Enron Stakeholders

1700 Words Apr 1st, 2008 7 Pages
BA 215 Spring 2007
Enron Stakeholder Assignment

Enron was a dream come true for a lot of people, but it was also a nightmare waiting to happen for many more. I am going to examine the collapse of Enron from the management perspective. The three examples of Enron behaving badly that I am going to study are the incidents in Valhalla, the electricity trading in California and the conflict of interest between Andy Fastow and his special purpose entities (SPE). These are just a few cases that led to the failure of the "World's Leading Company." In 1985 Houston Natural Gas merged with InterNorth, of Omaha, Neb., to form Enron and Ken Lay was named chief executive officer. The company was basically a producer of natural gas and had
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The theory of deregulation of electricity in California was a model one, but the truth was California was being robbed. Enron electricity traders were manipulating the market strategies to extract more money from the state. These strategies, most were technically legal, were given catchy names and encouraged new ideas throughout the traders. Enron traders were creating, and then relieving, phantom congestion on California's electricity grid. They were also involved in megawatt laundering, in which Enron bought power in California, resold the power out of the state and then bought the power back and resold it back into California, allowing Enron to avoid price caps meant to secure down costs (4). The electricity traders are also guilty of limiting the supply of energy by asking power plants that provide electricity to California to shut done for a specified period of time so they could take advantage of the shortages. All the while President Bush is refusing to step in to do anything stating the energy crisis will work itself out. Finally, in the summer of 2001 the Federal Energy Regulatory Commission (FERC) stepped in to try and alleviate the energy crisis. FERC imposed soft price caps, and the entire power market collapsed. Electricity prices decreased and sanity returned to the market because the federal government showed they were willing to intervene, and that was what the market had been waiting for. Andy

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