While the energy market sailed on past foundering Enron with barely a ripple, that would not have been the case if the major marketer’s implosion had occurred a year earlier during a time of rising energy prices, the chairman of the Maine Public Utilities Commission told a congressional committee Wednesday.

Enron is continuing to serve under its contracts encompassing approximately one-quarter of the Maine power market, Thomas L. Welch said, because those contracts, signed in a higher-priced environment, represent valuable assets to the bankrupt entity. Moreover, had Enron defaulted on the contracts, customers would have no problems replacing them in today’s low-price, oversupplied market.

“If the implosion occurred in a higher-priced market like the one we had just a year ago, and Enron defaulted on its obligations, Maine’s customers would have had to pay at least $100 million more for the same supply. The losses for all of New England could be 10 times that amount,” Welch said. He noted that it appeared the market apportions risk asymmetrically, with customers unable to get out of higher-priced contracts favorable to the supplier, but exposed to the risk of default on lower-priced pacts. There does not appear to be any way that customers can insulate themselves from this risk. “A corporate guarantee would not have saved our consumers.” The testimony came at a hearing Wednesday of the subcommittee on energy and air quality.

Rep. Henry Waxman, D-CA, described the plight of a Northern California power agency with contracts with an Enron subsidiary. The subsidiary failed to deliver for three weeks and is now delivering on a day-to-day basis. If the power agency terminates the contracts, it will have to pay “a huge penalty.” If it continues under the contract, it faces “uncertain service for years to come.”

Apache Corp. Chairman Raymond Plank pointed out that Enron was a trading company focusing mainly on paper products, not an energy company. He listed three reasons the market continued to function without Enron: (1) lower demand due to the recession, (2) the warm winter, and (3) “the fact that they weren’t contributing a damn thing in the first place. They were an opportunist that created an opportunity in order to go out and fill it. Futures sales don’t burn; they don’t generate energy.”

Plank blamed Enron and other marketers for creating volatility harmful to suppliers and consumers alike, simply so they could capitalize on it. “Today, our greatest problem is price volatility,” Plank said, noting that Enron and others had promised that with broader markets, volatility would be less. Right now, however, “energy markets are not fractured; they’re broken.”

“We are reducing capital commitments 70% because it’s too great a risk at the present time of continued price volatility.” He said other producers also are cutting back, and the potential for an energy shortage “is a ticking time bomb.”

One of Plank’s suggestions was to eliminate mark-to-market (MTM) accounting, but UtiliCorp Chairman Richard Green suggested the process could be improved with more disclosure on how future transactions are valued and some uniformity in price curves. He pointed out that MTM, used in many industries and required by the Securities and Exchange Commission, “is the most rigorous accounting tool we have.”

FERC Chairman Pat Wood said that for the market to work, “the public confidence in the reliability of the players must be restored.” Questioned as to what he would like to see included in the energy bill the committee is considering, Wood said it would help FERC if it had additional authority to go after information, for instance, on bilateral markets. He noted the reluctance the Commission has encountered from companies in its attempts to gather what the companies consider sensitive information.

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