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Monday, June 26, 2006

How Enron Conned Rhode Island, and How We're Paying For It

We all blame now-collapsed Enron for ruining the pension funds of its employees in Texas and causing blackouts in California. However, with the convictions of Ken Lay, the former CEO and chairman of Enron, and his partner in crime Jeffrey Skilling, it is important to remember that Rhode Islanders have one more reason to celebrate bringing Enron to justice.

Our story begins in 1996, in the halls of the Rhode Island General Assembly, during the fight over the Utility Restructuring Act. Under heavy lobbying pressure from Enron, this act was the first of its kind to make it out of a state legislature. Its proponents promised that it would decrease electricity costs by deregulating and opening up a single-player utility market to competition.

As it turns out, Enron wasn't really interested in entering the Rhode Island market. Because of the state's small size, Enron saw Rhode Island as low-hanging fruit in its state-by-state plan to deregulate America's utility markets. Enron used its Rhode Island legislative win to demonstrate to monopoly utility players and legislators in larger, more lucrative states that they had better jump on the deregulation bandwagon. Forty-eight states followed suit, including California, notorious for the ensuing energy crisis precipitated and manipulated by Enron. Less high-profile but equally tragic is the wake that Enron left in Rhode Island. Narragansett Electric Co. (now part of National Grid) saw the writing on the wall, stepped up to the lobbying plate, and made sure the deregulation worked in its favor. The resulting Utility Restructuring Act, of 1996, stripped away much of the public's regulatory control over the state's monopoly electric utilities.

The act defanged one of the most progressive and effective energy-efficiency efforts in the country. After deregulation, the building of power plants was no longer contingent on the utilities' implementation of cost-effective energy-efficiency measures for consumers. And instead of the promised price wars, residential consumers have seen only price spikes. The one silver lining is the green market: Green-power marketers now let consumers offset their electricity use with renewable-electricity production.

With increasing awareness of global warming and higher energy prices, the void left by government's failure to produce a cohesive, aggressive national energy policy is more gaping than ever. But some corporations have gotten the message. A growing number of venture capitalists and large companies appear to be greening their portfolios, processes, products, and image. Such giants as General Electric, BP, Shell, Sanyo, and Sharp are aggressively moving into the renewable-energy market and/or launching eco-friendly re-branding campaigns. Hybrid manufacturing is on the rise, while the biggest Hummer has been dropped from production.

But if Enron holds a lesson, it is that the profit motive is no substitute for public involvement and laws that support a clean and viable energy system. Corporations are not in business to protect our need for fair markets or sustainable energy systems; while their long-term interests are best served by a market environment that protects these rights, their immediate interest is profits -- which may not coincide with the public good.

As citizens, we have a responsibility to demand of our government environmentally responsible energy policies that encourage innovation and competition.

Some commendable recent legislation in the Rhode Island General Assembly (H8025, H7778, S2903, and S2905) would take critical steps in this direction. The bills would create a natural-gas-conservation fund and would foster small and mid-sized energy production by leveling the playing field for small local renewable-energy producers and letting medium-sized producers sell back extra site-generated power to the grid.

Some of the legislation would engage more citizen involvement and oversight, by creating a ratepayer advisory group, raising the governor's State Energy Office into a full state agency, and taking the efficiency program out of the hands of the utility. Other bills would require the utility to implement all available cost-effective energy-efficiency measures before purchasing traditional sources, just as in the good old days.

Enron conned us into believing that it knew what was best for us. Now we know better.

It is up to us, as informed citizens, to be "the smartest guys in the room." We Rhode Islanders may have been the first state to deregulate but, starting with comprehensive state-level legislation, we can be the first state to build a truly sustainable energy system.

Karina Lutz, a writer on and advocate of sustainable energy, lobbied against the Utility Restructuring Act, of 1996, for the Sierra Club. Jo Lee, a principal in a public-relations firm specializing in green and high-tech companies, is co-founder and director of the nonprofit, which offers free e-mail advocacy services to grassroots organizations.

© 2006 The Providence Journal Co.
How Enron Conned Rhode Island, and How We're Paying For It


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