The Federal government says it's pulling the plug on Enron - the company that became notorious for cooking its books and manipulating the price of electricity in California.
In a first-ever move, the Federal Energy Regulatory Commission (FERC) barred the company from selling electricity and natural gas in the US. FERC chairman Pat Wood says it is the first time FERC has ever imposed a "death penalty" on companies it regulates.
Enron became a household word for millions of Americans after revelations about its inflated profits, accounting tricks, and corporate greed. Its stock, once a high flier, became worthless.
Thousands of employees in Houston lost their jobs, and the company was forced to take its name off the Houston Astros stadium. The company's demise also resulted in the failure of Arthur Andersen, the giant accounting firm, which had audited Enron's books.
It's not clear what impact the FERC order will have on Enron. The company is in bankruptcy and is reorganizing its businesses. Through its Portland General subsidiary, the company will continue to provide electricity to 1.4 million people in Oregon. This includes hydroelectric and thermal plants.
"It is more of a signal to the rest of the market that FERC does have authority to discipline this kind of conduct, and it's pretty powerful authority," says Craig Pirrong, director of energy markets at the University of Houston's Global Energy Management Institute. "Although it may not have that big an impact on Enron, which has markedly diminished its presence in the marketplace, others still do have a strong presence. And this tells them that FERC is willing to take action."
For Enron, the FERC order does not apply to existing contracts, according to the company. Nor, it says, would the order affect the firm's natural-gas pipeline companies, since they are transporters of natural gas, not sellers. (Wednesday, Enron announced it was organizing the pipeline companies under a new corporate entity called CrossCountry Energy Corp.)
Instead, the company says the order applies to future sales of natural gas or electricity. "We're no longer in that business," says a spokesman. For the record, the company says it is studying the FERC decision and will not have any comment while the hearing is on-going.
FERC's action came after a probe into charges that Enron manipulated California power markets two years ago. Under a FERC order, California will receive about $1.8 billion in refunds. FERC investigated the pricing issue for 13 months and singled out Enron and five other companies as taking advantage of the chaotic energy market. Mr. Wood says the decision sends a "clear signal that competitive markets must work in the interest of customers and the public interest."
• Staff writer Kris Axtman in Houston contributed to this report. Wire service material was also used.