4 Hous. Bus. & Tax L.J. 1 (2004)

handle is hein.journals/houbtalj4 and id is 1 raw text is: COPYRIGHT 0 2004 HOUSTON BUSINESS AND TAX LAW JOURNAL ALL RIGHTS RESERVED

CAN ENERGY MARKETS BE TRUSTED?
THE EFFECT OF THE RISE AND FALL OF
ENRON ON ENERGY MARKETS
Jacqueline Lang Weaver*
TABLE OF CONTENTS
I.     INTRODUCTION ............................................................. 2
II. WHAT ENRON DID: THE BEST OF COMPANIES-
THE WORST OF COMPANIES ................. 6
A. In the Beginning: the Landscape Before
D eregulation   ................................................................   6
B. Shortages and Inefficiency ......................................... 8
C. Electricity Deregulation Begins .................................. 11
D. Enron: The Next Big Idea .......................................... 16
E. Enron's Fall: What Went Wrong ................................ 21
III.   ENRON      AND THE CALIFORNIA ENERGY CRISIS ....... 25
A.A. White Professor of Law, University of Houston Law Center. Copyright by
Jacqueline Lang Weaver. The author thanks Peter Egler, Research Librarian at the A.L.
O'Quinn Law Library and Ryan LaRue, class of 2004, for their outstanding research
assistance for this article. She also thanks the following reviewers for their substantial
time commitment and perceptive comments on a prior draft of this manuscript: Professor
Fred Bosselman, Chicago-Kent School of Law, Professor Roger Sherman, University of
Houston Economics Department, Professor David B. Spence, McCombs School of Business
at the University of Texas; Professor Darren Bush, Assistant Professor at the University
of Houston Law Center; and Alan Raymond, former president and CEO of Shell Energy
Services Company. Dr. Gurgen Gulen of the Institute for Energy, Law & Enterprise at
the University of Houston Law Center provided comments on sections of the article. Julia
Hernandez, class of 2003, provided excellent editing assistance. Angela Tao, Senior
Articles Editor of the Houston Business and Tax Law Journal did superb work on citation
form for the entire article. The author also thanks the students in her Energy Law class
in Spring 2002 who tracked and discussed developments in the California energy markets
with diligence, enthusiasm and a healthy skepticism: Dessi Angelkov, Terese Carr, Tanya
Coate, Julie Countiss-Wells, David Hartnett, Meg Healy, Michelle Lewis, Timothy Nebel,
Jason Derrick Price, Shawn Slack, Brad Soshea, Luis Suarez, Stephanie Urbano, Kevin
Wilson, and Vivien (Yuan-Lin) Yang. Kirk K. Weaver and Dr. Usha Shah also provided
invaluable assistance and encouragement, as did Associate Dean Seth Chandler. The
University of Houston Law Foundation provided research grants to support this work.
Excerpts from this article have been published as chapters in ENRON: CORPORATE
FIASCOS AND THEIR IMPLICATIONS (Nancy B. Rapoport & Bala G. Dharan, eds. 2003) with
the permission of the author and the Houston Business and Tax Law Journal.
A note to readers: Sources followed by the notation (ECP online) are printed from
Energy Central Professional, an online source that aggregates energy news from
hundreds of different daily newspapers and trade publications. Copies of the ECP articles
and articles from other online sources are in the author's files.

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