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Protest, Cream-pie Greet Enron Boss in California by Reuters Environmental News Network, June 22, 2001

SAN FRANCISCO — Enron Corp President Jeff Skilling delivered a stinging indictment of California's botched power deregulation scheme Thursday — and was greeted with pie-in-the-face from protesters angry over his company's role in the debacle.

"I'd like to recognize the emotions," Skilling said after a demonstrator lofted a cream pie at him as he was about to address the Commonwealth Club of California. "People in California are angry, and they should be."

The pie thrower was ejected from the room, and Skilling spent a few moments wiping pie residue from his ear.

He then calmly outlined his view of why residents of the state — which has seen soaring power prices, rolling blackouts, and utility bankruptcy — should be angry, pinning blame for the energy mess on government regulators and their failed 1996 move to revamp California's energy system.

"What happened in California is certainly not the consumers' fault," Skilling said. "The irony of this is the regulators are now the people California is turning to to fix the problem."

Gov. Gray Davis and state officials have repeatedly blasted Houston-based Enron and out-of-state power generators for causing California's power woes, accusing them of manipulating the market and jacking up prices to take advantage of the state's energy emergency.

California, which paid a about $7 billion for power in 1999, expects to pay between $50-60 billion this year thanks to a more than tenfold increase in wholesale prices.

While voicing sympathy for Davis and for California consumers facing sharply higher electricity bills, Skilling said the real villain was California's 1996 deregulation plan which forced major utilities to divest themselves of power plants and buy almost all their power on the volatile spot market.

The result, Skilling said, was a state at the mercy of "natural price spikes" in the wholesale market, spikes which have forced its largest utility into bankruptcy and cost the state billions of dollars as it seeks to buy emergency power to keep the lights on.

"Power consumers in the state of California were thrown totally, totally at the mercy of that spot market," Skilling said. "It was done to make the regulators' job easier."

Skilling's speech was repeatedly interrupted by protesters who accused him of profiteering at the expense of California ratepayers.

"You are ruining our state. You are a greedy man," one woman yelled as security guards hustled her out of the room.

But Skilling appeared unfazed and repeatedly defended Enron's role in providing power and seeking to push for open energy markets in the state.

"California needs to get deregulation right, and the rest of the country needs to get deregulation right," Skilling said. "Markets are powerful, and they work."

Skilling voiced doubts about the Federal Energy Regulatory Commission (FERC)'s decision this week to implement limited price caps in California, saying this would work against the free market principle and could discourage the investment in new generating capacity the state so badly needs.

He expressed the hope that California's energy problems would soon be behind it, saying the combination of new generating capacity, a more rational regulatory framework, and consumer conservation would tame prices.

"This one is easy to fix, and it will be fixed," Skilling said. "You'll get supply, you'll get reduction in demand, and prices will collapse."