-345-GPG5


Carolyn,

I have received my new card.  You can deactivate my att card.

Mark

Mark McConnell
Transwestern Pipeline Company
713-345-7896   office
713-822-4862   cell
713-646-2551   fax
mark.mcconnell@enron.com


Group,

When doing an import or an export from California there are a few important
guidelines to remember.

IMPORT-This must be FIRM.  A firm import is required so that we provide the
spinning reserves to California (we do this by buying firm energy for the
import).  If the import is non-firm, California will charge us their price
for spinning reserve margins.  This could easily be $400 per mw come this
summer.

EXPORT-This must be NON-FIRM.  A non-firm export allows us to provide
spinning reserves to our bilat trading partners (or to simply sell the energy
without spinning reserves as "non-firm"), and NOT have to pay the California
price for spinning reserve margins.  Conversely if we do a firm export, we
would have to pay for California to supply spinning reserves.  And because
California will sometime use actual purchased energy for spinning reserves,
this could easily be $400 per mw this summer.
California has also proposed cutting firm exports this summer, so a "firm"
export does not imply that the energy would actually be exported anymore than
nonfirm.

IF you have other questions.  Please let me know.

Thanks,
Bill


All testing was completed, but we encountered problems during the Flow Gas testing.  The Business Objects on-call was notified, and they are looking into the problem.  They will update us as they have more information.   We have confirmed with the ENW Resolution Center that the Exchange servers are up.


11:22:53 Synchronizing Mailbox 'Mann, Kay'
11:22:53 Synchronizing Hierarchy
11:22:53 Synchronizing Favorites
11:22:53 Synchronizing Folder 'Inbox'
11:23:12 	   34 item(s) added to offline folder
11:23:12 	   2 item(s) updated in offline folder
11:23:12 	   41 item(s) deleted in offline folder
11:23:12 	   1 view(s)/form(s) updated in offline folder
11:23:12 Synchronizing Folder 'Outbox'
11:23:12 Synchronizing Folder 'Sent Items'
11:23:14 	   9 item(s) added to offline folder
11:23:14 	   35 item(s) deleted in offline folder
11:23:14 	   1 view(s)/form(s) updated in offline folder
11:23:14 Synchronizing Folder 'Calendar'
11:23:17 	   4 item(s) added to offline folder
11:23:17 	   7 item(s) updated in offline folder
11:23:17 Synchronizing Folder 'Contacts'
11:23:17 Synchronizing Folder 'Drafts'
11:23:17 Synchronizing Folder 'Journal'
11:23:17 Synchronizing Folder 'Tasks'
11:23:17 Synchronizing Folder 'Notes'
11:23:17 Synchronizing Views
11:23:17 Synchronizing Forms
11:23:18 Done


Daren:

On 1/5/99, the above meter recorded flow 1,703 Mmbtus.  Currently, this
volume is booked to the HPL Strangers Gas Contract.  Logistics needs approval
to writeoff this volume to Unaccounted for Gas Loss.

                                            ___________
 APPROVAL to Writeoff the volumes to Unaccounted for Gas Loss

Please print, approve, and return original to me.

Thanks, Clem


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Just FYI - I believe you entered these deals on Jan. 16. What were you
thinking? How long have you worked here? Can you say, "wrong counterparty
name"? Also, why don't you have your own trader ID yet? Geez.

Sincerely,
Kate

P.S. Don't worry - I corrected them for you.
---------------------- Forwarded by Kate Symes/PDX/ECT on 01/18/2001 12:56 PM
---------------------------

Rhonda L Denton
01/18/2001 12:47 PM
To: Geir Solberg/PDX/ECT@ECT
cc: Kate Symes/PDX/ECT@ECT

Subject: Los Angeles Department of Water and Power

Please change deal nos. 497905 and 498198 to Los Angelese Department of Water
& Power.


Please be advised that as of this moment there will not be a conference call
for this Friday, June 16th.  I will notify everyone via email when a call is
set for sure. I will also give you the pincode for that call (which will be
the same as last Friday - dial in 800-998-2462 pincode 4309724).

Please feel free to call me if you have any questions.

Thanks
Twanda
713-853-9402


Per Mark Taylor's memo, the file cabinets that line the halls must be
relocated and our files must be condensed.  THUS, there will be a PIZZA PARTY
on our floor on Thursday, February 2, at 5pm to encourage compliance.  Trash
barges will be provided for your dead files.  SEE YA'LL THERE!!!


vkamins@enron.com, To unsubscribe send a blank mailto:leave-enerfaxtext-16362929Y@relay.netatlantic.com

Enerfax Daily
NORTH AMERICA'S FREE POWER AND GAS INFORMATION SOURCE
              Thursday, January 17 2002 No. 907
Visit: http://www.enerfax.com/ or for Oil Prices & News
http://www.enerfaxgold.com/
PHYSICAL NATURAL GAS PRICES
Gulf/Eastern Region
| Agua Dulce              | 2.24  |
| ANR SE                  | 2.32  |
| Carthage TG             | 2.30  |
| Chicago Citygate        | 2.38  |
| Columbia Gulf Onshore   | 2.36  |
| Dominion South Point    | 2.50  |
| Henry Hub               | 2.39  |
| Houston Ship Channel    | 2.37  |
| Katy Hub                | 2.31  |
| NGPL LA Pool            | 2.31  |
| NGPL - Midcontinent     | 2.24  |
| NGPL STX                | 2.26  |
| NGPL TX/OK              | 2.27  |
| NNG Demarc.             | 2.32  |
| Niagara                 | 2.58  |
| Sonat Tier 1            | 2.35  |
| TCO IPP Pool            | 2.49  |
| Tetco ELa               | 2.38  |
| Tetco M-3               | 2.84  |
| Tetco STX               | 2.26  |
| TGP Zone 0              | 2.27  |
| TGP Zone 1 (500 Leg)    | 2.32  |
| TGT Zone SL             | 2.37  |
| New York Citygate       | 2.98  |
| Transco Station 65      | 2.43  |
| Transco Zone 6 (NY)     | 2.99  |
| Trunk ELa               | 2.33  |
| Western Region
| California Border       | 2.29  |
| El Paso Keystone        | 2.19  |
| El Paso San Juan-Blanco | 2.18  |
| Waha Hub                | 2.24  |
| Canadian/Rockies Region
| Nova/Aeco (C$/gig)      | 3.02  |
| Dawn Hub/Union          | 2.39  |
| Northwest Stanfield     | 2.17  |
| Wyoming Pool            | 2.12  |
| Opal/Kern River         | 2.12  |
| PGT-Malin               | 2.26  |
| Sumas                   | 2.17  |
           Flow Date 1/17
-------------------------------------------------------------

NATURAL GAS FUTURES
Henry Hub
12 Month Strip  2.6170 +0.0709
18 Month Strip  2.7174 +0.0608
| Month | High  |  Low  | Close | Change |
| FEB   | 2.406 | 2.380 | 2.394 | +0.103 |
| MAR   | 2.375 | 2.356 | 2.363 | +0.090 |
| APR   | 2.383 | 2.376 | 2.383 | +0.080 |
| MAY   | 2.470 | 2.380 | 2.446 | +0.078 |
| JUN   | 2.525 | 2.420 | 2.506 | +0.078 |
| JUL   | 2.585 | 2.570 | 2.566 | +0.073 |
| AUG   | 2.615 | 2.605 | 2.606 | +0.068 |
| SEP   | 2.606 | 2.600 | 2.599 | +0.063 |
| OCT   | 2.615 | 2.565 | 2.621 | +0.063 |
| NOV   | 2.800 | 2.770 | 2.816 | +0.053 |
| DEC   | 3.015 | 2.960 | 3.011 | +0.051 |
| JAN   | 3.105 | 3.040 | 3.093 | +0.051 |
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Natural Gas Futures Rally on AGA Report

    Natural gas futures for February delivery on the NYMEX jumped $0.103
higher yesterday to $2.394 per MMBtu. The March contract gained $0.09 to
$2.363 per MMBtu. The market began the day up and pushed higher after a
137 Bcf withdrawal was reported by the AGA in the afternoon. The storage
report was about what was expected, but was 37 Bcf more than a year ago.
However, it barely dented the record amounts of inventory remain in
storage, about 2.529 Tcf, at 77% full compared to 44% full last year at
this time at 1.459 Tcf. The 5-year average is 2 Tcf. The rally broke
through the $2.36 resistance level. Funds are holding record-high short
positions and could cause a major technical rally if they ever had to
cover. But, more likely the market will head back down as the fundamentals
takeover. Support is seen at $2.36, $2.32 and $2.25 per MMBtu. A cold
front expected to move into eastern states next week and could cause the
market to rally again, but the increase will be difficult to sustain.
Natural gas for next day delivery across the US and Canada was generally
flat to $0.05 higher yesterday. Natural gas for next delivery at the hub
gained $0.03 to $2.39 per MMBtu.
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Today's Power Bulletins
 * SEC Approves National Grid  Niagara Mohawk Merger
 * AES NewEnergy Receives License to Sell Electricity in Oregon
 * Entergy Nuclear Plants Earn Top Safety Rating from OSHA
 * Fuel Cell Investor 2nd Annual Industry Summit to be Held in New York
Marriott
Marquis Hotel at Times Square, March 26  27
 * California Attorney General Seeks to Hold Enron in Contempt of Court
for Failing to Turn Over Subpoenaed Documents
 * Enron Shares Fall in Pink Sheet Trading.
FERC Chairman Wood to Meet with PJM Interconnection and Midwest ISO
Regarding Letter of Intent to Create Single Market Between Them
 * Great River Energy Research Project Could Increase Lignite
Marketability.
Western Spot Power Prices Rise Amid Curtailed Generation
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 PG&E Ads Blast California PUC Lawsuit

    PG&E has bought full-page advertisements in newspapers throughout
California blasting a giant state fraud lawsuit against the bankrupt
utility in a bid to topple the company's reorganization plan. The ads
reprinted a recent letter to the employees of Pacific Gas and Electric
from the chairman and chief executive of the parent company. He wrote that
the lawsuit by the California Attorney General contained false and
unwarranted accusations. The lawsuit charges that PG&E drained cash from
the utility during the California power emergency to fund new businesses
and drove the company into bankruptcy and seeks damages of $600 million to
$4 billion. The attorney general and the PUC are working to derail the
utilitys reorganization plan because they don't want to lose regulatory
jurisdiction over the company, the ad said. The plan would shift the
utility's power generation and energy transmission systems to new
companies formed by PG&E and beyond state jurisdiction.
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-------------------------------------------------------------
AGA Natural Gas Storage Report

            Week                                    Prev
           Ending    Prev                   Prev    Year
| Region | 1/11/02 | Week | Diff | % Full | Year | % Full|
| Prod   |  733    |  777 | -44  |  78%   |  343 |  35%  |
| East   | 1396    | 1482 | -86  |  76%   |  880 |  46%  |
| West   |  400    |  407 |  -7  |  79%   |  236 |  47%  |

| Total  | 2529    | 2666 |-137  |  77%   | 1459 |  44%  |
-------------------------------------------------------------
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--------------------------------------------------------------
Calpine Revises 2001 and 2002 Earnings Estimates

    Calpine has lowered its earnings estimates for 2001 and 2002. It now
expects profits of $1.95 per share for 2001 compared to estimates of $2.00
per share. For 2002, it expects earnings of $1.70 per share versus
estimates of $2.20 per share. Even though Calpine lowered its estimate for
2001, it will see its profits rise by 63% above 2000 earnings. Calpine
also revised its capital spending budget downward by $2 billion saying it
will complete 27 power projects, accounting for 15,200 MW, which are
currently being built. Another 34 projects in the advanced development
stage will be on hold until demand for power increases. It is also
negotiating with major equipment suppliers to adjust payment schedules and
revise delivery timing in line with its new construction schedule.
Calpine, Mirant and other power generators have delayed or canceled
billions of dollars in projects in an attempt to bolster credit ratings
and reassure investors. Last month, Moody's lowered Calpine's credit
rating to junk and said it remained on review for further possible
downgrades. Calpine has raised almost $5 billion in the last 3 months,
including a $2.6 billion bond sale. Its current generating capacity is
11,100 MW, but was scheduled to have up to 70,000 MW by the end of 2005.
It now expects to have 26,300 MW by the end of 2003. Plants with a
combined capacity of 82,000 MW have been canceled or postponed. Plants
under construction with another 200,000 MW of capacity are on the auction
block.
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-------------------------------------------------------------
PHYSICAL POWER PRICES
|            | High  |  Low  | Average |
|            | $/MWh | $/MWh |  $/MWh  |
| Cinergy    | 20.00 | 19.35 |  19.75  |
| ECAR       | 21.50 | 18.50 |  20.25  |
| ERCOT      | 21.00 | 17.55 |  19.75  |
| Entergy    | 23.00 | 20.00 |  21.40  |
| TVA        | 26.35 | 23.75 |  25.90  |
| ComEd      | 21.75 | 19.50 |  20.45  |
| Nepool     | 30.50 | 30.25 |  30.40  |
| PJM West   | 23.40 | 23.20 |  23.30  |
| Main       | 21.75 | 19.05 |  20.25  |
| MAPP       | 23.00 | 20.00 |  20.90  |
| Palo Verde | 30.50 | 28.00 |  28.65  |
| Mid C      | 22.75 | 20.50 |  21.35  |
| COB        | 25.50 | 23.75 |  24.30  |
| 4 Corners  | 27.00 | 26.00 |  26.50  |
| Mead       | 30.00 | 28.00 |  29.10  |
| NP 15      | 30.00 | 27.00 |  28.25  |
| SP 15      | 30.50 | 27.25 |  28.65  |
            Power Delivered 1/17
-------------------------------------------------------------
FERC to Create Power Market Oversight Unit

  The FERC plans to create a new market oversight unit to prevent
manipulation of wholesale electricity prices and supplies. The new Office
of Market Oversight and Investigations is designed to protect customers
through vigilant oversight of the nation's energy market, according to the
FERC. It plans to have the office operating with a staff of over 50 by
this Spring. The FERC currently has an office of Markets Tariffs and
Rates, which monitors markets in a broad way. But, the new office will be
FERC's first attempt of defining and curbing market power, either through
refund orders or courts.
-------------------------------------------------------------
Allegheny Energy Supply Company, Salt River Project (SRP) and Sempra
Energy
Resources announce Open Season for proposed Desert Crossing Gas Storage
and
Transportation System. Open Season for customers interested in capacity
begins Jan. 10, 2002 and extends through Feb. 8, 2002.  For information,
visit www.desert-crossing.com
-------------------------------------------------------------
Natural Gas NYMEX Volume
02FEB   32,364
02MAR   13,993
02APR    5,770
02MAY    1,972
02JUN    1,601
02JLY    3,826
02AUG    2,476
02SEP      609
02OCT    4,332
02NOV    1,411
02DEC    1,859
03JAN      953
03FEB      519
03MAR    2,032
03APR      482
03MAY        0
03JUN       69
03JLY       16
03AUG    1,532
03SEP        2
03OCT      592
03NOV       30
03DEC      181
04JAN        0
-------------------------------------------------------------
Todays Gas Bulletins
 * Hart Publications Launches Pipeline and Gas Technology Magazine
 * Dynegy Promotes Matt Schatzman to President and CEO of Energy
Convergence
Business
 * California Meteorologist Wins $50,000 in Aquila/AMS Forecast
Competition
 * David Duncan, Fired Former Andersen Auditor Who Shredded Enron
Documents, Now Cooperating with House Energy and Commerce Committee
Investigation
 * Southern Natural Files $200 Million Debt Offer with SEC
 * Phillips Optimistic About Alaska Natural Gas Pipeline; Favors 2100-Mile
Southern Route to Alberta, Partly Along Existing Trans-Alaska Oil Pipeline
and Partly Alaska Highway Route
 * GAO Trying to Gauge Congressional Support for Court Action Against
White House Over Refusal to Give Details of How Energy Policy was
Formulated
------------------------------------------------------------
 Ziff Energy Group presents
Gas Storage 2002
Redefining the Fundamentals:
Is Gas Still in the Storage Game?
Power Drives Storage
Will the recession affect plant and storage development?
Will record high volumes in storage further depress gas prices?
Is it possible to mitigate storage risk while dealing with year-round
price
volatility?
Plus
Two Important Workshops
Calpine Corporation
Hear what the Power Generator wants from the storage industry
Bruce Bernard
Learn from the expert how to mitigate storage price risk in the 2002 gas
marketplace
February 6 & 7
Houston
Four Season Hotel
1300 Lamar Street
Register Today for this Important Conference
Call 1-800-853-6252

Email: gasconference@ziffenergy.com

Visit: www.ziffenergyconferences.com
-------------------------------------------------------------
JP Morgan Posts 4th Quarter Loss

    JP Morgan Chase posted its first quarterly loss in 5 years after it
wrote off loans to Argentina and Enron. The bank lost $332 million, or
$0.18 per share, compared with earnings of $0.34 per share, or $708
million, in the 4th quarter of 2000. The banks decision to lend to Enron,
Argentina and others that defaulted kept it from profiting from the lowest
interest rates in 40 years. Competitors that took advantage of the low
rates are reporting increased earnings. JP Morgan took a write-off of $456
million for trading losses and loans to Enron and still has exposure of
$2.06 billion of potential losses. The lender had a complex relationship
with Enron as it traded with the company, advised it and loaned it money.
JP Morgan will attempt to recover its Enron loans, some of which were not
backed by collateral, in bankruptcy court. The bank is also suing
insurance companies for $965 million for insured oil and natural gas
contracts. In addition, JP Morgan took a charge of $351 million for loans
to Argentina, which devalued its currency and defaulted on its bonds. It
is one of 4 US lenders with large exposures in the country. The bank said
it lost $385 million in its private equity business, and also allowed $510
million to cover further possible loan defaults in response to
deteriorating market conditions.
-------------------------------------------------------------
 R. W. Beck is an engineering and management consulting firm serving
utilities, developers, financiers and governments worldwide.  Founded in
1942, we help our clients face energy market challenges by providing:
Portfolio Analysis to improve diversification and risk-adjusted
performance
of energy assets.
Risk Control services to help reduce the probability of losses.
Systems and Facilities services to identify, design and implement
effective
risk management systems.
Training to improve your ability to identify and manage tactical and
strategic risks.
Please visit our web site at http://www.rwbeck.com
-------------------------------------------------------------
Marathon Announces 2 Deepwater Gulf of Mexico Dry Holes

    Marathon Oil did not encounter hydrocarbons at the company's Paris
Carver and Flathead exploratory wells in the deepwater Gulf of Mexico. The
Paris Carver and Flathead wells are located in Green Canyon Block 601 and
Walker Ridge Block 30, respectively.  Paris Carver was drilled to a total
depth of 24,120 feet in 4,572 feet of water, and Flathead was drilled to a
total depth of 28,043 feet in 6,556 feet of water.  Marathon has plugged
and abandoned the Paris Carver well.  The Flathead well has been
temporarily abandoned and, after completing additional technical studies,
Marathon is considering reentering and sidetracking options. Marathon was
operator of the Paris Carver well and holds a 50% interest in Blocks 601
and 602; and also operated the Flathead well, and holds a 100% interest in
Block 30.
-------------------------------------------------------------
POWER FUTURES
| Month |   COB   | Change |   PV    | Change |
| FEB   |  22.00  | +0.00  |  23.50  | +0.00  |
| MAR   |  20.50  | +0.00  |  23.00  | +0.00  |
| APR   |  20.90  | +0.00  |  24.25  | +0.00  |
| MAY   |  19.00  | +0.00  |  25.25  | +0.00  |
| JUN   |  20.50  | +0.00  |  30.00  | +0.00  |
| JUL   |  30.50  | +0.00  |  40.00  | +0.00  |
| AUG   |  40.50  | +0.00  |  44.25  | +0.00  |
| SEP   |  35.00  | +0.00  |  35.00  | +0.00  |
| OCT   |  27.00  | +0.00  |  27.50  | +0.00  |
| NOV   |  26.50  | +0.00  |  27.00  | +0.00  |
| DEC   |  27.50  | +0.00  |  27.50  | +0.00  |
| JAN   |  27.00  | +0.00  |  27.00  | +0.00  |
| Month | Entergy | Change | Cinergy | Change |
| FEB   |  20.15  | +0.65  |  21.20  | +0.65  |
| MAR   |  20.70  | +0.35  |  22.10  | +0.10  |
| APR   |  20.70  | +0.35  |  22.10  | +0.10  |
| MAY   |  23.75  | +0.25  |  25.35  | +0.15  |
| JUN   |  29.00  | +0.00  |  31.65  | +0.00  |
| JUL   |  38.00  | +0.25  |  41.70  | +0.00  |
| AUG   |  28.00  | +0.00  |  41.70  | +0.00  |
| SEP   |  22.25  | +0.00  |  23.15  | +0.25  |
| OCT   |  22.25  | +0.25  |  23.25  | +0.25  |
| NOV   |  22.25  | +0.25  |  23.00  | +0.00  |
| DEC   |  22.25  | +0.25  |  23.00  | +0.00  |
| JAN   |  24.75  | +0.25  |  26.00  | +0.00  |
-------------------------------------------------------------
Power Futures
| Month |  PJM  | Change |
| FEB   | 24.75 | +0.10  |
| MAR   | 24.90 | +0.15  |
| APR   | 24.90 | +0.15  |
| MAY   | 28.25 | +0.05  |
| JUN   | 35.15 | -0.10  |
| JUL   | 48.75 | -0.10  |
| AUG   | 48.75 | -0.10  |
| SEP   | 25.55 | +0.05  |
| OCT   | 25.25 | +0.00  |
| NOV   | 25.25 | +0.00  |
| DEC   | 25.25 | +0.00  |
| JAN   | 29.00 | +0.30  |
-------------------------------------------------------------
Energy Seminars, Inc. Announces Key Seminar Offerings for January:

Energy Seminars will be going to Florida and Calgary in 2002!

Click to www.energyseminars.com to see our 2002 schedule.

Register on-line at http://www.energyseminars.com or call Registrar Gina
Patrick

Phone: 281-362-7979
FAX: 281-296-9922
--------------------------------------------------------------------------------------------------------------------------

Dominion Resources Expects 4th Quarter Costs

    Dominion Resources had 4th quarter expenses of $348 million for losses
from dealings with Enron and for a restructuring. The companys 2001
earnings, excluding some items, met or exceeded forecasts of $4.15 per
share. The expenses include $97 million related to Enron, a $183 million
write-off of Dominion Capital assets and $68 million from a restructuring.
The Enron costs involve $6 million for past sales to the energy trader and
$91 million for the decline in value of forward natural gas contracts with
Enron. Dominion expects profit this year of $4.90 - $4.95 per share.
Earnings after 2002 should rise at an average annual rate of 10%, Dominion
says.  Last November, Dominion cut its senior-management team by 19
officers, or 25%. Dominion has hedged more than 60% of its 2002 natural
gas production and 40% of its 2003 natural gas volume at prices above
current market prices.
-------------------------------------------------------------
UBS to Restart EnronOnline

    Natural gas traders who did large volumes of business with Enron are
taking a wait-and-see approach toward dealing with the new market player
expected to emerge from the recent deal with Swiss bank, UBS. Some have
their doubts about UBS' potential impact on the market. The deal calls for
UBS to restart the trading business, including EnronOnline, with the help
of 830 former Enron workers. However, even if the deal does get the
court's approval, there is still some question among marketers and traders
as to whether a revitalized trading operation could recapture the dominant
market share Enron held prior to bankruptcy.
-------------------------------------------------------------

                Progas Storage Services, Inc

Was recently organized to offer specialized natural gas storage services
to marketers and end users servicing the upper Midwest and Northeast
market regions along the major transmission systems in Indiana, Illinois,
Kentucky, and Michigan. PGSMI has 10 bcf of potential working capacity
which will offer service along TXG, ANR, Midwestern, and is currently
evaluating for purchase another 21 bcf of potential working capacity which
can be serviced by these and other systems in the region. PGSMI also
explores for natural gas in the Gulf Coast region through a wholly owned
subsidiary. Progas intends to go public through a route of private
industry offerings, and an IPO or registration. For more information on
services or the company mail to: gastorage@aol.com or for AOL mail to
gastorage@aol.com;
The company's executive and administrative office is located in Abilene,
Texas with storage operations in Owensboro, KY and exploration operations
in Corpus Christi, TX.
Vist our website http://www.progas.net/wip
Progas Storage Services, Inc
8610 S. Hwy 277
Abilene, TX 79606

Ph 915 698 3699
Fx 915 698 2859
-------------------------------------------------------------
President Urges Senate to Act on National Energy Plan

    In an address in New Orleans, President Bush said that it was a matter
of national security for the US to have a National Energy Package. The
president urged the Senate, where energy legislation is currently stalled,
to take immediate action to pass a National Energy Plan. The president's
remarks come prior to Congress reconvening next week after the holiday
recess. The White House, labor and business leaders support the
development of resources in ANWR to increase energy independence, national
security and create over 755,000 jobs. Opening the ANWR could double the
current domestic supply of oil and make the US far less reliant on foreign
sources for its energy needs. The US Geological Survey reports that the
1.5 million-acre tract holds upwards of 16 billion barrels of recoverable
oil, which is the energy equivalent of 17.7 billion barrels of gasoline,
enough to supply the total US gasoline demand for nearly 6 years. Arctic
Power, an Alaskan-based non-profit organization that supports the opening
of ANWR says that Congress has debated ANWR for over 14 years and now it
is the responsibility of the Senate to face up to the realities of the
present situation. The 2,000 acres of the ANWR designated for exploration
could replace Iraqi imports for the next 70 years.
-------------------------------------------------------------
FINANCIAL SUMMARY
The TSE 300 dropped 59.88 points to 7584.02
The CRB Index added 1.32 points to 194.32
The US Dollar increased 0.16 points to 117.56
The Dow declined 211.46 points to 9712.27
The S&P 500 lost 18.62 points to 1127.57
The Nasdaq was down 56.47 points to 1944.44
February NYMEX Crude Oil fell 0.04 to 18.86
Canadian-US Exchange rose 0.0050 to 1.5947
-------------------------------------------------------------
Pure Text, Lotus, AOL, Yahoo, Excite, Readers-subscribe by writing to:
enerfax-subscribe@egroups.com

Outlook Email Readers-subscribe to webmail by writing to:
mailto:join-EnerfaxDaily@relay.netatlantic.com
-------------------------------------------------------------
Washington DC
January 24, 2002
Spencer Abraham U.S. Secretary of Energy to address energy community on
potential security and commerce threats. Also to speak will be key
directors
from the CIA, SPR, IEA, SPR and more. See complete
detail and register today at
http://www.wesc.org
-------------------------------------------------------------
Please welcome our advertisers by visiting these websites.
http://www.e-acumen.com
http://www.kwi.com/
http://www.fea.com/
http://www.caminus.com/
http://www.progas.net/wip
http://www.ziffenergyconferences.com/
http://www.energyseminars.com
http://www.desert-crossing.com
http://www.epis.com
http://www.rwbeck.com
http://www.NewEnergyAssoc.com

enerfaxtext, forward to delete@enerfax.com to unsubscribe.


Ben,

Please find attached the tentative meeting schedule along with the
proposed travel itinerary.  Please let me know if you have any suggested
changes to the travel itinerary.

I will be out on vacation, but will be checking email.  Feel free to
leave me a voicemail too.  We can make any necessary changes prior to
your trip.  Thanks!

Missy Sturgeon
859-372-6869

 <<Interview Schedule Ben Rogers.doc>>
 - Interview Schedule Ben Rogers.doc


The referenced counterparty is on the list below for online approval to trade
us gas financial products.  This counterparty came through before on the
1/20/00 list and we did not approve them for financial trading because of a
"payment dispute".  Is anyone out there aware of the payment dispute with
this counterparty, and has it been resolved?  Can we open this counterparty
up to trade financial?  They are an ESP...
----- Forwarded by Tana Jones/HOU/ECT on 04/17/2001 01:21 PM -----

	Walter Guidroz/ENRON@enronXgate
	04/12/2001 05:21 PM

		 To: Karen Lambert/HOU/ECT@ECT, Tana Jones/HOU/ECT@ECT, Samuel
Schott/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT, Brant Reves/ENRON@enronXgate,
Debbie R Brackett/HOU/ECT@ECT, David Hardy/LON/ECT@ECT, Lesli
Campbell/ENRON@enronXgate, Cynthia Clark/ENRON@enronXgate, Enron Europe
Global CounterParty/LON/ECT@ECT, Stephanie Sever/HOU/ECT@ECT, Tom
Moran/ENRON@enronXgate, Claudia Clark/HOU/ECT@ECT, William S
Bradford/ENRON@enronXgate, Lisa Lees/HOU/ECT@ECT, Juana
Fayett/Corp/Enron@Enron, Jana Morse/Corp/Enron@Enron, Trang Le/HOU/ECT@ECT,
Paul Maley/LON/ECT@ECT, Sonya Clarke/LON/ECT@ECT, Tim Davies/LON/ECT@ECT,
Karen O'Day/NA/Enron@Enron, Tanya Rohauer/ENRON@enronXgate, Kelly
Lombardi/NA/Enron@Enron, Brian Lindsay/Enron Communications@Enron
Communications, EOL Call Center@ECT, Bernice Rodriguez/HOU/ECT@ECT, Bill D
Hare/HOU/ECT@ect, Amy Heffernan/Enron Communications@Enron Communications,
Molly LaFuze/Enron Communications@Enron Communications, Danny Clark/Enron
Communications@Enron Communications, Stephanie Panus/NA/Enron@Enron,
Mandola@/O=ENRON/OU=NA/CN=RECIPIENTS/CN=NOTESADDR/CN=BCBC586C-1D5A658C-862568C
D-532EF3@EX@enronXgate,
Kyle@/O=ENRON/OU=NA/CN=RECIPIENTS/CN=NOTESADDR/CN=97746094-1B0A69C0-86256945-5
803A9@EX@enronXgate
		 cc:
		 Subject: EOL approvals, 04-12-01

Please see attached.


FROM STEVE KEAN:  PLEASE DO NOT COPY OR FOWARD THIS EMAIL

           DRAFT

To:	Enron Employees Worldwide

From:	Ken Lay and Jeff Skilling

Subject:	Organizational Changes	Date:	February 6, 2001

 Enron is forming a new organization - - the Enron Accelerator - - to drive
the formation and development of new businesses at Enron.  Enron,s unique
ability to start and develop new businesses has driven most of our growth
over the years.  Lou Pai, currently Chairman and CEO of Enron Energy Services
will lead the Accelerator.  Over his years at Enron, Lou has been key to the
creation and rapid growth of our wholesale gas, wholesale power and energy
service businesses.  The existing business units will continue their new
business development activities, while the Accelerator will be focused on
identifying new business opportunities which are natural extensions of Enron,
s business model and core skills, but not currently under development within
Enron.

 Dave Delainey, currently President and CEO of Enron Americas, will become
Chairman and CEO of Enron Energy Services.  Dave brings a wealth of
experience and accomplishment from Enron Wholesale Services, businesses where
he led phenomenal growth in our Canadian business and our North American
origination activity, and, most recently, had a stellar year in Enron
Americas.

 Joining Dave in EES will be Janet Dietrich, currently Managing Director in
Enron Americas.  Janet will assume responsibilities as _____________________
of EES.  Janet has led an extremely successful origination team in Enron
Americas.  Together, Janet and Dave will bring extraordinary commercial
skills to the already outstanding EES team.

 In connection with these leadership changes at EES, Dan Leff and Marty Sunde
will assume responsibility as ________________ and ______________
respectively at EES.  Together with Tom White, Vice Chairman of EES, Dan and
Marty have led the development and execution of a highly successful business
model at EES.  This new leadership structure will enable EES to continue on
its path of rapid growth and profitability over the coming years.

 John Lavorato will succeed Dave as President and CEO of Enron Americas.
John has been an essential part of Enron,s energy trading success over the
years and is a key part of Enron Wholesale Services, continuing success
story.  Joining John is Louise Kitchen, currently President and CEO of Enron
Networks.  Louise, who accelerated Enron,s phenomenal growth with the
deployment of EnronOnline, will take over as Chief Operating Officer of Enron
Americas.

 Philippe Bibi, currently Chief Operating Officer of Enron Networks will take
over as President and CEO of Enron Networks.  Under Philippe,s leadership,
Enron has become a technology powerhouse and the leading e-commerce company.
Joining Philippe as Chief Operating Officer is Greg Piper, currently Managing
Director of Enron Networks.  Greg ____________________________

 Please join us in congratulating all of these individuals on their
achievements and their new responsibilities.

 [Policy Committee Changes?]

 [In addition, a number of individuals have elected to leave Enron.  David
Haug, currently Executive Vice President of Enron and formerly Chairman and
CEO of Enron CALME, has elected to leave Enron to pursue other
opportunities.  David initiated and oversaw the successful transition of
CALME into Enron Wholesale Services while continuing to meet financial
targets for his organization.  Also leaving Enron are Diomedes Christodoulou,
Chief Commercial Officer of Enron Broadband Services; James Bannantine,
formerly CEO of Enron South America; and Sanjay Bhatnagar, CEO of Enron
Broadband Services for the Middle East and Asia.  Diomedes, Jim and Sanjay
built and led strong and talented teams at Enron.  We wish all of these
individuals the very best in their new endeavors.]


Carrin,

Other people mentioned as possible
class cert. experts:

1.  Bill Powers

2.  Wm. Dorsaneo

3.  Sam Issacharof

4.  Charles Silver

5.  Arthur Miller

6.  Jack Coffee

I have opinions re all except Coffee, who I
do not know.  We can discuss at your
office Friday afternoon.

>>> "cpatman@bracepatt.com" 03/28/00
06:05pm >>>
CONFIDENTIAL AND PRIVILEGED
ATTORNEY/ATTORNEY AND
ATTORNEY/CLIENT COMMUNICATION

Today Don Ray talked to Donnie Rhodes.
 Donnie was aware the Beeson case had
come down, and contends "I told them all
along they should certify those excluded
from Dow Waiver as the class"!  At any
rate, Donnie said -- and as with all of
Donnie's info, this must be taken with a
grain of salt -- that Ronnie is no longer
getting along with Joseph and King, and
Ronnie is in charge of the case.  Donnie
is still owed $80,000.  Nonetheless, if they
asked, he would work for them on the
case.  I suspect we will see him at the
hearing working basically on a
contingency, and with a whole new Dow
Waiver theory of certification!
 - Enclosed.txt


We would like to thank you for your time yesterday allowing us to make you
aware of the Buildscape initiative and potential opportunities for Enron,
Dow and Buildscape to partner and develop the web based services for the
residential building industry in NA that would lead to a tremendous market
offering for the users/customers of the web solution as well as the market
access and services that could be made available through this new business
entity.

The potential synergy of the Buildscape market rollout and web based
technology platform with the Enron capabilities and market making
functionality and Dow's position in the Building industry as a major
manufacturer/supplier would be a powerful combination and I would like to
recommend a follow up meeting to discuss the options around strategic
investment interests and alliance after you have had a chance to regroup
after yesterday's meetings. The possibilities exist today for Enron to join
Dow as a major investor/partner in Buildscape.

Rob, you mentioned that you will be visiting the NAHB show this weekend. Dow
and Buildscape are also participating and our VP for Building Products
Business - John Schaw who was on the original conference call will be there
as well and we would like to arrange a meeting between John and yourself. I
will ask his assistant Marcy Putt to try to contact you and see whether a
meeting can be setup possibly for Saturday.

Jeff,  James Mason and I were also pleased to meet with you to discuss
global market opportunities on a broader sense between Enron and Dow and we
will follow with a meeting between yourself and Pedro Reinhard( CFO) in
Midland at the earliest convenience.

I have attached the Buildscape presentation from yesterday for your review
and follow up to complement the documents previously sent.

 <<BuildscapeEnron.ppt>>

Best Regards,

Carlo
Carlo Guarino
Global Development Director
Dow Growth Center

Office  (517) 636-0860 / Mobile (313)655-7553
Fax      (517) 636-1453
Internet address: CGuarino@dow.com

 - BuildscapeEnron.ppt


BUSINESS HIGHLIGHTS

Coal Trading
The liquidity in trading of the Standard European Coal Agreement has
increased significantly over the last 6 weeks.  Many counterparties that
previously opted to stay on the sidelines finally chose to join the game.
Since the contract's inception at the beginning of the year, Enron has traded
a total of 5.3 million tons against the SECA contract, of which 3.8 million
tons has been traded via EnronOnline since July 2000.  We are 5.3 million
tons of a total traded market of 5.8 million tons.

Principal Investments
Tridium Inc., the leading provider of Internet-based automation
infrastructure solutions, announced the close of a $20 million round of
capital funding. The funds will be used to increase Tridium,s sales and
technical support offices in North America, expand its operations into Europe
and Asia, and enhance its technology and products. kRoad Ventures, L.P. and
Enron North America each contributed $10 million in venture capital.

Corporate Development
Allegheny Energy Supply Company, LLC, a wholly owned subsidiary of Allegheny
Energy, Inc., announced the signing of a definitive agreement under which
Allegheny Energy Supply will purchase three Enron natural gas-fired merchant
generating facilities. The acquisition is expected to close in the 2nd
quarter of 2001.

PERFORMANCE REVIEW

The deadline to provide feedback is Friday, November 17.  If you have been
selected to provide feedback on one of your fellow employees, please take the
time to fill out an evaluation online at www.pep.enron.com.

IN THE NEWS

"Enron Corp., already North America's biggest, buyer and seller of natural
gas and electric power is dead serious about its efforts to capture a big
slice of the $400 billion global trade in pulp, paper and lumber."
-Reuters News Service

2000 CHAIRMAN,S AWARD NOMINEES
Please join us in congratulating the ENA/EIM/EGM/ employees who have been
recognized as Chairman,s award nominees.

Congratulations to:

 Irma Alvarez  Alan Aronowitz  Rick Bergseiker  Carol Coats  Joya Davis
Rufino Durante
 Sue Foust  Julie Gomez  Barbara Gray  Jackie Griffith  John Harrison  Gerri
Irvine
 Kathy Benedict  Michael Kelley  Mike McConnell  Dave Nommensen Ina Norman
Juan Padron
 Veronica Parra  Michael Roberts  Rhonda Robinson Kevin Sweeney  Helen
Taylor  Stacey White

Extra kudos to BARBARA GRAY, who is a finalist for the 2000 Chairman,s
Award.  Barbara and ten other individuals are flying to San Antonio from
around the world to be honored at Enron,s annual Management Conference.  One
of these finalists will be recognized as the 2000 Chairman,s Award winner.

WELCOME
New Hires ENA/EIM/EGM
ENA ) Anil Chandy, Alejandra Chavez
EGM ) Marty Cates, JoAnne Underwood, Brad Miller

Transfers to ENA/EIM/EGM
ENA ) Mark Wadlington, Jennifer Blay-Smith, Georgian Landau, Kathryn Bussell,
John Coleman, Steven Gillespie, Clarissa Garcia, Ina Rangel, Farouk Lalji,
Eva Rainer, Chuchu Wang, Smith Day
EGM ) Gloria Solis, Carmella Jones, Nancy Haralson

LEGAL STUFF
The information contained in this newsletter is confidential and proprietary
to Enron Corp. and its subsidiaries.  It is intended for internal use only
and should not be disclosed outside of Enron.


I believe we need to assign someone from the Central Desk to be the point
person for CES Central Desk activity, for pricing and scheduling issues.

CES currently has issues with the BTU conversions at the different Michcon
citygates.  ENA delivers the gas to different Michcon citygates and each one
has a different BTU factor.  This causes CES to be long or short depending on
the conversion factor.  I'm not sure if there is anything we can do about it
but I would prefer to have someone from the Central Desk address this issue.

Comments?


Done.

D

	Enron North America Corp.

	From:  Megan Parker @ ENRON                           01/02/2001 12:35 PM

To: Daren J Farmer/HOU/ECT@ECT
cc:
Subject: Tenaska IV 11/00

All of the outside sales for 11/00 have been paid.  We now need to forward
the cash to Tenaska IV.  The demand charge for deal 529856 should be
$341,250.47.  I have attached my spreadsheet.  The number is based on noms,
so when we receive the actuals I will send you a revised number.

Megan


Please call if you have questions.

Kam
x3-5781


Business&Finance: ESB ownership of network is questioned - Competition
Authority says separation of national grid from core company does not go far
enough. Arthur Beesley reports

11/13/2000
Irish Times
18
Copyright (C) 2000 Irish Times; Source: World Reporter (TM)

The Competition Authority has questioned the ESB's ownership of the
electricity network in the newly deregulated power market.

In a paper submitted to the Department of Public Enterprise, the body said
the separation of the ESB's National Grid operation from the core company did
not go far enough to ensure fair competition.

It said arguments in favour of the ESB retaining the transmission and
distribution system ignored the 'overwhelming conclusion' that a generation
company which owns such assets 'will naturally favour itself' at the expense
of customers and reliability.

The paper has not been published yet. It is believed to state, however, that
the ESB's retention of its 'non-competitive' transmission and distribution
assets and its 'competitive' electricity generation business was unwise from
a competition perspective.

The National Grid, which controls when individual power stations feed
electricity into the network, was separated from the ESB when 27 per cent of
the market was opened last February.

In theory, this meant the ESB could not favour its own generation stations
over more efficient competitors when deciding which plant to switch on and
off as demand for power fluctuates.

But the authority's response to the Statutory Instrument behind the
separation - which renamed the National Grid as Eirgrid - said more should be
done to ensure the market operates fairly.

The paper said: 'Some argue that as long as there is an independent operator
of the underlying transmission system, ownership of the transmission system
can remain in the hands of an upstream generation operator.

'In accordance with this line of argument, the shift of operational control
of electricity transmission to Eirgrid would mean that discrimination in
dispatch [of power] and other operations would not be possible. However, the
Competition Authority considers that this argument ignores the overwhelming
conclusion that the generation company that owns the transmission lines will
naturally favour itself.'

The Statutory Instrument followed complex talks, which led to an agreement
between the ESB, its trade unions and the Minister for Public Enterprise, Ms
O'Rourke.

When Eirgrid was formed, the ESB retained ownership and responsibility to
develop and maintain the high-voltage national transmission system and the
low-voltage local distribution network.

The authority says these, too, should be separated from the ESB to ensure the
competitive market functions fairly, according to a person familiar with its
paper.

This would ensure equal access to the power network and an objective,
transparent, non-discriminatory treatment of all electricity generators in
the market, it said.

The paper argues the ESB has an incentive to allocate as many costs as
possible to the operation of the transmission and distribution system.

Folder Name: Utilities, Electric: Deregulation
Relevance Score on Scale of 100: 100

______________________________________________________________________
To review or revise your folder, visit Dow Jones CustomClips or contact Dow
Jones Customer  Service by e-mail at custom.news@bis.dowjones.com or by phone
at 800-369-7466. (Outside the U.S. and  Canada, call 609-452-1511 or contact
your local sales representative.)
______________________________________________________________________
Copyright (c) 2000 Dow Jones &Company, Inc. All Rights Reserved


Brian T. Hoskins
Enron Broadband Services
713-853-0380 (office)
713-412-3667 (mobile)
713-646-5745 (fax)
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----- Forwarded by Brian Hoskins/Enron Communications on 11/17/00 09:43 AM
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	Milson Mundim
	11/17/00 09:05 AM

		 To: Brian Hoskins/Enron Communications@Enron Communications
		 cc:
		 Subject: New Gore Campaign Sign

----- Forwarded by Milson Mundim/Enron Communications on 11/17/00 09:11 AM
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	Brian Blakely
	11/16/00 04:45 PM

		 To:
		 cc: (bcc: Milson Mundim/Enron Communications)
		 Subject: New Gore Campaign Sign

Brian C. Blakely
Enron Broadband Services
Transaction Development & Structuring
e-mail:  brian_blakely@enron.net
Phone:  713-853-1433
Mobile:  713-516-0622
Pager:  877-638-1546


How Enron Blew It
Less than a year ago, the Houston-based energy behemoth had everything: money, power, glitz, smarts, new ideas, and a CEO who wanted to make it the most important company in the world. Now its stock is down, wall street is bearish, and the CEO is gone. What went wrong?
by Mimi Swartz </mag/issues/authors/mimiswartz.php>
THE ENRON SKYSCRAPER NEAR THE SOUTH END OF HOUSTON'S DOWNTOWN feels like the international headquarters of the best and the brightest. The lobby in no way resembles the hushed, understated entryways of the old-fashioned oil companies, like Shell and Texaco nearby. Enron, in contrast, throbs with modernity. The people hustling in and out of the elevators are black, white, brown; Asian, Middle Eastern, European, African, as well as American-born. They are young, mostly under 35, and dressed in the aggressively casual uniform of the tech industry-the guys wear khakis, polo shirts, and Banana Republic button-downs. Almost preposterously fit, they move through the building intently, like winners. Enron is nothing if not energetic: A Big Brother-size TV screen frantically reports on the stock market near a bank of elevators, while another hefty black television relaying the same news greets people entering from the garage. A sculpture of the corporate symbol, an E tipped at a jaunty angle, radiates colors as it spins frenetically on its axis; a Starbucks concession on the ground floor keeps everyone properly caffeinated. Multicolored, inspirational flags hang from the ceiling, congratulating Enron on its diversity and its values; one more giant banner between elevator banks declares Enron's simple if grandiose goal: "From the World's Leading Energy Company to . . . The World's Leading Company!"
For a while, that future seemed guaranteed, as Enron transformed itself from a stodgy, troubled pipeline company in 1985 to a trading colossus in 2000. It was a Wall Street darling, with a stock price that increased 1,700 percent in that sixteen-year period, with revenues that increased from $40 billion to $100 billion. "The very mention of the company in energy circles throughout the world creates reactions ranging from paralyzing fear to envy," notes a 2001 report from Global Change Associates, a firm that provides market intelligence to the energy business.
This Enron was largely the creation of Jeff Skilling, a visionary determined to transform American business. Hired sixteen years ago as a consultant by then-CEO Ken Lay, Skilling helped build a company that disdained the old formula of finding energy in the ground, hauling it in pipelines, and then selling it to refineries and other customers. Instead, it evolved into a company that could trade and market energy in all its forms, from natural gas to electricity, from wind to water. If you had a risky drilling venture, Enron would fund it for a piece of the action. If you wanted your megacorporation's energy needs analyzed and streamlined, Enron could do the job. If you were a Third World country with a pitiful infrastructure and burgeoning power needs, Enron was there to build and build. Basically, if an idea was new and potentially-and fantastically-lucrative, Enron wanted the first crack. And with each success, Enron became ever more certain of its destiny. The company would be the bridge between the old economy and the high-tech world, and in February of this year, Skilling reaped his reward when he succeeded Lay as chief executive officer. Enron, says Skilling, "was a great marriage of the risk-taking mentality of the oil patch with the risk-taking mentality of the financial markets."
The Enron story reflects the culture that drove American business at the end of the twentieth century. Like the high-tech companies it emulated, Enron was going to reinvent the American business model and, in turn, the American economy. Maybe it was natural that this Brave New World also produced a culture that was based on absolutes: not just the old versus the new, but the best versus the mediocre, the risk takers versus the complacent-those who could see the future versus those who could not. The key was investing in the right kind of intellectual capital. With the best and the brightest, a company couldn't possibly go wrong.
Or could it? Today Enron's stock trades at around $35, down from a high of $80 in January. The press cast Enron as the archvillain of California's energy crisis last spring, and Skilling caught a blueberry pie in the face for his relentless defense of the free market. A long-troubled power plant project in India threatened the company's global ambitions. Telecommunications, in which Enron was heavily invested, imploded. Wall Street analysts who once touted the company questioned its accounting practices. Some of the change in Enron's fortunes can be attributed to the economic downturn in uncertain times that has afflicted all of American business. But the culture that the company created and lived by cannot escape blame.
ENRON, JEFF SKILLING SAYS, HAD "a totally different way of thinking about business-we got it." At Enron, in fact, you either "got it" or you were gone-it was as simple as black and white. It is not coincidental, then, that the color scheme of Skilling's River Oaks mansion mirrors the corporation he once headed. Here, the living room's white walls shimmer against the mahogany floors. Black leather trims the edge of snowy carpets. Billowy sofas set off the jet-black baby grand. In the entry, white orchids cascade from a black vase on a black pedestal table that in turn pools onto cold, white marble. There is only one off-color note: After almost twenty years, Jeff Skilling is no longer associated with Enron, having resigned abruptly after just six months as CEO. Once, Skilling was hailed as the next Jack Welch (General Electric's masterful CEO), as one of Worth magazine's best CEO's in America (anointed in 2001), and even as a daredevil who hosted the kind of unchained adventure junkets in which, a friend told BusinessWeek, "someone could actually get killed." Today, he sounds more like Ebenezer Scrooge on Christmas morning. "I had no idea what I'd let go of," Skilling says of all the personal sacrifices he made while retooling Enron.
From a black chair in the white library, across from a huge black and white photograph of his daughter and two sons, Skilling clarifies. The demands of working 24-7 for Enron caused him to ignore his personal finances. Divorced, he lived in a 2,200-square-foot house without a microwave or a dishwasher. He almost missed his brother's wedding. "Learning a foreign language-I never learned a foreign language!" he exclaims. He never once took his youngest son to school. "I'm interested in the kids. You don't do kids in fifteen-minute scheduling." Travel: "You can't go to Africa for a week and get anything out of it!" Skilling includes the study of architecture and design on his list of missed opportunities, then he stops and sighs. "I'm not sure that fulfillment in life is compatible with a CEO's job," he says, finally. Then his eyes lock on mine, and his voice, which had softened, regains its pragmatic edge. "It would have been easy to stay," he says. "But that would not have been good for me."
He's a smallish, ruddy-faced man who keeps himself at fighting weight, handsome in the way of corporate titans, with piercing cheekbones and that assiduously stolid gaze. But the impatience Skilling once reserved for cautious underlings and dull-witted utility company executives is now targeted at reporters who have labeled his resignation "bizarre" and associates who are bitterly skeptical of his need for family time. His shrug stretches the limits of his shimmering blue button-down, and his matching blue eyes look put upon. "I'm surprised," he says, "that people have so much trouble understanding this."
PEOPLE WHO PASSED THROUGH DOWNTOWN HOUSTON in the late eighties or early nineties couldn't help but notice a funny and, for its time, novel scene unfolding throughout the workday at the base of the Enron Building. From nine to five and before and after, you could see people slipping out of the pristine silver skyscraper to smoke. They perched on the chrome banisters or lurked near the glass doors at the entry, puffing like mad. They always looked hurried and furtive, even ashamed. Whatever people knew about Enron in those days (and most people didn't know much), it was often associated with that scene: Enron boasted one of the first nonsmoking corporate headquarters in Houston, and there couldn't have been clearer evidence of its break with the energy world of the past. What macho engineer would have put up with such humiliation?
But this company was a child of another time, that period in the mid-eighties when chaos enveloped the gas business. Federal deregulation of natural gas turned a steady, secure industry, in which gas pipeline companies frequently enjoyed a monopoly in portions of the areas that they served, into a volatile free-for-all. The situation was compounded five years later by federal deregulation of the pipeline business. So it happened that a gentlemanly gas pipeline company, Houston Natural Gas (HNG) found itself under attack from Coastal Corporation, Oscar Wyatt's less than gentlemanly firm. HNG was then run by Lay, a sturdy, taciturn former economics professor and Transco chief operating officer who had a passion for military strategy. (His doctoral thesis at the University of Houston was on supply and demand in the Vietnam War.) Lay, who was from Missouri and never succumbed-at least outwardly-to Texas brashness, had done well enough: Thanks to canny expansions, HNG's pipelines stretched from Florida to California and throughout the state of Texas.
HNG fended off Coastal, but to protect the company from other takeover attempts, Lay nimbly engineered the sale of HNG in 1985 to a friendly Nebraska pipeline concern called InterNorth, one of the largest pipeline companies in the country at the time. Then, a funny thing happened: HNG started acting in a way that would characterize the company for years to come-a lot like Coastal. What the Nebraskans blithely labeled "the purchase" was being called "the merger" back in Houston, and before long, following some particularly brutal politicking between Omaha and Houston, the company's center of gravity started shifting toward Texas, and shortly after that, Ken Lay was running a new company called Enron. "Over time it became clear that Lay had a better vision of the future," says one person associated with Enron at that time. "He never fought change. He embraced change."
Lay had won, but what exactly did that mean? Enron was saddled with massive debt from the takeover attempt, and thanks to deregulation, no longer had exclusive use of its pipelines. Without new ideas-for that matter, a whole new business plan-the company could be finished before it really even got started.
LIKE MANY PEOPLE WHO TEAMED UP WITH ENRON IN THE EIGHTIES, Jeff Skilling had spent a lot of time in the Midwest, and he was self-made-at fourteen he had been the chief production director at a start-up TV station in Aurora, Illinois. (His mother would drop him off there every day after school.) "I liked being successful when I was working, and I was smart," he told BusinessWeek earlier this year. But unlike many of his Enron colleagues, Skilling wasn't deliberate and soft-spoken and happy to go home at five o'clock; he was anxious and excitable, and nothing, but nothing excited him more than what he would come to call "intellectual capital." He loved being smart, and he loved being surrounded by smart people. He graduated from Southern Methodist University, went into banking-assets and liability management-and took on Harvard Business School, where he graduated in the top 5 percent of his class. Then Skilling took the next step on what was then the new, souped-up path to American success: He joined Manhattan's McKinsey and Company as a business consultant, and that is where Ken Lay found him in 1985.
It is often said of Lay that his instincts for hiring the best are flawless, and his choice of Skilling probably saved the company. Skilling was above all an expert at markets and how they worked. While everyone else was worrying about the gluts and the shortages that defined the gas industry, he alone saw the parallels between gas and other businesses. And so in a world where credit was nearly impossible to come by, Skilling came up with what he called the Gas Bank, which contractually guaranteed both the supply and the price of gas to a network of suppliers and consumers. Enron would not be a broker but a banker. It would buy and sell the gas itself and assume the risk involved. And Enron would make money on transactions, much like an investment bank would.
Skilling worked up some numbers and found them "absolutely compelling." Then the McKinsey consultant took the idea to a meeting of about 25 Enron executives. He had a one-page presentation. "Almost to a person," Skilling says, "they thought it was stupid." Almost. After Skilling left the meeting dejected, he walked Ken Lay to an elevator and apologized. Lay listened and then said, "Let's go."
The Gas Bank was not an overnight success. For months Skilling woke up in a cold sweat, sure he had ruined not only his career but the careers of dozens of colleagues who had assisted him. In fact, he had come upon one of those divides that seem to define his life: "I believed this whole world would be different, a huge breakthrough" is the way Skilling puts it today, and even if he is typically immodest, he was right. Fairly soon after launching, the company sold $800 million worth of gas in a week. True to Skilling's character, success turned out to be a matter of old versus new: He says the joke around Enron was that if a company's CEO was under fifty, "We were in." And he was in too: In 1990 Skilling finally left McKinsey and joined Enron as the head of Enron Finance Corporation, a new division created just for him. In 1991 that company closed a deal that earned $11 million in profit. After that, says Skilling, "we never looked back."
Skilling and Lay also realized that the Gas Bank couldn't work unless it had a trading component. Myriad trades were needed to build the market that would make the project go. But by buying and selling enormous quantities of gas, Enron not only constructed a market but almost instantly came to dominate it. The company had the best contacts, the best intelligence, and the best access to supplies. That, in turn, attracted more customers who wanted to be part of the play. With so many customers in its pocket, Enron could better predict the direction of the market and could use that knowledge to make trades for its own benefit-Enron could in effect bet on which way the price of gas would go, as one might do with pork bellies or soybeans, but with startling accuracy, thereby generating profits higher than anyone could have ever imagined.
THIS CHANGE COULD NEVER HAVE OCCURRED without another change Skilling had made: He created, within Enron, a new culture to match its new trading business. The idea was to build a "knowledge-based business," which demanded a skill set not exactly prized by Enron's employees from the old HNG days. Most were deliberate, cautious, responsible, somewhat defensive people, most of them men, of course-the kind of people you'd expect to find working in an industry regulated by the federal government. But now the company needed bolder people for its bold new era: that included anyone who wanted to make money-lots of money-for themselves and for the company. "Enron was going to create a niche for itself or die," one former executive explains. "The people who had narrow views eventually were forced out, because if they had narrow views about other things, they had narrow views about the market."
Skilling wanted smart people but not just any smart people. He wanted the smartest people from schools like Harvard, Stanford, and maybe, Rice. And because his firm was now acting more like a bank than a pipeline company, he wanted to draw from the pool of recruits that would be attracted to the biggest and best investment banks, like Merrill Lynch or Credit Suisse First Boston. In addition to being smart, Enron people were also supposed to be "aggressive." You were right for Enron if you didn't want to wait until you were thirty to close your own deals or move up in an organization.
You could see what he was looking for on "Super Saturdays" at the Houston headquarters: eight fifty-minute interviews with ten minute breaks in between-the company might herd as many as four hundred people through in just one day. They were scored from 1 to 5 on their smarts, their problem-solving ability, their passion for hard work, and what at Enron was called "a sense of urgency." People who scored less than 2.5 were scratched. The shrewdest candidates knew how to work Enron before they were even hired: These were the types that automatically turned down the company's first offer, knowing Enron would come back with more. The starting salary was around $80,000. Maybe it wasn't a fortune-yet-but the signing bonus, about $20,000, was more than enough for a lease on the obligatory Porsche Boxster or one of the lofts being renovated close to downtown. (Enron people didn't live in far-flung suburbs. Suburbs were uncool and too far from the office.)
For the lucky winners, Enron offered the corporate equivalent of a gifted-and-talented program. New associates learned the latest techniques for structuring energy deals, and there were rotations at Enron offices around the globe. The hours were long, but every possible need was taken care of. A company concierge handled all the things important people couldn't be bothered with: picking up dry cleaning or prescriptions, shining shoes, cleaning the house, planning a vacation. Of course, a lot of people who worked for Enron never got to take vacations-they were too busy making money-but they could use the company gym and the company's personal trainers. If they were overweight or wanted to quit smoking, they could join Enron's Wellness Program. Massages were offered six days a week, from seven in the morning until ten at night. "They were so cutting edge," rhapsodizes someone involved with the company health care program at the time. "They really thought about the psychology and what it took to keep these people going."
Skilling handed out titles analogous to those at Wall Street firms-analysts, associates, directors, and managing directors-but everyone knew that those titles didn't really matter. Money did. Instead of competitive salaries and decent bonuses, Enron offered competitive salaries and merit-based bonuses-with no cap. "If you really worked hard and delivered results, you could make a lot of money," says Ken Rice, who stayed with Enron for 21 years until resigning recently as the head of the company's faltering broadband division. Or, as the saying goes, you got to eat what you killed. Gas traders with two or three years of experience could wind up with a $1 million bonus. And the more you produced, the closer you got to Jeff: Real hot dogs joined him glacier hiking in Patagonia, Land Cruiser racing in Australia, or off-road motorcycling in a re-creation of the Baja 1,000 race, ending at a spectacular Mexican villa. "Every time he'd speak, I'd believe everything he'd say," one loyalist says.
And why not? By 1995 Enron had become North America's largest natural-gas merchant, controlling 20 percent of the market. But at a company where the buzzword was "aggressive," that was no place to stop: Skilling and Lay believed the Gas Bank model could easily be applied to the electricity business. Firmly committed to the notion that a deregulated market meant better service at lower prices for consumers (and untold profits for Enron), they began barnstorming the country, pressing their case with entrenched power company presidents (who, with their multimillion-dollar salaries and monopoly service areas, had little incentive to change) and energy regulators (who were somewhat more receptive, thanks in part to Enron's generous lobbying efforts).
But the biggest winner of all was probably Jeff Skilling. In 1997 Ken Lay made him the president and chief operating officer of the company. By then, the division known as Enron Capital and Trade Resources was the nations largest wholesale buyer and seller of natural gas and electricity. The division had grown from two hundred to two thousand employees, and revenues from $2 billion to $7 billion. "Mr. Skilling's experience so far with the turmoil in the industry has convinced him that he is on the right track," the New York Times noted. Everyone would certainly have thought so: Enron and Skilling had totally transformed one industry and were well on their way to transforming another.
"FIRING UP AN IDEA MACHINE; Enron Is Encouraging the Entrepreneurs Within," sang the New York Times in 1999. "In the staid world of regulated utilities and energy companies, Enron Corp is that gate-crashing Elvis," crowed Fortune in 2000. Wall Street was demanding tech-size growth on a tech timetable, and Enron, in 2000, obliged with second quarter earnings of $289 million, up 30 percent from the previous year. That year the company seemed to discover a market a minute: Under Skilling, Enron was trading coal, paper, steel, and even weather. No one blinked when a London wine bar became an Enron client. People drank more in warm weather than cold, so why not buy a hedge against the usual winter downturn?
But most exciting to the financial world was Enron's entry into high-tech communications. Because of the company's marketing dominance, EnronOnline became another overnight success, handling $335 billion in commodity trades online in 2000. Enron, as usual, made its money on the spread between the bid price and the asking price. Then there was the broadband business: To Enron, trading excess capacity in large, high-speed fiber-optic networks (empty lanes on the fabled information highway) wasn't that different from trading the capacity of natural gas pipelines. So Enron created a market for what the industry calls bandwidth. Soon after, it also announced a twenty-year deal with Blockbuster to deliver movies on demand electronically to people in their homes. Enron looked like a company that couldn't lose. "Its strategy of building businesses, shedding hard assets, and trading various commodities can help it do well even in an uncertain market," BusinessWeek insisted.
There was, however, another reason Enron did so well in such a short time: the company's hard-nosed approach toward its customers. The old notion of customer service was based on the long haul-you had to nurse and coddle customers to keep them. But Enron had new markets and new ideas-customers had to come to it. Over time, the company stopping referring to its business clients as customers and began calling them "counterparties."
Skilling wanted the biggest profits on the shortest timetable: Gains were maximized by creating, owning, and then abandoning a market before it became overtaxed and overregulated. So if you wanted to launch a high-risk venture quickly-such as Zilkha Energy's new high-tech approach to drilling for oil-you got your financing from Enron because a bank would take forever to underwrite the project, if it ever would. But because Enron invented its markets and subsequently dominated them, Enron could set the terms of its deals, from the timeline to the method of accounting to whether the deal happened at all.
While many businesses used what was known in the industry as "mark-to-market accounting," for instance, Enron used it on an unprecedented scale. The company priced their deals at current market value-but it was always Enron's idea of the market value; companies that balked at their pricing didn't get deals. And while old-fashioned companies spread their profits out like annuities over a period of years, Enron took most of its profit up-front. However many millions would be made on a deal that covered several years, they went on the books in the current year. If a few analysts thought there might be something fishy about what they called "subjective accounting," investors didn't particularly care as long as the profits rolled in. As the market fluctuated and the landscape changed, the company might abandon a project that had been in the works for months because its profit margins weren't going to be high enough. "Enron is known for leaving people at the altar," says one former employee. Winning the highest possible profits for the company could even extend to Enron's attitude toward charity. When a fundraiser for the Houston READ Commission, a literacy group, called on Enron for a contribution, it was suggested that he start raising money for Enron's competing literacy charity: "Even the person who was supposed to give money away for Enron was supposed to make money for Enron," he says.
As Enron became more and more successful, the culture Skilling had created took on a dark side: The competition turned inward. As one member of the Enron family put it, "It became a company full of mercenaries." The change started at the bottom. As Enron's domination of the energy market grew, most of the recruiting frills fell away. New associates were treated much like the commodities the company traded. Global Change's Enron spies reported overhearing orders like "I need a smart person-go buy me one" or "Buy me an intelligent slave, quick." Enron had never been the kind of place where people sang to you on your birthday, but now the workaholism bordered on self-parody: A Random Acts of Kindness program lasted only a few months. It was too disruptive. People couldn't get their work done.
And, of course, Enron had a program for institutionalizing creative tension. The Performance Review Committee, which had initially been installed by Skilling in the Capital group, became known as the harshest forced ranking system in the country. Employees were rated on a scale of one to five, and those with fives were usually gone within six months. (The PRC's nickname quickly became "rank and yank.") It was a point of pride that Skilling's division replaced 15 percent of its workforce every year. As one Skilling associate put it, "Jeff viewed this like turning over the inventory in a grocery store." Skilling's approach to business-get in and get out-had become Enron's attitude toward its workers. In time, it would become many workers' attitude toward the company. Teamwork, never that valuable in a trading culture, went the way of the eyeshade and the abacus. If protocol required an Enron higher-up to come from Europe to help with a project in the Third World, he might help-or he might not, depending on whether another, potentially more lucrative project was pending elsewhere.
Everyone felt the pressure to perform on a massive scale at massive speed: "They were so goal oriented toward immediate gratification that they lost sight of the future," says one former employee. Anyone who couldn't close deals within a quarter was punished with bad PRC scores, as were the higher-ups who had backed them. Past errors and old grudges were dredged up so often as new ammunition in PRC meetings that the phrase "No old tapes" became an Enron clich?. "People went from being geniuses to idiots overnight," says one former Enron executive.
In such a hothouse, paranoia flowered. New contracts contained highly restrictive confidentiality agreements about anything pertaining to the company. E-mail was monitored. A former executive routinely carried two laptops, one for the company and one for himself. People may have been rich at Enron, but they weren't necessarily happy. One recruiter described the culture this way: "They roll you over and slit your throat and watch your eyes while you bleed to death."
BEFORE JEFF SKILLING COULD TRANSFORM ENRON from the world's leading energy company into the world's leading company, he had to make one more change: Just as he had done ten years before, Skilling had to purge the company of its remaining old order. Where Enron once prized cautious executives who dealt with tangible assets like pipelines, it now valued bold executives who dealt with intangible assets. Pipelines, power plants-they may have been Enron's pride, but Skilling wanted them gone. Expensive, long-term building projects had no place when Wall Street was devoted to quick profits and enormous returns on investment capital, and Skilling knew it. "It wasn't the time for long-term approaches," an Enron executive says of Wall Street's mood. "It was the technology era."
To rid Enron of the last vestiges of its past, Skilling had to take on Rebecca Mark, long considered his rival for the CEO's job. Mark was for many years the poster child for the Enron way: Young, attractive, aggressive-her nickname was Mark the Shark-she came from sturdy Midwestern stock but had the requisite Harvard MBA. Mark was largely responsible for the success of Enron International, the asset-heavy side of the company where she developed $20 billion worth of gas and power plants, which accounted for 40 percent of Enron's profits in 1998. For this she reaped breathtaking compensation-one Enron executive estimated $10 million-and adoring press clips, including two appearances on Fortune's list of the fifty most powerful women in corporate America.
But then Mark ran into trouble with a gas-fired power plant in Dabhol, India, one of the largest ever constructed. She had played the game the Enron way: Taking Enron into a new market, she had finagled low import taxes (20 percent instead of the usual 53) and hung in through 24 lawsuits and three changes in government. But the time and expense needed to make India and other Enron plants around the globe successful did not mesh with Enron's goals, and Skilling's impatience with Mark grew.
Forcing Mark out, however, was no easy matter. Key executives left, divisions were dismantled, but she remained. The truth was Enron didn't mind firing lower-level employees, but it hated to fire the kind of aggressive, relentless people it tended to promote. The company preferred humiliation-keeping a director in his cubicle, say, but failing to include him in the glamour deals, or kicking someone upstairs with a fancy title. (One particularly difficult executive won a few years at graduate school, gratis.) A company as smart as Enron could probably deduce too that dispatching one of the most visible businesswomen in the country would provoke a public-relations disaster. So Lay and Skilling did something classically Enronian: They gave Mark her own company. Despite Skilling's contempt for asset-heavy businesses, Enron spent more than $2 billion to buy a run-of-the-mill British water utility that could serve as Enron's entry into the emerging world of water privatization. Mark was put in charge of making Enron, yes, the world's greatest water company. Azurix, as the new business was called, looked like another sure thing: Its IPO in 1999 raised $695 million.
But Mark had to succeed on Enron's increasingly abbreviated timetable in a business fraught with political and emotional complexities. Water is not like gas or electricity-owners and governments are a lot less willing to give it up, even for lots of money. The company stumbled, layoffs commenced, and confidence evaporated. By August 2000 the stock price, which had started out at $19, had fallen to $5. Mark's resignation followed, and Azurix, much diminished, was folded into Enron. "I think it's best for Rebecca to start afresh," Lay, who had been a mentor to Mark, told the Wall Street Journal. Or as one critic put it, "They were more interested in destroying the old culture than running a business."
As 2000 drew to a close, Skilling was in total command. In December Ken Lay announced the inevitable: "The best time for the succession to occur is when the company is doing well," he told the press. "Enron is doing extremely well now." In February 2001 Jeff Skilling took over the CEO's job.
ALMOST IMMEDIATELY THE TROUBLE STARTED. Enron's domination of the electric-power market made it an instant target in the California deregulation debacle. Both PBS's Frontline and the New York Times took on Enron, portraying the company as a heartless colossus that used its influence in Washington (Lay and Enron's political action committee are the top contributors to George W. Bush) to force old people on fixed incomes to choose between buying food or electricity. Skilling and Lay appeared on camera singing belligerent anthems to the free market, while another memorable scene juxtaposed one of the company's jackallike traders against a hapless state employee in California, as both tried to buy power online. The Times reported that Lay had tried to persuade a new federal commissioner to change his views on energy deregulation. The bad press was, to say the least, ironic: Just as the media was pounding Enron for its omnipotence, Wall Street was discovering its weaknesses. By late March the stock price had slid to $50 a share from $80 in January.
Within Enron, the asset-based divisions took the rap for the decline. (The India plant continued to be enormously costly, at least in part because of constant turnover within Enron's management team.) But the California situation was more visible and therefore more damaging, despite Enron's claim that the state had never built enough power plants to service its population and never properly managed those it had. "For three months Gray Davis did a very good job of blaming us," says Mark Palmer, a vice president for corporate communications. "We were a Texas company. There was a Texan in the White House. California was a state that didn't put him in office, and his biggest contributor was a Texas energy company. Performance is going to take care of our stock price. The truth will take care of Gray Davis." (California utilities still owe Enron $500 million, another reason stockholders might be panicky.) But more problematic than the crisis itself was Skilling's all too apparent lack of contrition. Facing down his critics, he cracked a joke comparing California with the Titanic. ("At least the Titanic went down with its lights on.")
But the biggest problem was Enron's telecommunications division, which had been responsible for at least one third of its heady stock price. Investors believed that Enron could revolutionize high-speed communications, just as it had revolutionized gas and power. Enron estimated the global market for buying and selling space over fiber-optic cable would grow from $155 billion in 2001 to $383 billion by 2004-but then the tech bubble burst. So too did the much-hyped movies-on-demand deal with Blockbuster. For the first time in its confoundingly successful life, Enron had nothing new to take to market. Like the popular high school girl who suddenly packs on a few pounds, Enron suddenly looked less alluring to Wall Street.
Skilling launched a campaign to keep Enron's most important cheerleaders, the stock analysts, in the tent, but he wasn't cut out to be a supplicant. During the reporting of first quarter profits, he called an analyst who challenged Enron's financial reporting an "asshole." When the company reported hefty second quarter profits, many analysts questioned whether those profits had come from the generation of new business or from the sale of old assets. Ignoring the growing chorus critical of Enron's accounting, Skilling promised, as he always had, that innovations were just around the corner. "There wasn't any positive news," Carol Coale, of Prudential Financial, says now. "Basically, he talked me out of a downgrade."
The business press, so generous in the past, turned surly. Fortune had asked in March whether Enron was overpriced. ("Start with a pretty straightforward question: How exactly does Enron make its money?") The routine cashing in of stock options that were about to expire by key executives was portrayed in the media as a fire sale. (Skilling had sold $33 million worth, Ken Lay and Ken Rice close to four times that amount.) Then the Wall Street Journal reported on a fund run by the CFO that had been a source of strife within the company. (It was essentially risk management against Enron's possible failures.) Every negative story seemed to produce a concurrent drop in the stock price: By late August it had fallen below $40. Enron, so institutionally unforgiving, finally got a taste of its own medicine. "When Wall Street is in love with a stock, they're forgiving of something like accounting," says Carol Coale. "When a company falls out of favor, all these issues carry more weight."
This fact was not lost on people inside the company, who suddenly started experiencing an attack of conscience. Those who had looked the other way as the most powerful Enron executives dumped their wives and married their secretaries or carried on flagrant interoffice affairs now saw the error of their ways. "It just created an attitude," one executive still at Enron says. "If senior people are doing that, why are we held to a higher standard? There was a real culture of 'We're above everyone else.'"
Loyalty had never been prized at Enron, so there was no reason to expect it now. An old-fashioned, slow-moving company like Exxon could demand hardship duty in Baku with the promise of greater rewards down the road. "But," as one Houston oilman explains, "if you have to negotiate a hardship duty with someone who doesn't have loyalty and has money, then you have a corporation that's better suited for good times than bad."
As it turned out, that description applied to Jeff Skilling too. As the stock price stubbornly refused to ascend, he made no secret of his unhappiness and frustration. Then, after a trip to visit the families of three employees killed at a plant in England, he had an epiphany: Life was short; for him, Enron was over. Ever stoic, Ken Lay returned to the CEO's office, named a new president, arranged a trip to New York to calm analysts and investors, and promised a kinder, gentler Enron in the future. Trading anything and everything was out. The company, Lay says, will still innovate but "innovate much closer to our core." As for the culture: "Things like the Performance Review Committee, I think we could have applied better. By trying to categorize people into so many different categories, you ended up creating a morale problem."
That Skilling's supposedly brilliant colleagues were as shocked at the news of his departure as the rest of the business community may be testament to their lack of emotional intelligence. Despite Skilling's lengthy tenure with Enron, he'd always been contemptuous of the long haul; he'd always believed in cutting losses and moving on. But now that he was abandoning them when the company was in trouble, it was different. "Even Jeff's biggest detractors wouldn't have wanted him to walk out the door," one loyalist admits.
But on the day we meet, Skilling is looking forward, not back. "Look," he says with finality, "ninety percent of my net worth is in Enron. Were my interests aligned with the shareholders? Absolutely."
Free of falling stock prices and shareholder pressures, he is nestling himself back into the world of ideas. His eyes flash as he talks about new technologies. "The first wave never gets it right," he says. "The stand-alone dot-coms didn't work, but the technological applications will create a second wave that will change the world." Houston, he promises, will become the world's center of commodity trading, and he intends to be a part of it. In fact, he is already shopping for office space.
"This is the second wave, and Enron's got it," he says, almost breathless. "There are thousands of people running around the streets of Houston that get it."