Summary of Book 3
Enron Ascending: The Forgotten Years, 1984–1996
A great fall cannot be understood apart from the rise that preceded it. Enron Ascendingexamines in detail the first two-thirds of that iconic energy company’s life. Thus, it is the only book to date that exposes the deepest causes of Enron’s stunning collapse.
Nobel economist Paul Krugman predicted that history would look upon Enron’s plummet as a greater turning point than the fall of the Twin Towers. He was right—but first history must understand what happened at Enron. “A conspiracy of fools,” the title of a leading Enron book, does not change the world.
Enron Ascendingexplains the shock of the company’s fall by recalling the astounding achievements of Enron’s birth, childhood, adolescence, and early maturity. It sets forth the once-celebrated but now-forgotten productiveness and innovation that caused the company and its reputation to soar stratospherically. At the same time, always conscious of the company’s fate, the book highlights throughout the developing habits of thought and behavior that later evolved into self-destructive acts of desperation and deceit.
Written fifteen years after the firm’s demise, Enron Ascendingoffers the long perspective of a maverick insider, Robert L. Bradley Jr., the company’s director of public-policy analysis and Chairman Ken Lay’s personal speechwriter. The book also offers a library of previously unavailable information, drawn from Bradley’s innumerable corporate documents and unrepeatable interviews, which he collected in his capacity as the company’s prospective historian.
Most important, however, Enron Ascendingoffers an antidote to the unending stories, studies, and books about Enron that are presented as just-the-facts but are in reality shaped decisively by the Progressivist worldview of their authors. Bradley shows, beyond dispute, that the early habits which set precedents for Enron’s history-making demise were directly contrary to the free-market behaviors and capitalist attitudes generally blamed for Enron’s fall.
Praise for Enron Ascending: The Forgotten Years
“One of the most remarkable contributions to business history in years. Anyone interested in American capitalism should read this book.”
– Tyler Cowen, Mercatus Center, George Mason University
“Bradley’s original, detailed framing of the Enron in terms of ‘political capitalism’ powerfully corrects the notion that the company’s collapse was simply the result of reckless investments, fraudulent financing and reporting, administrative incompetence, uncontrolled egos, puffery, and regulatory failure.”
– Malcolm Salter, Harvard Business School
“… A model for future business studies in America’s mixed economy.”- Randall Holcombe, Florida State University
Enron Ascending: The Forgotten Years, 1984–1996
(Book Outline)
Preface
Acknowledgments
Introduction: The Process of Enron
Contra-Capitalism
Primrose Paths, Slippery Slope
Conflicts of Interest
Chairman Lay
Appetite for Risk
Confidence, Optimism, Hubris
Getting Governmental
Lay Unleashed
Tragedy in the Making
Earnings Issues
Icarus Projects
Postponing Write-Offs
Imprudent Marketing
Subquality Income
Promises versus Premises
Marking to Market
Perceptionism
Corporate Masks
A “Green” Company?
Procompetition
Government Opportunity and Dependence
Political Capitalism
Mixed-Economy Competition
Inherited Intervention Opportunities
PURPA Opportunity
Export Aid
Shaped Intervention
FERC Open Access: Wholesale Gas
Clean Air Emissions Control
Championed Intervention
Desired Intervention
Oil Tariff
CO 2 Limits
MOA: Retail Electricity
Achievements (in Political Space)
Surging ENE
Profitable Core
Competitive Pipelining
Commoditizing Natural Gas
Contra-Capitalist Enron
Bourgeois Vice
Philosophic Fraud
Political Capitalism (Rent-Seeking)
Lessons for History
Part I: From HNG to Enron: 1984–1987
Introduction to Part I
Chapter 1. The New Houston Natural Gas
A New Company
Back to Gas
New Talent
Acquisitions
Transwestern Pipeline Company
Florida Gas Transmission Company
New Management
Divestitures
Momentum—and Debt
Into 1985
A Final Piece?
Chapter 2. HNG/InterNorth
Northern Natural Gas Company
A Marketing Pipeline
Prelude to a Merger
HNG/InterNorth
Buyer’s Remorse
A Postmerger Stumble
Getting Together
Ken Lay Takes Charge
Competitive Pipelining
Positioning for the Future
A New Name
Chapter 3. Foundations
A New Home
The New Team
Enduring 1986
Operating Results
Innovative Pipelining
Reorganizing Cogeneration
Buying Independence
Public Policy Overtures
Brightening 1987
A Star for Enronn Oil & Gas
Enron Gas Marketing
Conclusion
Part II: Perils and Progress: 1987–1989
Introduction to Part II
Chapter 4. Crisis at Enron Oil Corporation: 1987
Sirens and Denial (Valhalla 1)
Crisis and Cleanup (Valhalla 2)
Sanitization
Costs and Consequences
Lessons Unlearned
Chapter 5. Recovery: 1988–1989
Managerial Depth and Change
Repositioning EOG
Recommitting to Cogeneration
Pipeline Entrepreneurship
Capturing Gas Marketing
Liquid Fuels: Profitable Incrementalism
Getting Political
Vision Accomplished
Part III: Natural Gas, Natural Politics: 1990–1993
Introduction to Part III
Chapter 6. Natural Gas Majoring
A New Vision
Growing the Interstates
Going Open Access
Operational Order
Back to Decentralization
Transwestern: Expedited Certification
Besting Oil in Florida
Full Utilization
Going International
From Teesside to Enron Europe
Transportadora de Gas del Sur (Argentina)
Reorganizations, Multiplicity
Dabhol (India) Project
Export-Import Financing
Breakout—and Peril
Enron Power
Enron Oil & Gas Company
Tight-Sands Gas: The Tax-Credit Boom
Technology “Mini-Renaissance”
Enron Synergies
Jawboning and Politics
Hoglund’s Touch
Liquids
Corporate Culture
Conclusion
Chapter 7. Political Lay
Mr. Natural Gas
Talking Up Prices
Fighting Oil
Warring Against Coal
Getting to Even
“The Natural Gas Standard”
Beyond Even: Global-Warming Activism
Getting Gas to Green
Getting Bush to Rio
From Bush to Clinton-Gore
Environmental Enron
Politicking Elsewhere
PUHCA Reform
Tax Policy
An Energy Philosopher?
Part IV: Jeff Skilling
Introduction to Part IV
Chapter 8. Gas Marketing: 1990–1991
Regulatory Change, New Markets
Enron Gas Marketing: 1990
Hub Services vs. NYMEX
Enron Finance Corp.
Jeff Skilling
A Running Start
Enron Gas Services Group: 1991
Reserve Acquisition Corp.
Enron Power Services
Enron Risk Management Services
Structured Finance/Derivative Products
Reported Results
Mark-to-Market Accounting
Conclusion
Chapter 9. Expanding Gas Marketing: 1992–1993
Enron Gas Services: 1992
Enron Power Services (Sithe Contract)
EnFolio Agreements
Enron Gas Trading and Transportation
Risk Management
Enron Producer Services
Enron Finance
EGM—Canada
Enron Access: Getting to Retail
Enfuels (Enron Ventures)
Breakout Year
Enron Gas Services: 1993
AER*X Emissions Trading
Louisiana Resources Company
CalPERS and JEDI
Reorganization—and Promotion
Gaming Clean Fuels
Power Marketing
Regulatory Issues
Federal Regulation
State Regulation
Competition and Pressure
Part V: Expanding Enron: 1994–1996
Introduction to Part V.
Chapter 10. The Steady Side
Interstate Pipeline Progress
Cost Reduction: Staying Competitive
Transwestern Entrepreneurship
Florida Gas: Forestalling Entry
Northern Natural: Incremental Growth
Northern Border: More from Canada
Enron Transportation & Storage
Deregulation Not
Gathering Deregulation
Enron Oil & Gas Company
Low-Price Profitability
International
Mark Papa Joins In
Enron Oil Transportation & Trading (EOTT)
Conclusion
Chapter 11. Enron Capital & Trade Resources
New Name, Organizational Change
Wholesale Electricity Marketing
International
ECT—Europe
ECT—Canada
ECT—South America
Risk Management, Corporate Culture
Talent Evaluation and Infusions
Conclusion
Chapter 12. International Ambitions
Early Successes
Developing Problems
Teesside II (J-Block)
Dabhol I, II
San Juan Gas Company
Unfulfilled Aspirations
Enron Global Power & Pipelines
Enron Engineering & Construction
Conclusion
Part VI: Restless Enron: 1994–1996
Introduction to Part VI.
Chapter 13. Alternative Energies
Big Thoughts, New Bets
Solar Power
A Flashy Proposal
An Unlikely Partner
Amoco/Enron Solar (Solarex)
Imaging versus Reality
The Crete-Greenpeace Proposal
A Graceful Exit
Wind Power
Wind Energy in History
Major Issues
Purchasing Zond Corporation
A Try at Fuel Cells
Enron Environmental Services
President’s Council on Sustainable Development
Conclusion
Chapter 14. Visionary Enron
New Enron Visions
Natural Gas Major
“The World’s Leading Energy Company”
Enron 2000
New-Economy Enron (Gary Hamel)
Great Man, Great Company
Corporate Culture
Corporate Ethics
Accolades
Nepotism
Conclusion
Chapter 15. Energy Retailing
Natural Gas
Electricity
Public Policy Push
A California Proposal
Arguing the Case
Federal Action
Poolco Threat
Branding Enron
The Road to Enron Field
Acquiring Portland General Electric
Pilot Programs
Peterborough (Electricity)
Toledo (Natural Gas)
California (Electricity)
Oregon (PGE and Customer Choice)
PECO Energy (Electricty)
Disengagement, Re-engagement
Enron Energy Services
Conclusion
Epilogue: Dangerous Ambitions
Three Eras
Circa 1996
A Changing Company
New Leadership
Richard Kinder Departs
Jeff Skilling: President and COO
Ken Lay: Going Outside
The New Enron
1996 Annual Report
Roaring Ahead
Skilling’s Company
Righting Misinterpretations
Enron as a Process
The Richard Kinder Question
Contra-Capitalist Enron
Final Thoughts
Kenneth L. Lay: A Chronology
Bibliography
Illustration Credits
Name Index
Business Index
Political Economy Index