Question

How was the Enron scandal related to government regulations and price ceilings? What made them have more power over what price to charge? How were to California blackouts related to Enron's corruption?

Answer 1

The combination of unregulated state wholesale electricity markets and federal product exchange deregulation has eliminated accountability and transparency from the energy industry, allowing companies to exploit electricity and gas rates and supplies through the exercise of substantial market power. The recent energy crisis in California and Enron's bankruptcy, under a controlled structure, would have been unlikely.
Enron has built mutually beneficial partnerships with federal regulators and policymakers to promote measures that greatly limit regulatory control of their operations

Enron's business model was based solely on the idea that, by actually generating energy at a power plant, it could make more money speculating on energy contracts than it could. Central to Enron's plan to turn energy into a financial asset was the elimination of government regulation of its trading activities and the manipulation of market vulnerabilities to enable prices and supply to be manipulated.
In his role as Chairman of the Commodity Futures Trading Commission (CFTC), Dr. Wendy Gramm prohibited Enron from investing in future contracts in response to Enron's 1992 request for such action.

Following the passage in December 2000 of Gramm's energy product deregulation bill, Stage 3 emergencies rose from one to 38 before federal regulators helped end the crisis by implementing price caps in June 2001. The legislation of Phil Gramm, for which Enron was the primary lobbyist, allowed Enron's unregulated energy trading subsidiary to exploit the supply in such a way as to threaten millions of California households and businesses with power outages solely for the purpose of raising the company's income.

Although price caps obviously saved California, Enron lost because it was no longer able to bully customers in the market and price gouge. With no clear ownership of assets to account for its losses, Enron's uncontrolled power auction rapidly generated huge debt.
Around the same time, the curtailed sales flow has made it difficult for managers and board members to mask accounting gimmicks from the company. CEO Jeff Skilling resigned in August, in the midst of the chaos. But it was not until November 2001 that shareholders and federal regulators heard of the extent of Enron's financial crisis. At this time, Enron's top executives were also earning large salaries

The near association of the Gramms with Enron's corporate and legislative operations, the potential awareness and/or link of the Gramms with criminal activity related to the fall of Enron, and the consequences of Enron's layoffs and other economic impacts on the constituents of Senator Gramm may have been the leading factor in Gramm's decision of September 4 not to seek re-election in the Senate in 2002