To understand just how diligently George W. Bush protected the interests of Enron and its former chief executive, Kenneth (Kenny Boy) Lay, it is necessary to look back beyond last fall, when the prospect of bankruptcy loomed. The question is not whether Mr. Bush bailed out his old pal under politically impossible circumstances, but what he did for Enron when he still had a free hand.
Until Vice President Dick Cheney surrenders the secret files of his Energy Task Force, the complete history of the Bush administration’s entanglement with its favorite firm may never be known. There are, however, many significant favors on the public record–and the first took place within days after Mr. Bush’s inauguration.
On Jan. 23, 2001, the White House announced the new administration’s response to California’s rolling blackouts, which had led even conservative Republicans in the state to call for price controls. The good news for Californians was that the temporary relief ordered by the Clinton White House in December would be continued for another two weeks, until Feb. 7; the bad news was that from that date forward, there would be no further federal assistance.
In essence, Mr. Bush was rescinding his predecessor’s emergency order, issued on Dec. 13, 2000, which required out-of-state electricity wholesalers to stop withholding power from California. That order had been accompanied by a warning from departing Energy Secretary Bill Richardson: “I will not allow them to unjustly profit from these conditions.” By that he meant spot electricity prices literally 100 times higher than a year earlier.
For Enron and the other energy privateers, the arrival of the Bush team was timely indeed. Enron’s stock price, having reached a high of about $83 a share in the early days of 2001, was beginning a rapid descent under pressure from investors who feared the return of energy regulation in the wake of Mr. Richardson’s action.
The two weeks of breathing space for California’s energy consumers was little enough, compared with the boost provided to Enron by Mr. Bush’s anti-regulatory policies and appointments. In the months that followed, despite the administration’s attempts at “market mitigation,” the White House killed Congressional efforts to cap rates. Among the new President’s pronouncements on energy matters was a stern vow to fight price controls and a sunny promise to create a national electric grid, which would enable Enron to trade in a greatly expanded market.
On April 17, Enron reported first-quarter 2001 net income of $425 million, an increase of $87 million over the first quarter of the previous year. While $19 million of that increase reflected a “change in accounting practices”–a phrase with new meaning these days–much of the rest had come from earnings on sales of electricity and natural gas.
The Enron division that sold gas and electricity enjoyed an operating profit in those first few months of the Bush regime of $755 million–up from $429 million during the same period in 2000.
Those earnings helped to offset big losses in Enron’s ill-fated broadband venture and to stabilize the price of Enron shares. Until Congress subpoenas detailed records of Enron’s dealings, it’s impossible to know how much of those profits is attributable to price-gouging in California. But as the Houston Chronicle noted when the Enron earnings came out, the company’s rising revenues were largely due to “much higher prices received for natural gas and power sold during the winter.” And nowhere had those prices escalated more rapidly than in California.
Meanwhile, on the very same day that Enron announced its happy first-quarter results, Mr. Lay met with the Vice President to discuss his company’s recommendations for the Energy Task Force. The Enron boss gave the Vice President a detailed memo that highlighted his most urgent request: Under no circumstances should the federal government take any further steps to hold down the price of electricity in the West. Specifically, the memo urged that “the administration should reject any attempt to re-regulate wholesale power markets by adopting price caps or returning to archaic methods of determining the cost-base of wholesale power.” (Those “archaic methods,” incidentally, were established to suppress an earlier gang of predators known as the utility trust, with support from Mr. Bush’s supposed idol, Theodore Roosevelt.)
Now the White House insists that Mr. Cheney never even glanced at that Enron memo, a claim contradicted by The New York Times in a story published one month after their meeting. Among other things, the Vice President’s task force recommended “finding ways to give the federal government more power over electricity transmission networks.” This was, according to The Times , “a longtime goal of [Enron] that was spelled out in a memorandum Mr. Lay discussed during a 30-minute meeting earlier this spring with Mr. Cheney.”
No denial emanated from the White House when that article was published. But today they’re denying, and withholding documents, and trying to change the subject. And Kenny Boy isn’t talking at all.