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Enron Who?

Although the collapse of energy trading company Enron produced the largest bankruptcy in U.S. history, it may not make much of a difference to electric utilities.

That thought occurred to me as I sat in a meeting in Louisville with a group of electric co-op leaders from several states, listening to comments by the head of a national co-op bank.

Sheldon Petersen serves as CEO of the National Rural Utilities Cooperative Finance Corporation, better known as CFC. It finances projects for more than 1,000 electric co-ops and their subsidiaries in Kentucky and across the country. Since CFC holds more than $20 billion in private, non-government loans and guarantees with member co-ops, Petersen pays special attention to what’s happening in the energy and financial markets.

And that means he carefully followed the story of Enron, which in a few short years of brokering contracts for electricity and other commodities and services, became one of the largest corporations in the nation. With revelations of an accounting scandal last year, in just a few short months Enron collapsed into bankruptcy. Employees lost their retirement savings. Congress held hearings and considered federal rule changes. And the fallout threatened to destroy one of the premier auditing firms, Arthur Andersen, for enabling the scandal.

That left financial markets jittery, says Petersen. He says investors lost a lot of confidence in financing energy ventures, adding, “Trust has to be brought back into the system.”

So in some ways Enron’s effects are huge and widespread. But not in all ways.

Petersen’s most surprising observation was that while Enron’s collapse has shaken investors, the marketplace for trading energy supplies and contracts has not been significantly affected. Petersen concludes, “Enron doesn’t seem to have been providing any significant value to the energy trading markets.”

Enron’s effects may be blasting through the halls of politics, capital markets, and the accounting industry. And certainly electric utilities tangle every day with the difficulties of generating and distributing electricity. But despite all the headlines and hand-wringing, it doesn’t look like the woes of Enron will have much of a lasting effect on our supply of electricity here in Kentucky.

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