New York The debacle at Enron Corp. is shaking up the debate on Wall Street and in Washington about just how freely energy markets should operate.
When blackouts rolled through California last year, advocates of stricter government oversight accused energy traders of manipulating prices at the expense of consumers. Now, with Enron Corp. on the brink of financial ruin, the discussion is focused on whether tighter rules could help prevent a vital industry from destroying itself or trigger even more problems.
Tough talk about regulating natural gas and power markets quieted recently as prices fell and stability appeared to be restored to wholesale markets, where utilities, manufacturers and suppliers swap short- and long-term contracts to fulfill their needs and hedge their bets.
Once-soaring profits and stock prices at energy trading firms such as Enron, American Electric Power Inc. and Dynegy Inc. also settled down. Federal regulators declared that temporary price caps in California worked, while free-market advocates insisted it was the law of supply and demand that prevailed.
Either way, a massive restructuring appeared unlikely as the controversy died down.
But Enron's rapid descent in the past month and the financial rubble left behind has revived interest in scrutinizing the byzantine market structure it helped to create.
Congressional leaders have promised to hold hearings early next year and the chairman of the Federal Energy Regulatory Commission, Pat Wood, said Thursday that standards relating to the creditworthiness of market players and the timely reporting of transactions might need to be raised.
"Do we need to look behind the trades and look at the ability of companies on both ends of the trade to follow through on that trade? We could do that," Wood said. "It's probably not a bad idea."
Those on Wall Street consider re-regulation of the energy trading business an idea born out of a misunderstanding of why Enron failed and one that would do more harm than good.
Simply put, rival executives and analysts said the main reason Enron collapsed is that traders lost confidence in its ability to meet financial obligations and took their business elsewhere after rating agencies dropped Enron's credit rating to junk status.