Chapter 15Energy Retailing

Retailing gas and electricity to the home—a step downstream from wholesaling to utilities—was central to the goal of doubling the size and earnings of Enron between 1996 and 2000. Enron 2000, as that goal was called, was part of becoming the world’s leading energy company, discussed in the previous chapter.

Ken Lay’s new vision and Enron 2000 were very aggressive, even brazen. So was Enron’s grand leap into energy retailing, which began in 1995 and was in full swing by 1997. The next year, however, a major strategy change was made: to shift from residential commodity sales to total energy outsourcing for large establishments and industry.

Enron’s retail plan required scaling three peaks. First, a public policy changeover to mandatory open access (MOA) for utility transmission was necessary to allow independent providers (such as Enron) to reach residential users and commercial establishments. Enron, in fact, would have to create a movement in state legislatures and state commissions, an effort requiring dozens of full-time lobbyists and a war chest for political contributions.1

Second, Enron was unknown to the buying public. Brand-name recognition and trust were necessary to compete against established utilities. Consumers, although captive to their utility, were hardly rebelling, much less searching for an alternative supplier. Regulators and legislators were well tended to by the incumbents to help keep this status quo.

Third, Enron had little retailing ...

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