Enron Energy Services
Encyclopedia
Enron Energy Services was a business unit of Enron Corporation, whose purpose was to provide gas, electricity, and energy management
directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be able to call and order all of their energy from Enron in one bill. EES was headed by Lou Pai
until he left the company in 2000, when it was taken over by David Delainey.
. Part of their strategy was to use two-way wireless electric meters, which could be read remotely
and eventually turn air-conditioning and lighting systems on and off by telephone http://www.enron.com/corp/pressroom/releases/1997/169meter.html. Enron bought thousands of these meters as well as millions of dollars worth of wireless air time. Enron Energy Services promised business and home users average annual savings from 5% to 15%.
EES spent millions of dollars on advertising to attract customers. This business strategy depended on a large, deregulated
market, and it became clear in the late 1990s that states were not deregulating fast enough. Few meters made it out of the warehouse and Enron employees received Skytel pagers because the company already bought the massive amount of airtime. Enron decided to change its strategy and target businesses, organizations, and corporations with offices distributed around the United States.
Enron Energy Services had problems billing customers and getting the bills to them in the correct amount. It was alleged that they paid customers to sign contracts, to prove to Wall street that energy trading actually was happening. It was also alleged that the company manipulated the California electricity market to increase profits http://www.publiccitizen.org/pressroom/release.cfm?ID=1106.
After spending on ads and marketing with little return, the company’s operations were in a deficit of over 500 million dollars. Enron Energy Services was one of the many business units that filed for bankruptcy
with Enron Corporation on December 2, 2001.
Energy management system
An energy management system is a system of computer-aided tools used by operators of electric utility grids to monitor, control, and optimize the performance of the generation and/or transmission system...
directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be able to call and order all of their energy from Enron in one bill. EES was headed by Lou Pai
Lou Pai
Lou Lung Pai born Nanjing China 1946, is a Chinese-American businessman and former Enron executive. He was CEO of Enron Energy Services and Enron Xcelerator, a venture capital division of Enron. He left Enron with over $250 million...
until he left the company in 2000, when it was taken over by David Delainey.
The business plan
EES's best known area of business was CaliforniaCalifornia
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
. Part of their strategy was to use two-way wireless electric meters, which could be read remotely
Automatic meter reading
Automatic meter reading, or AMR, is the technology of automatically collecting consumption, diagnostic, and status data from water meter or energy metering devices and transferring that data to a central database for billing, troubleshooting, and analyzing.This technology mainly saves utility...
and eventually turn air-conditioning and lighting systems on and off by telephone http://www.enron.com/corp/pressroom/releases/1997/169meter.html. Enron bought thousands of these meters as well as millions of dollars worth of wireless air time. Enron Energy Services promised business and home users average annual savings from 5% to 15%.
EES spent millions of dollars on advertising to attract customers. This business strategy depended on a large, deregulated
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
market, and it became clear in the late 1990s that states were not deregulating fast enough. Few meters made it out of the warehouse and Enron employees received Skytel pagers because the company already bought the massive amount of airtime. Enron decided to change its strategy and target businesses, organizations, and corporations with offices distributed around the United States.
Problems
Enron Energy Services signed contracts with large commercial and industrial customers guaranteeing a fixed amount of energy savings off their historical bills. Enron contracted to share the savings, split installation costs and/or assumed they could exceed these savings and pocket the additional savings for themselves. However, when construction costs for energy retrofits exceeded their earlier estimates and energy savings were less than projected, they were often upside down on deals and owed more money than they were making. Initial problems were presented within the company as typical “start-up” losses that would eventually be covered as sales and profitability were expected to grow exponentially. However, much of the losses were concealed with complicated contract language, mark-to-market accounting and other financial tricks that are known about Enron, while the dramatic increase of sales and profitability never materialized.Enron Energy Services had problems billing customers and getting the bills to them in the correct amount. It was alleged that they paid customers to sign contracts, to prove to Wall street that energy trading actually was happening. It was also alleged that the company manipulated the California electricity market to increase profits http://www.publiccitizen.org/pressroom/release.cfm?ID=1106.
After spending on ads and marketing with little return, the company’s operations were in a deficit of over 500 million dollars. Enron Energy Services was one of the many business units that filed for bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
with Enron Corporation on December 2, 2001.