Post-Enron Regulation of the Energy Industry

Does the Enron Collapse Show that We Need More Regulation of the Energy Industry?

Introduction

For all but the most uninformed or ignorant, the very mention of the name Enron conjures up visions of corporate greed and corruption at its worst, shattered dreams and heartache for thousands of honest workers, not to mention the damage that was done to the integrity of the energy industry. In the aftermath of "Enron", the question arises as to whether this debacle is proof of the need for more regulation of the energy industry? In this research, both sides of that issue will be presented, and in conclusion, the question will attempt to be answered.

Evidence that More Regulation is Needed

The energy industry first experienced deregulation during the years of the Reagan presidency under the premise that relaxing the regulations on energy companies would stimulate more competition and result in better rates for consumers. However, in retrospect, it is seen that Enron took advantage of a lack of regulation to manipulate markets, line the pockets of top executives, and ultimately, drain the finances of the state of California, compromising the state's ability to provide some services for years to come (Rosen, 2002). In light of these factors, it is clear that more regulation of the industry would be suitable.

When discussing possible regulation for the energy industry, there would be a need for more regulation on many different levels, even with Enron out of the picture. Regulation would be needed in the way that energy is priced and sold, as well as an intense scrutiny of the accounting practices of energy companies, lest another Enron step up to fill the void left when Enron itself collapsed in a cloud of greed, grief and chaos.

No Further Regulation is Needed

Conversely, there is evidence that no further regulation of the energy industry is needed. This is based on one central assertion- the very real possibility that another Enron would be highly unlikely, given the fact that the authorities are now wary to the types of activities that Enron was involved in and the entire industry has become more self regulating in a way, keeping a sharp eye focused for possible irregularities on the part of competitors and the like. Furthermore, the fact that the American economy is based on a free market system that must be allowed to function without excess restraint from additional regulations that would slow down the transaction of business, add cost to operations, and make fair competition exceedingly difficult, which in some ways may be just as bad as outright corruption (Culp & Hanke, 2003).

Conclusion-What is the Answer?

By all indications, it seems that less regulation of the energy industry is required for one simple fact- while the Enron case was tragic and unacceptable, it is just as bad to put a stranglehold on an entire industry because of one bad outcome, not to mention the fact that the American economy must be able to function unfettered by too many rules. Therefore, in conclusion, to paraphrase the classic economic theory, let the market do what it will.

Works Cited

Culp, Christopher L. & Hanke, Steve H. Empire of the Sun: An Economic Interpretation of Enron's Energy Business. February 20, 2003: Cato Policy Analysis No. 470.

Rosen, Richard. Regulating Power: An Idea Whose Time is Back. March 25, 2002: The American Prospect.