Excerpt from the Executive Summary:
News of Enron’s accounting improprieties and subsequent collapse have been part of the continued eventful last two years for the electric supply industry. Shortly after the skyrocketing prices in California and the West of 2000 and 2001 had subsided, the Enron developments began to come to light in late 2001. This has lead to investigations by several federal agencies and revelations of improper trading and reporting practices of other energy companies. As a result of this and reduced demand for electricity, the industry has been hit by a “credit crunch” as investors have become more wary and has forced many energy companies to cut back on trading activities, sell assets, and reduce future investments in order to improve their balance sheets. In the face of all the industry turmoil, while many retail markets remain relatively inactive, particularly for smaller residential customers, overall market activity has increased from last year. Wholesale markets since California settled down, continue in general to function well from an operational standpoint, however, there continues to be strong evidence that significant market power is being exercised in all markets that have been examined.