Question

What role did Enron play in the California energy crisis of 2000-2001?

Answer 1

California had an installed generating capacity of 45 GW. At the time of the blackouts, demand was 28 GW. A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price.[7][8] Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value. Because the state government had a cap on retail electricity charges, this market manipulation squeezed the industry's revenue margins, causing the bankruptcy of Pacific Gas and Electric Company (PG&E) and near bankruptcy of Southern California Edison in early 2001.​The financial crisis was possible because of partial deregulation legislation instituted in 1996 by the California Legislature (AB 1890) and Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.​
The crisis cost between US$40 to $45 billion​.

The Enron traders said their competitors at other rival energy companies learned of their tricks through word of mouth at local bars in Houston and soon everyone was buying power in California for $250 and selling to Nevada or Washington for $1,200.​​

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