Summary of Book 2

Edison to Enron: Energy Markets and Political Strategies

M & M Scrivener Press

(Forthcoming: 2009)

There are few flowing histories of the U.S. energy industry, just beaucoup books describing particular individuals, companies, or themes relating to the U.S. oil, natural gas, or electricity businesses. A few cover industry eras but are very academic. One rare exception is The Prize, a history of the petroleum industry by Daniel Yergin, which serves as a model for my Book 2.

Edison to Enron begins with the career and fall of Samuel Insull, one of the great American businessmen, whose unique experience provides a powerful comparison and contrast to that of Ken Lay and Enron. Insull not only brings the Thomas Edison era to life (he was Edison’s “financial factotum,” as one historian put it). Insull’s post-Edison career as head of Chicago Edison Company is a window onto the development of the modern electricity industry. Insull became the leading figure in his industry, and his relentless expansion resulted in the nation’s largest holding company.

The parallels between Insull and Lay are striking. Insull fathered public-utility regulation in the electricity industry, an inheritance that Enron would transform via the “mandatory open access” regulatory regime. The accounting firm Arthur Andersen gained national prestige with the Insull account and died from its controversial work for Enron. Samuel Insull was Mr. Chicago and Ken Lay Mr. Houston. Both icons were on top of the world and thought themselves to be invincible. Both fell to the very bottom. But there were differences too: Insull’s fall was much less deserved than that of Lay, and Insull was acquitted at trial while Lay was not.

Insull’s career comprises the first three of the book’s 11 chapters. Next comes a four-chapter section based on Ken Lay’s two-time mentor—Jack Bowen. Bowen went to work for the Warren Buffet of his day, Clint Murchison, a legendary figure whom few now know. Murchison invested in hundreds of businesses, almost all of which were money-makers. In particular, the “Wheeler-Dealer from Texas,” who made the cover of national magazines such as Time, founded major natural gas pipeline companies that are part of the Enron story in different ways.

It was Jack Bowen at Florida Gas Company (which Enron would later acquire), who hired Ken Lay from government. And some years later, while CEO of Transco Energy Company, the major gas supplier to New York City, Bowen hired Lay again. Lay, Transco’s president, was expected to succeed Bowen as CEO when Houston Natural Gas (HNG) called. HNG, through merger, would become Enron.

The last four chapters of Book 2 concern Houston Natural Gas, the major gas supplier to the Texas Gulf Coast, one of the boom areas of the United States. The HNG story begins with the legendary John Henry Kirby, who in 1901 attracted $40 million of capital from St. Louis and the Northeast to form interlocking oil and timber companies. Three years later, the companies declared bankruptcy, an event that drew national attention. Kirby went on to have a colorful career as Mr. Houston and as a nationally known figure from the South, but bankruptcy stuck him again during the Great Depression. The parallels between Kirby and Lay are notable and even striking.

HNG, meanwhile, had a storybook history under three chairmen: Frank Smith, John Wimberly, and Robert Herring. Herring, in particular, was a revered Houston leader whose career was many things that Lay’s would not be. Herring’s pre-HNG career centered upon Ray Fish, who was the world’s greatest pipeline builder. (Fish is the subject of his own chapter.) It was Herring’s death in 1981 that precipitated a series of events that led to HNG’s luring Ken Lay away from Jack Bowen at Transco. (And Herring’s death led his wife, Joanne, on a path that would culminate in a story chronicled in the book and movie, Charlie Wilson’s War.

Audience

The case studies and company histories of Book 2 will interest several audiences:

• Five Fortune 500 companies with major assets that are detailed in the book: El Paso Corporation, GE, Southern Union Company, TransCanada, and Williams Company
• Historians of the natural gas and electricity industries
• Aficionados of American business history
• Those interested in the pre-Enron career of Ken Lay

As for competing books, there are histories of Samuel Insull, but each is either dated (Insull, by Forrest McDonald) or superficial (From Edison to Enron: The Business of Power and What It Means for the Future of Electricity by Richard Munson). A recent biography of Insull, The Merchant of Power, by John Wasik, reestablishes the importance of Insull in American historiography but lacks a worldview to draw the right conclusions from his career and life.

Working Outline (February 2008)

Edison to Enron: Energy Markets and Political Strategies

Introduction

Part I: The Chief [Samuel Insull]

Chapter 1: General Electric Company

Chapter 2: Chicago Edison to Middle West Utilities

Chapter 3: The Great Fall & Aftermath

Part II: The Boss [Jack Bowen]

Chapter 4: Meadows to Murchison

Chapter 5: A Monumental Mistake [Trans-Canada Pipe Lines Ltd.]

Chapter 6: Florida Gas Company

Chapter 7: Transco Energy Company

Part III: Enron Predecessors

Chapter 8: Pretty Boy & Mr. Pipeliner (Robert Herring and Ray Fish)

Chapter 9: The Prince of Bankruptcy (John Henry Kirby)

Chapter 10: Houston Natural Gas: Part I

Chapter 11: Houston Natural Gas: Part II

Epilogue