Two prominent energy industry consultants agreed last Tuesday at GasMart/Power in Reno that fallout from Enron’s bankruptcy probably will include significant reregulation of the energy markets and continued unprecedented financial scrutiny of the energy industry.

“Enron’s troubles have chilled the industry beyond simply taking a one-sixth [market share] player out,” said Ben Schlesinger, president of Maryland-based consulting firm Schlesinger and Associates. “The financial community has raised the bar on trading and marketing companies. Fears abound, not so much because people feel their own management are cheats or thieves, just because they are not clear about stuff. They’re saying ‘Was Enron really that different than the company I work for?’ There’s uncertainty around, and it’s reducing investment levels, but that will come back. There’s local area unemployment; that will come back.”

The more permanent changes will occur in the area of regulation, both Schlesinger and Robert McCullough, general manager of Portland, OR-based McCullough Research, agreed. “The next year is going to be the most highly regulated in our history, and that is going to be very costly to all of us,” said McCullough.

“There’s going to be reregulation; I don’t think there’s any doubt about that,” said Schlesinger.

“I think we are going to see some more economic regulation coming out of the [Federal Energy Regulatory Commission], financial regulations coming out of the Commodity Futures Trading Commission. There’s the Gramm-Feinstein bill, being negotiated. Those are two parties who I’m sure never talked to each other until last week, but they are close to agreeing on a bill to regulate energy derivatives,” he noted. “There will be more safety regulation [because of Sept. 11]. There will be state and local regulations as well as regulations by our Canadian counterparties.”

What won’t change is the commoditization of energy, he said. “It would take sort of a Chinese cultural revolution for that to be taken away, and I don’t think that is going to happen.

“By an large, I think this is healthy for the energy industry,” said Schlesinger, who noted the level of competition, particularly in the gas market, remains extremely high. “As far as the new regulation, I think you know a lot of it is not going to be a good idea,” he said.

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