Tags: Liberal | 'Scholars' | Urge | Energy | Re-regulation

Liberal 'Scholars' Urge Energy Re-regulation

Thursday, 24 January 2002 12:00 AM

Deregulation has removed accountability from the electricity market, they said, and made it possible for Enron and others to "manipulate" energy supplies and prices. "The California energy crisis and the Enron debacle would have been completely impossible had we retained a fully regulated cost-based system," said Tyson Slocum, research director for Nader's group Public Citizen.

However, Grover Norquist, executive director of Americans for Tax Reform and a critic of big government, said the problem isn't a lack of regulation, but rather too much regulation.

"The California mess is all driven by bad government decisions, not by Enron," Norquist said. "Enron bought and sold power, and the problem in California was that no one was producing power because of their regulatory burdens."

Slocum insists that "a combination of state deregulation plans like we have seen in California and Montana and a federal deregulation of commodity trading, coupled with the gutting of federal regulations that used to oversee energy markets has ... allowed companies like Enron to dictate supply of electricity and other energy commodities, and therefore the price of the commodities.

"Deregulation of energy markets allowed Enron to escape the price regulations that existed in our energy markets for nearly a century [and] use fraudulent practices in a deregulated, unscrutinized marketplace," Slocum said.

Former Hofstra University law professor Carl Mayer claims the 1995 Private Securities Reform Act eliminated a stockholder's right to sue a corporation and its auditor for joint damages, which he believes allowed Enron and the auditing giant Arthur Andersen to behave in a negligent and irresponsible manner.

"[What the law] means is that if an accountant, in the case of Enron, Arthur Andersen, and Enron were found liable through a private case, then both of them would be responsible for 100 percent of the damages," Mayer said. "That is important in the case of Enron because Enron is a bankrupt shell, and it doesn't have any money to compensate the retirees, the investors, etc.

"There was also a subsequent act that pre-empted state laws that would have provided additional remedies to investors, so all of these remedies for investors that the securities laws built up since the Great Depression were designed to achieve, were essentially undercut," Mayer said.

Mayer said the Private Securities Reform Act, combined with similar subsequent legislation, left accounting firms such as Arthur Andersen free to "cook the books."

Since 1995, Mayer said, more and more companies have been forced to restate earnings. In 2000, he said, there were 223 such instances. "You are almost going back to a time before the securities laws where the annual report's numbers just aren't available because you just can't trust them," he said.

Norquist said deregulation is not the culprit in the Enron crisis or in California's energy woes of last year. Instead, Norquist said, the problem was too much government regulation.

"California didn't deregulate, they had a different set of regulations that were flawed. Pennsylvania is deregulated and there you saw new entrants into the business," Norquist said. "It's the California regulatory mess that caused the spikes in prices in California, and the regulatory burdens that stopped them from adding new plants and facilities."

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Deregulation has removed accountability from the electricity market, they said, and made it possible for Enron and others to manipulate energy supplies and prices. The California energy crisis and the Enron debacle would have been completely impossible had we retained a...
Liberal,'Scholars',Urge,Energy,Re-regulation
527
2002-00-24
Thursday, 24 January 2002 12:00 AM
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