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146-613: In 1884, the Phoenix Light and Fuel Company was formed to provide electricity and heat to the people of the three-year-old town of Phoenix. In 1901, it built two hydroelectric power stations to provide power to Phoenix. It changed its name to Pacific Gas and Electric Company in 1906 and to Central Arizona Light and Power in 1920. The Childs-Irving Hydroelectric Facilities , began producing power in 1909 to support local mining operations. The company began paid an annual dividend from 1920 to 1989 without interruption. The company became

292-656: A conflict of interest over the significant consulting fees generated by Enron. During 2000, Andersen earned $ 25 million in audit fees and $ 27 million in consulting fees (this amount accounted for roughly 27% of the audit fees of public clients for Andersen's Houston office). The auditor's methods were questioned as either being completed solely to receive its annual fees or for its lack of expertise in properly reviewing Enron's revenue recognition, special entities, derivatives, and other accounting practices. Enron hired numerous Certified Public Accountants (CPAs) as well as accountants who had worked on developing accounting rules with

438-652: A $ 3.25 million settlement with NERC and FERC related to the September 2011 blackout. On September 7, 2018, APS cut off the power to 72-year-old retiree Stephanie Pullman, due to a $ 51 overdue electric bill. The same day, the temperature in Phoenix hit 107 °F (42 °C). Within a week, Pullman had died from heat exposure. Her death sparked statewide media coverage and street protests over APS's disconnect policy. The incident led to Arizona regulators banning power shutoffs on hot summer days. APS serves about two-thirds of

584-588: A $ 500 million gain on the swap contracts in its 2000 annual report . The gain was responsible for offsetting its stock portfolio losses and was attributed to nearly a third of Enron's earnings for 2000 (before it was properly restated in 2001). On paper, Enron had a model board of directors comprising predominantly outsiders with significant ownership stakes and a talented audit committee. In its 2000 review of best corporate boards, Chief Executive included Enron among its five best boards. Even with its complex corporate governance and network of intermediaries, Enron

730-454: A 20-year agreement to introduce on-demand entertainment to various U.S. cities by year's end. After several pilot projects, Enron claimed estimated profits of more than $ 110 million from the deal, even though analysts questioned the technical viability and market demand of the service. But in March 2001, the parties withdrew from the contract. Enron continued to claim future profits, even though

876-718: A 502-mile main that connected with the El Paso network at the state line. During this period of expansion PG&E was involved in legal proceedings with the Securities and Exchange Commission regarding the company's status as a subsidiary of the North American Company . As outlined by the Public Utility Holding Company Act of 1935 , a utility subsidiary was defined as a utility company with more than 10% of their stock held by

1022-802: A New York investment firm. In return, North American received shares of PG&E's common stock worth $ 114 million. PG&E also gained control of two smaller utilities, Midland Counties Public Service and the Fresno Water Company, which was later sold. The acquisition of these utilities did not result in an immediate merger of property and personnel. The Great Western Power Company and the San Joaquin Company remained separate corporate entities for several more years. But through this final major consolidation, PG&E soon served nearly all of Northern and Central California through one integrated system. The gas industry market structure

1168-540: A consequence of the scandal, new regulations and legislation were enacted to expand the accuracy of financial reporting for public companies. One piece of legislation, the Sarbanes–Oxley Act , increased penalties for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders. The act also increased the accountability of auditing firms to remain unbiased and independent of their clients. In 1985, Kenneth Lay merged

1314-560: A cover-up. Revelations concerning Andersen's overall performance led to the break-up of the firm, and to the following assessment by the Powers Committee (appointed by Enron's board to look into the firm's accounting in October 2001): "The evidence available to us suggests that Andersen did not fulfill its professional responsibilities in connection with its audits of Enron's financial statements, or its obligation to bring to

1460-569: A limited capacity. The request remained unresolved until 1945 when the North American Company sold off stocks that brought its ownership to below 10%. The SEC then ruled that PG&E was not a subsidiary of the North American Company. In 1948, the North American Company sold its remaining stock in PG&;E. In 1957, the company brought online Vallecitos Nuclear Center , the first privately owned and operated nuclear reactor in

1606-675: A merger of the San Francisco Gas Company, the City Gas Company, and the Metropolitan Gas Company. Gas utilities, including San Francisco Gas Light, faced new competition with the introduction of electric lighting to California. According to a 2012 PG&E publication and their 1952 commissioned history, in 1879, San Francisco was the first city in the U.S. to have a central generating station for electric customers. To stay competitive,

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1752-910: A modern coal-gas plant as a hedge against shortages in the supply of oil. In 1891, the North Beach Gas Works was completed under the direction of San Francisco Gas Light president and engineer Joseph B. Crockett. The facility was the largest gas holder in the U.S. west of Chicago. In 1896, the Edison Light and Power Company merged with the San Francisco Gas Light Company to form the new San Francisco Gas and Electric Company. Consolidation of gas and electric companies solved problems for both utilities by eliminating competition and producing economic savings through joint operation. Other companies that began operation as active competitors but eventually merged into

1898-589: A post-mortem interview with The Washington Post , she recalled finding "strange transactions", "erratic cash flow", and "huge debt". The debt was the biggest red flag to McLean; she wondered how a supposedly profitable company could be "adding debt at such a rapid rate". Later, in her book, The Smartest Guys in the Room , McLean recalled speaking off the record with a number of people in the investment community who were growing skeptical about Enron. McLean telephoned Skilling to discuss her findings prior to publishing

2044-506: A public utility holding company. Though 17% of PG&E stock was held by the North American Company at this time, PG&E filed with the SEC to be exempted from subsidiary status on the grounds that 17% ownership did not give the North American Company control and because the North American Company occupied only two board member spots. The North American Company backed PG&E's request by stating that they were involved in business operations in

2190-432: A recorded conference call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling stammered, "Well uh ... Thank you very much, we appreciate it ... Asshole." This became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's offensiveness, with slogans such as, "Ask Why, Asshole",

2336-798: A reporter at The Wall Street Journal bureau in Dallas wrote a story about how mark-to-market accounting had become prevalent in the energy industry. He noted that outsiders had no real way of knowing the assumptions on which companies that used mark-to-market based their earnings. While the story only appeared in the Texas Journal, the Texas regional edition of the Journal, short-seller Jim Chanos happened to read it and decided to check Enron's 10-K report for himself. Chanos did not think it made sense that Enron's broadband unit appeared to far outpace

2482-460: A result, the state also lost significant amounts of money. The crisis cost PG&E and the state somewhere between $ 40 and $ 45 billion. PG&E Company, the utility, emerged from bankruptcy in April 2004, after paying $ 10.2 billion to its hundreds of creditors. As part of the reorganization, PG&E's 5.1 million electricity customers will have to pay above-market prices for several years to cancel

2628-659: A separate investment. CalPERS was interested in the idea, but only if it could be terminated as a partner in JEDI. However, Enron did not want to show any debt from assuming CalPERS' stake in JEDI on its balance sheet. Chief Financial Officer (CFO) Fastow developed the special purpose entity Chewco Investments, a limited partnership (L.P.) which raised debt guaranteed by Enron and was used to acquire CalPERS's joint venture stake for $ 383 million. Because of Fastow's organization of Chewco, JEDI's losses were kept off of Enron's balance sheet. In autumn 2001, CalPERS and Enron's arrangement

2774-491: A series of rules dictate whether a special purpose entity is a separate entity from the sponsor. In total, by 2001, Enron had used hundreds of special purpose entities to hide its debt. The company used a number of special purpose entities, such as partnerships in its Thomas and Condor tax shelters, financial asset securitization investment trusts (FASITs) in the Apache deal, real estate mortgage investment conduits (REMICs) in

2920-440: A shift to energy conservation and alternative energy sources alone could slake the thirst for electricity". As of December 1992, PG&E operated 173 electric generating units and 85 generating stations, 18,450 miles (29,690 km) of transmission lines and 101,400 miles (163,200 km) of distribution system. In 1997, PG&E reorganized as a holding company, PG&E Corporation. It consisted of two subsidiaries—PG&E,

3066-552: A similar incident resulted in additional compensation for another employee. By 1995, Pinnacle West Capital had been added to the S&;P MidCap 400 index. That year, earnings surpassed US$ 200 million again, and by early the next year the stock price began approaching its old 1987 high. Also in 1995, the utility subsidiary Arizona Public Services issued 30-year Monthly Income Debt Securities paying 10%. The first solar plant in Arizona

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3212-548: A subsidiary of the giant conglomerate American Power and Light in 1925, but became an independent company once again in 1945. In 1949, it merged with Northern Arizona Power and Light . In 1952, it merged with Arizona Edison and changed its name to Arizona Public Service. The stock doubled in price through the long bear market of the 1970s, while paying a 10% dividend yield. By then it had become an electric and natural gas utility fueled 94.4% by coal plants, 5.2% by natural gas, and 0.4% by oil. The company traded its common stock on

3358-503: A subsidiary, Federal Engineering), Phillips Petroleum , and Mack Trucks , were buying streetcar lines and rapidly converting most of them to bus service. This consortium was convicted in 1949 of federal charges involving conspiracy to monopolize interstate commerce in the sale of buses and supplies to National City Lines and its subsidiaries. The actions became known as the Great American Streetcar Scandal or

3504-399: A then-troubled broadband industry. He also noticed that Enron was spending much of its invested capital, and was alarmed by the large amounts of stock being sold by insiders. In November 2000, he decided to short Enron's stock. In February 2001, Chief Accounting Officer Rick Causey told budget managers: "From an accounting standpoint, this will be our easiest year ever. We've got 2001 in

3650-415: A third preferred stock (formerly NYSE :  PR Q ARP PR Q ) paying an adjustable rate between 6 and 12%, through 1986. 1984 was a down year for both earnings and the stock price, which at its low that year had lost almost half its value from the 1983 peak. In February 1985, Arizona Public Service Company reorganized as a holding company, AZP Group Inc., with APS as the leading subsidiary. It traded under

3796-608: A transmission corridor PG&E built. With a critical power shortage, rolling blackouts began on January 17, 2001. In 1994, PG&E caused the Trauner Fire in Nevada County , California through criminal negligence. The fire burned many acres of land and destroyed a schoolhouse and twelve homes near the town of Rough and Ready , California. PG&E was found guilty of causing the fire and of 739 counts of criminal negligence. In 1996, one of PG&E's substations in

3942-404: A variation on Enron's official slogan "Ask why". By the late 1990s Enron's stock was trading for $ 80–90 per share, and few seemed to concern themselves with the opacity of the company's financial disclosures. In mid-July 2001, Enron reported revenues of $ 50.1 billion, almost triple year-to-date, and beating analysts' estimates by 3 cents a share. Despite this, Enron's profit margin had stayed at

4088-516: A variety of assets including gas pipelines, electricity plants, paper plants, water plants, and broadband services across the globe. Enron also gained additional revenue by trading contracts for the same array of products and services with which it was involved. This included setting up power generation plants in developing countries and emerging markets including the Philippines ( Subic Bay ), Indonesia and India ( Dabhol ). The bull market of

4234-602: A very low price. The deal failed, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code . Enron's $ 63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until the WorldCom scandal the following year. Many executives at Enron were indicted for a variety of charges and some were later sentenced to prison, including former CEO Jeffrey Skilling. Then CEO and Chairman Kenneth Lay

4380-625: Is an American investor-owned utility (IOU) . The company is headquartered at 300 Lakeside Drive , in Oakland, California . PG&E provides natural gas and electricity to 5.2 million households in the northern two-thirds of California , from Bakersfield and northern Santa Barbara County , almost to the Oregon and Nevada state lines. Overseen by the California Public Utilities Commission , PG&E

4526-548: Is scheduled to cease operations in 2025. In 2023, Four corners began seasonally operating at half capacity and operating at full capacity during the summer which is the peak season for energy demand in the Arizona market. This has resulted in the Arizona energy market consuming hundreds of MWh less of coal produced energy. Pinnacle West operates and partially owns the Palo Verde Nuclear Generating Station . Pinnacle West has been in lawsuits with

Pinnacle West Capital - Misplaced Pages Continue

4672-550: Is the leading subsidiary of the holding company PG&E Corporation , which has a market capitalization of $ 36.33 billion as of February 23, 2024. PG&E was established on October 10, 1905 from the merger and consolidation of predecessor utility companies, and by 1984 was the United States' "largest electric utility business". PG&E is one of six regulated, investor-owned electric utilities (IOUs) in California;

4818-726: The Financial Accounting Standards Board (FASB). The accountants searched for new ways to save the company money, including capitalizing on loopholes found in Generally Accepted Accounting Principles (GAAP), the accounting industry's standards. One Enron accountant revealed "We tried to aggressively use the literature [GAAP] to our advantage. All the rules create all these opportunities. We got to where we did because we exploited that weakness." Andersen's auditors were pressured by Enron's management to defer recognizing

4964-706: The Lehman Brothers Repo 105 scheme in the 2008 financial crisis , or the currency swap concealment of Greek debt by Goldman Sachs. In Enron's case, Merrill Lynch bought Nigerian barges with an alleged buyback guarantee by Enron shortly before the earnings deadline. According to the government, Enron misreported a bridge loan as a true sale, then bought back the barges a few months later. Merrill Lynch executives were tried and in November 2004 convicted for aiding Enron in fraudulent accounting activities. These charges were thrown out on appeal in 2006, after

5110-585: The New York Stock Exchange , and in 1976, the company issued a preferred stock (formerly NYSE :  PR ARP PR ) with a 10.5% dividend, callable in 1990. APS also performed well through the early 1980s recession , reaching peak earnings of over US$ 255 million in 1983. However, by then the company had accumulated over US$ 2.1 billion in long-term debt. In 1982, APS issued another preferred stock (formerly NYSE :  PR O ARP PR O ) with an 11.9% dividend, callable in 1987. And in 1983, it issued

5256-652: The Tubbs Fire was potentially added when U.S. Bankruptcy Judge Dennis Montali ruled that a fast-track state jury trial could proceed to resolve who is at fault for the Tubbs Fire. Cal Fire determined that customer equipment was at fault, but lawyers representing wildfire victims claimed that PG&E equipment was at fault. This trial was scheduled to begin January 7, 2020 in San Francisco. The court case

5402-650: The Union Iron Works , the largest shipbuilding operation on the West Coast, and became interested in manufacturing gas Joseph G. Eastland, an engineer and clerk at the foundry, joined them in gathering information. In July 1852, James applied for and received from the Common Council of the City of San Francisco a franchise to erect a gasworks, lay pipes in the streets and install street lamps to light

5548-488: The electrical grid supporting it was gradually extended. A second generating station was constructed in 1888 by the California Electric Light Company to increase production capacity. New competition also emerged in the 1880s in the form of water gas , an improved illuminant patented by Thaddeus Lowe . The United Gas Improvement Company, a water gas manufacturer organized after purchasing

5694-544: The natural gas pipeline companies of Houston Natural Gas and InterNorth to form a multi-billion dollar company. Just a year later, they then changed the name to Enron. In the early 1990s, he helped to initiate the selling of electricity at market prices and, soon after, Congress approved legislation deregulating the sale of natural gas. The resulting markets made it possible for traders such as Enron to sell energy at higher prices, thereby significantly increasing its revenue. After producers and local governments decried

5840-500: The 1990s helped to fuel Enron’s ambitions and contributed to its rapid growth. Enron's stock increased from the start of the 1990s until year-end 1998 by 311%, only modestly higher than the average rate of growth in the Standard & Poor 500 index . However, the stock increased by 56% in 1999 and a further 87% in 2000, compared to a 20% increase and a 10% decrease for the index during the same years. By December 31, 2000, Enron's stock

5986-562: The 2018 Camp Fire , the deadliest wildfire in California history. The formal finding of liability led to losses in federal bankruptcy court. On January 14, 2019, PG&E announced its filing for Chapter 11 bankruptcy in response to its liability for the catastrophic 2017 and 2018 wildfires in Northern California. The company hoped to come out of bankruptcy by June 30, 2020, and was successful on Saturday, June 20, 2020, when U.S. Bankruptcy Judge Dennis Montali issued

Pinnacle West Capital - Misplaced Pages Continue

6132-624: The Alberta and Southern Gas Company on the Canadian side, and by Pacific Gas Transmission Company, a subsidiary of PG&E, on the U.S. side. Construction of the pipeline lasted 14 months. Testing began in 1961, and the completed 1,400-mile pipeline was dedicated in early 1962. PG&E began construction on another nuclear facility, the Diablo Canyon Power Plant , in 1968. Originally slated to come online in 1979,

6278-469: The California Gas & Electric Company to acquire and merge gas and electric power businesses, and bought many utilities like Oakland Gas Light & Heat Company, United Gas & Electric Company, and, in 1905, San Francisco Gas & Electric Company. In 1905, Martin and de Sabla formed Pacific Gas and Electric Company . According to PG&E's 2012 history timeline on their webpage,

6424-587: The Department of Energy over the Yucca Mountain nuclear waste repository since 2003. In 2023, the Department of Energy approved its ninth settlement with Pinnacle West all these settlements have totaled $ 36 million in awarded damages for Pinnacle West. The plant has enough storage for spent fuel to store its waste through 2047. Pinnacle West owns and operates six natural gas or oil based energy generators. In 2019, it completed modernizing Ocotillo, one of

6570-547: The General Motors Streetcar Conspiracy . Within a few years of its incorporation, PG&E made significant inroads into Northern California's hydroelectric industry through purchase of existing water storage and conveyance facilities. These included many reservoirs, dams, ditches and flumes built by mining interests in the Sierras that were no longer commercially viable. By 1914, PG&E

6716-611: The Great Earthquake. The company's substantial capital allowed it to survive, rebuild, and expand. In 1906, PG&E purchased the Sacramento Electric, Gas and Railway Company and took control of its railway operations in and around Sacramento . The Sacramento City Street Railway began operating under the Pacific Gas & Electric name in 1915, and its track and services subsequently expanded. By 1931

6862-649: The Lowe gas patents, acquired a lease and then an interest in San Francisco's Central Gas Light Company on November 1, 1883. United was acquired by the Pacific Gas Improvement Company in 1884. Under the management of president Albert Miller, Pacific Gas Improvement developed into a formidable competitor to San Francisco Gas Light. His sons, Horace A. Miller and C. O. G. Miller (Christian Otto Gerberding Miller), acting as Secretary and President, respectively, eventually owned and controlled not only

7008-527: The Merrill Lynch executives had spent nearly a year in prison, with the 5th U.S. Circuit Court of Appeals in New Orleans calling the conspiracy and wire fraud charges "flawed". Expert observers said that the reversal was highly unusual for the 5th Circuit, commenting that the conviction must have had serious issues in order to be overturned. The Justice Department decided not to retry the case after

7154-665: The Mission District of San Francisco caught fire. PG&E was eventually found legally culpable for the fire due to criminal negligence, according to an investigation in 2003. The 1999 Pendola fire in the Plumas National Forest and Tahoe National Forest burned nearly 12,000 acres of forest was found to have been caused by poor vegetation management by PG&E. In 1998, a change in the regulation of California's public utilities, including PG&E, began. The California Public Utility Commission (CPUC) set

7300-634: The Oregon border". In the 1950s and 1960s, at both the Topock and Hinkley compressor stations, a hexavalent chromium additive was used to prevent rust in the cooling towers, which later was the cause of the Hinkley groundwater contamination . It disposed of the water from the cooling towers "adjacent to the compressor stations". PG&E was significantly affected by the 1906 San Francisco earthquake . The company's assorted central offices were damaged by

7446-553: The Pacific Gas Improvement Company but also the Pacific Gas Lighting Company (Pacific Lighting Company). In 1888, San Francisco Gas Light built its own water gas plant at the Potrero gas works . The manufacturing of water gas proved successful due to the increased availability of inexpensive petroleum. The company decided to construct a modern gas works with both updated water gas manufacturing technology and

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7592-493: The Phoenix metropolitan area. It primarily serves downtown and northern Phoenix, a large swath to the north and west of the city, and the downtown areas of Chandler , Gilbert , Glendale , Peoria , Scottsdale and Tempe . Outside of the Valley, it serves Flagstaff , Prescott , Yuma and Douglas . Pinnacle West owns and operates a number of power plants through its Arizona Public Service company which it wholly owns. Most of

7738-728: The Sacramento Street Railway Division operated 75 streetcars on 47 miles (76 km) of track. PG&E's streetcars were powered by the company's hydroelectric plant in Folsom . In 1943, PG&E sold the rail service to Pacific City Lines, which was later acquired by National City Lines . Several streetcar lines were soon converted to bus service, and the track was abandoned entirely in 1947. During this same period, Pacific City Lines and its successor, National City Lines, with funding from General Motors , Firestone Tire , Standard Oil of California (through

7884-463: The San Francisco Gas Light Company introduced the Argand lamp that same year. The lamp increased the light capacity of gas street lamps, but proved to be an expensive improvement and was not generally adopted. Meanwhile, the demand for electric light in the stores and factories of downtown San Francisco continued to grow. The first electric street light was erected in 1888 in front of City Hall , and

8030-634: The San Francisco Gas and Electric Company and the California Gas and Electric Corporation merged to form the Pacific Gas and Electric Company (PG&E) on October 10, 1905. The consolidation gave the California Gas and Electric Corporation access to the large San Francisco market and a base for further financing. The San Francisco Gas and Electric Company, in turn, was able to reinforce its electric system, which until then had been powered entirely by steam-operated generating plants , which could not compete with lower cost hydroelectric power . After

8176-831: The San Francisco Gas and Electric Company included the Equitable Gas Light Company, the Independent Electric Light and Power Company, and the Independent Gas and Power Company. In 1903, the company purchased its main competitor for gas lighting, the Pacific Gas Improvement Company. John Martin and Eugene J. de Sabla , started out as gold miners along the Yuba River, harnessing hydroelectric power, building hydro plants in Nevada City (1895), and Northern California. In

8322-599: The Sierra and San Francisco Power Company, which provided hydropower to San Francisco's streetcars. These three companies added valuable properties and power and water sources. By the end of 1927, PG&E had nearly one million customers and provided electricity to 300 Northern Californian communities. In 1930, PG&E purchased majority stock holdings in two major Californian utility systems—Great Western Power and San Joaquin Light and Power —from The North American Company ,

8468-636: The Steele deal, and REMICs and real estate investment trusts (REITs) in the Cochise deal. The special purpose entities were Tobashi schemes used for more than just circumventing accounting conventions. As a result of one violation, Enron's balance sheet understated its liabilities and overstated its equity , and its earnings were overstated. Enron disclosed to its shareholders that it had hedged downside risk in its own illiquid investments using special purpose entities. However, investors were oblivious to

8614-497: The United States, in Pleasanton, California . The reactor initially produced 5,000 kilowatts of power, enough to power a town of 12,000. In addition to nuclear power, PG&E continued to develop natural gas supplies as well. In 1959, the company began working to obtain approval for the import of a large quantity of natural gas from Alberta , Canada to California, via a pipeline constructed by Westcoast Transmission Co. and

8760-407: The accounting employed when a company issues stock at a public offering , then booked the notes payable issued as assets on its balance sheet while increasing the shareholders' equity for the same amount. This treatment later became an issue for Enron and its auditor Arthur Andersen , as removing it from the balance sheet resulted in a $ 1.2 billion decrease in net shareholders' equity. Eventually

8906-814: The actions of an APS employee in the North Gila substation, and it is unknown why safeguards did not keep the outage limited to the Yuma area. The outage occurred days before the tenth anniversary of the September 11 attacks , and hours before the United States Department of Homeland Security warned of a potential terrorist attack leading up to the anniversary, but the Federal Bureau of Investigation and SDG&E early in their investigations ruled out terrorism. On July 7, 2014, APS agreed to

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9052-609: The agent model. Enron's method of reporting inflated trading revenue was later adopted by other companies in the energy trading industry in an attempt to stay competitive with the company's large increase in revenue. Other energy companies such as Duke Energy , Reliant Energy , and Dynegy joined Enron in the largest 50 of the revenue-based Fortune 500 owing mainly to their adoption of the same trading revenue accounting as Enron. Between 1996 and 2000, Enron's revenues increased by more than 750%, rising from $ 13.3 billion in 1996 to $ 100.7 billion in 2000. This expansion of 65% per year

9198-632: The appearance of reported earnings to meet Wall Street's expectations. Stock tickers were installed in lobbies, elevators, and on company computers. At budget meetings, Skilling would develop target earnings by asking, "What earnings do you need to keep our stock price up?" and that number would be used, even if it was not feasible. On December 31, 2000, Enron had 96 million shares outstanding as stock option plans (approximately 13% of common shares outstanding). Enron's proxy statement stated that, within three years, these awards were expected to be exercised. Using Enron's January 2001 stock price of $ 83.13 and

9344-542: The article, but he called her "unethical" for not properly researching his company. Fastow claimed that Enron could not reveal earnings details as the company had more than 1,200 trading books for assorted commodities and did "... not want anyone to know what's on those books. We don't want to tell anyone where we're making money." In a conference call on April 17, 2001, then-Chief Executive Officer (CEO) Skilling verbally attacked Wall Street analyst Richard Grubman, who questioned Enron's unusual accounting practices during

9490-415: The attention of Enron's Board (or the Audit and Compliance Committee) concerns about Enron's internal contracts over the related-party transactions". Corporate audit committees usually meet just a few times during the year, and their members typically have only modest experience with accounting and finance. Enron's audit committee had more expertise than many others. It included: Enron's audit committee

9636-402: The bag." On March 5, Bethany McLean 's Fortune article "Is Enron Overpriced?" questioned how Enron could maintain its high stock value, which was trading at 55 times its earnings, arguing that analysts and investors did not know exactly how the company made money. McLean was first drawn to the company's financial situation after Chanos suggested she view the company's 10-K for herself. In

9782-458: The board of directors, as later learned by a Senate subcommittee. The board was informed of the rationale for using the Whitewing, LJM, and Raptor transactions, and after approving them, received status updates on the entities' operations. Although not all of Enron's widespread improper accounting practices were revealed to the board, the practices were dependent on board decisions. Even though Enron extensively relied on derivatives for its business,

9928-785: The chairman of Enron in its last few years, and approved of the actions of Skilling and Fastow, although he did not always inquire about the details. Skilling constantly focused on meeting Wall Street expectations, advocated the use of mark-to-market accounting (accounting based on market value, which was then inflated) and pressured Enron executives to find new ways to hide its debt. Fastow and other executives "created off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people could understand them." Enron earned profits by providing services such as wholesale trading and risk management in addition to building and maintaining electric power plants, natural gas pipelines, storage, and processing facilities. When accepting

10074-470: The charges from the special purpose entities as its credit risks became known. Since the entities would never return a profit, accounting guidelines required that Enron should take a write-off , where the value of the entity was removed from the balance sheet at a loss. To pressure Andersen into meeting earnings expectations, Enron would occasionally allow accounting companies Ernst & Young or PricewaterhouseCoopers to complete accounting tasks to create

10220-399: The city with "brilliant gas". The council specified that gas should be supplied to households "at such rates as will make it to their interest to use it in preference to any other material". Eastland and the Donahue brothers incorporated the San Francisco Gas Company on August 31, 1852, with $ 150,000 of authorized capital . It became the first gas utility in the West. Its official seal bore

10366-403: The committee. The United States Senate Permanent Subcommittee on Investigations of the Committee on Governmental Affairs ' report accused the board members of allowing conflicts of interest to impede their duties as monitoring the company's accounting practices. When Enron's scandal became public, the audit committee's conflicts of interest were regarded with suspicion. Commentators attributed

10512-503: The company became public in October 2001, the company filed for bankruptcy and its accounting firm, Arthur Andersen —then one of the five largest audit and accountancy partnerships in the world—was effectively dissolved. In addition to being the largest bankruptcy reorganization in U.S. history at that time, Enron was cited as the biggest audit failure. Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth . Several years later, when Jeffrey Skilling

10658-662: The company began exploring possibilities for a 3,000-mile pipeline from Alaska, which would travel through the Mackenzie River Valley and on to join with the previously constructed pipeline originating in Alberta. In 1977 the Mackenzie Valley Pipeline project received approval from the U.S.  Federal Power Commission and support from the Carter Administration. The pipeline still required approval from Canada. Plans for

10804-414: The company returned to profitability, as earnings recovered to over US$ 150 million. The stock price tripled from its 1991 low by the end of 1993. The company reinstated its dividend that year. The company faced a variety of regulatory disputes due to its operation of Palo Verde and treatment of whistleblowers. It was ordered by the Department of Labor to pay a whistleblower $ 50,000 in compensation. In 1993,

10950-454: The company use accounting limitations to misrepresent earnings and modify the balance sheet to indicate favorable performance. Furthermore, some speculative business ventures proved disastrous. The combination of these issues later resulted in the bankruptcy of Enron, and the majority of them were perpetuated by the indirect knowledge or direct actions of Lay, Skilling, Andrew Fastow and other executives such as Rebecca Mark . Lay served as

11096-401: The company's finance committee and board did not have enough experience with derivatives to understand what they were being told. The Senate subcommittee argued that had there been a detailed understanding of how the derivatives were organized, the board would have prevented their use. Enron's accounting firm, Arthur Andersen, was accused of applying reckless standards in its audits because of

11242-470: The company's financial statement footnotes. The special purpose entities had been used to pay for all of this using the entities' debt instruments . The footnotes also declared that the instruments' face amount totaled $ 1.5 billion, and the entities notional amount of $ 2.1 billion had been used to enter into derivative contracts with Enron. Enron capitalized the Raptors, and, in a manner similar to

11388-689: The customer records destroyed. At the beginning of 2001, the Enron Corporation, the world's dominant energy trader, appeared unstoppable. The company's decade-long effort to persuade lawmakers to deregulate electricity markets had succeeded from California to New York. Its ties to the Bush administration assured that its views would be heard in Washington. Its sales, profits and stock were soaring. —A. Berenson and R. A. Oppel, Jr. The New York Times , October 28, 2001. On September 20, 2000,

11534-451: The deal resulted in a loss. Enron used special purpose entities—limited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assets . The company elected to disclose minimal details on its use of "special purpose entities". These shell companies were created by a sponsor, but funded by independent equity investors and debt financing. For financial reporting purposes,

11680-455: The debt. Facing potential liabilities of $ 30 billion from multiple wildfires in the years 2015–2018, Pacific Gas and Electric Company (PG&E), on January 14, 2019, began the process of filing for bankruptcy with a 15-day notice of intention to file for bankruptcy protection. On January 29, 2019 PG&E Corporation, the parent corporation of PG&E, filed for bankruptcy protection. Because fire survivors are unsecured creditors with

11826-438: The derivative contracts worth $ 2.1 billion lost significant value. Swaps were established at the time the stock price achieved its maximum. During the ensuing year, the value of the portfolio under the swaps fell by $ 1.1 billion as the stock prices decreased (the loss of value meant that the special purpose entities technically now owed Enron $ 1.1 billion by the contracts). Enron, using its mark-to-market accounting method, claimed

11972-585: The deterioration in prices in the Arizona real estate market. By 1990, the company's earnings had fallen to under US$ 100 million, as it struggled through the 1990-1991 recession , as well as a series of failed attempts to diversify. By 1991, the company was facing a loss of almost US$ 190 million, and discontinued paying its dividend . APS and its predecessors had paid a dividend without interruption since 1920. The stock price plunged 85% from its 1987 peak, to its lowest level in over twenty years. Its long-term debt by then reached over US$ 2.5 billion. However, by 1992,

12118-498: The directors' beneficial ownership reported in the 2001 proxy, the value of director stock ownership was $ 659 million for Lay, and $ 174 million for Skilling. Skilling believed that if Enron employees were constantly worried about cost, it would hinder original thinking. As a result, extravagant spending was rampant throughout the company, especially among the executives. Employees had large expense accounts and many executives were paid sometimes twice as much as competitors. In 1998,

12264-618: The early 1890s, Martin, de Sabla, Alfonso Tregidgo, and later, Romulus Riggs Colgate, began developing a hydroelectric powerhouse on the South Fork of the Yuba River. In 1899, Martin and de Sabla formed Yuba Power Company. In 1900, Martin and de Sabla created the Bay Counties Power Company, constructing a 140-mile transmission line for an electric railway in Oakland. In 1903, John Martin and Eugene de Sabla started

12410-538: The effect of requiring the utility to buy power from the energy generators at fluctuating prices, while being forced to sell the power to consumers at a fixed cost. The market for electricity was dominated by the Enron Corporation , which, with help from other corporations, artificially pushed prices for electricity ever higher. This led to the California electricity crisis that began in 2000 on Path 15 ,

12556-409: The end 1987. However, the stock price reached an all-time peak that year, which was not surpassed for the next decade, as the company ran into troubles through the early 1990s. In 1986, Pinnacle acquired MeraBank, a savings and loan association . It grew to become Arizona's largest thrift, with $ 6.5 billion in assets. However, the thrift was seized by federal regulators in January 1990, due in part to

12702-526: The end of 1855, the company had laid more than 6 ½ miles of pipe and 154 street lamps were in operation. The growing popularity of gas light led to competing gas companies, including the Aubin Patent Gas Company and Citizens Gas Company. The San Francisco Gas Company quickly acquired these smaller rivals. However, one rival did provide serious competition. The Bank of California founded the City Gas Company in April 1870 to compete with

12848-462: The equity, also contributed $ 22 million to fund the entities. Enron transferred to "Raptor I-IV", four LJM-related special purpose entities named after the velociraptors in Jurassic Park , more than "$ 1.2 billion in assets, including millions of shares of Enron common stock and long term rights to purchase millions more shares, plus $ 150 million of Enron notes payable " as disclosed in

12994-625: The fact that the special purpose entities were actually using the company's own stock and financial guarantees to finance these hedges. This prevented Enron from being protected from the downside risk. In 1993, Enron established a joint venture in energy investments with CalPERS , the California state pension fund, called the Joint Energy Development Investments (JEDI). In 1997, Skilling, serving as Enron's chief operating officer (COO), asked CalPERS to join Enron in

13140-404: The final approval of the plan for PG&E to exit bankruptcy. In the 1850s, manufactured gas was introduced to the United States for lighting. Larger American cities in the east built gasworks , but the west had no gas industry. San Francisco had street lights only on Merchant Street, in the form of oil lamps. Three brothers—Peter, James, and Michael Donahue—ran the foundry that became

13286-477: The fire was caused by PG&E transmission lines. Damages would not be covered by the settlement for wildfire victims that was part of the PG&E bankruptcy. PG&E settled for $ 1 billion with state and local governments in June, 2019, and settled for $ 11 billion with insurance carriers and hedge funds in September, 2019. Representatives for wildfire victims say PG&E owes $ 54 billion or more, and PG&E

13432-411: The firm might never have received the money, with this income increasing financial earnings on the books. However, because in future years the profits could not be included, new and additional income had to be included from more projects to develop additional growth to appease investors. As one Enron competitor stated, "If you accelerate your income, then you have to keep doing more and more deals to show

13578-478: The first major urban area to switch from manufactured gas to natural gas. The transition required the adjustment of burners and airflow valves on 1.75 million appliances. In 1936, PG&E expanded distribution with an additional 45-mile pipeline from Milpitas . PG&E gradually retired its gas manufacturing facilities, although some plants were kept on standby. Defense activities boosted natural gas sales in California during World War II , but cut deeply into

13724-538: The first nonfinancial company to use the method to account for its complex long-term contracts. Mark-to-market accounting requires that once a long-term contract has been signed, income is estimated as the present value of net future cash flow. Often, the viability of these contracts and their related costs were difficult to estimate. Owing to the large discrepancies between reported profits and cash, investors were typically given false or misleading reports. Under this method, income from projects could be recorded, although

13870-629: The gas based plants resulting in an increase from 290MW to 690MW. Pinnacle West owns and operates two utility scale solar systems as well as thirty small scale facilitates. AZ Sun received $ 675 million in Pinnacle West investment and provides up to 180MW. Red Rock solar plant produces 44MW which are sold for energy credits to institutional buyers. Small scale facilities are expanding to Pinnacle West owned systems government owned rooftops and residential programs. Pinnacle West spent millions in lobbying dollars during 2012 election of ACC. This campaign

14016-561: The gas monopoly held by the Donahue brothers' operation. City Gas began operation in 1872 and initiated a price war with the San Francisco Gas Company. In 1873, the two companies negotiated a consolidation as a compromise and the Bank of California gained part ownership of "the most lucrative gas monopoly in the West". On April 1, 1873, the San Francisco Gas Light Company was formed, representing

14162-608: The illusion of hiring a new company to replace Andersen. Although Andersen was equipped with internal controls to protect against conflicted incentives of local partners, it failed to prevent conflict of interest. In one case, Andersen's Houston office, which performed the Enron audit, was able to overrule any critical reviews of Enron's accounting decisions by Andersen's Chicago partner. In addition, after news of SEC investigations of Enron were made public, Andersen would later shred several tons of relevant documents and delete nearly 30,000 e-mails and computer files, leading to accusations of

14308-526: The inscription " Fiat Lux "—let there be light—the same slogan later adopted by the University of California. There were 11 original stockholders, and the three Donahue brothers subscribed for 610 of the 1,500 shares. The original location for the gas works was bounded by First, Fremont, Howard and Natoma streets south of Market, on what was then the shore of the San Francisco Bay . Work on

14454-401: The invariable fluctuation of future energy prices. Enron's downfall was attributed to its reckless use of derivatives and special purpose entities. By hedging its risks with special purpose entities which it owned, Enron retained the risks associated with the transactions. This arrangement had Enron implementing hedges with itself. Enron's aggressive accounting practices were not hidden from

14600-409: The issues. Shareholders filed a $ 40 billion lawsuit (and were eventually partially compensated with $ 7.2 billion), after the company's stock price, which achieved a high of US$ 90.75 per share in mid-2000, plummeted to less than $ 1 by the end of November 2001. The Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at

14746-570: The largest seller of natural gas in North America by 1992, its trading of gas contracts earned $ 122 million (before interest and taxes), the second largest contributor to the company's net income. The November 1999 creation of the EnronOnline trading website allowed the company to better manage its contracts trading business. In an attempt to achieve further growth, Enron pursued a diversification strategy. The company owned and operated

14892-480: The merger, engineers and management from each organization made plans to coordinate and unify the two systems. However, the two firms maintained separate corporate identities until 1911. PG&E began delivering natural gas to San Francisco and northern California in 1930. The longest pipeline in the world connected the Texas gas fields to northern California, with compressor stations that included cooling towers every 300 miles (480 km), at Topock, Arizona , on

15038-456: The mismanagement behind Enron's fall to a variety of ethical and political-economic causes. Ethical explanations centered on executive greed and hubris, a lack of corporate social responsibility, situation ethics, and get-it-done business pragmatism. Political-economic explanations cited post-1970s deregulation, and inadequate staff and funding for regulatory oversight. Enron made a habit of booking costs of cancelled projects as assets, with

15184-471: The office from other departments (instructing them to pretend to work hard) to create the appearance that the division was larger than it was. This ruse was used several times to fool analysts about the progress of different areas of Enron to help improve the stock price. Enron division Azurix, slated for an IPO , initially planned to bid between $ 321 million and $ 353 million for the rights to operate water system services for areas around Buenos Aires . This

15330-420: The open market PG&E started hemorrhaging cash. PG&E Company (the utility, not the holding company) entered bankruptcy under Chapter 11 on April 6, 2001. The state of California tried to bail out the utility and provide power to PG&E's 5.1 million customers under the same rules that required the state to buy electricity at market rate high cost to meet demand and sell it at a lower fixed price, and as

15476-507: The other five are PacifiCorp , Southern California Edison , San Diego Gas & Electric , Bear Valley Electric , and Liberty Utilities . In 2018 and 2019, the company received widespread media notoriety when investigations by the California Department of Forestry and Fire Protection (Cal Fire) found the company's infrastructure primarily responsible for causing two separate devastating wildfires in California, including

15622-461: The outside equity investor needed for the special purpose entities that were being used by Enron. Fastow had to go before the board of directors to receive an exemption from Enron's code of ethics (as he had the title of CFO) in order to manage the companies. The two partnerships were funded with around $ 390 million provided by Wachovia , J.P. Morgan Chase , Credit Suisse First Boston , Citigroup , and other investors. Merrill Lynch, which marketed

15768-420: The pipeline were placed on hold in 1977 by a Canadian judge. Justice Thomas R. Berger of British Columbia shelved the project for at least 10 years, citing concerns from First Nations groups, whose land the pipeline would have traversed, as well as potential environmental impacts. In 1984 the great-grandson of PG&E's founder George H. Roe—David Roe published his book entitled Dynamos and Virgins during

15914-479: The plant started in November 1852, and finished a few months later. On the night of February 11, 1854, the streets of San Francisco were for the first time lighted by gas. To celebrate the event, the company held a gala banquet at the Oriental Hotel. Gas lighting quickly gained public favor. In the first year of operation, the company had 237 customers. That number more than doubled the next year, to 563. By

16060-532: The plant's opening was delayed for several years due to environmental protests and concerns over the safety of the plant's construction. Testing of the plant began in 1984, and energy production was brought up to full power in 1985. During the construction of the Diablo Canyon plant, PG&E continued its efforts to bring natural gas supplies from the North to their service area in California. In 1972,

16206-495: The power Pinnacle West supplies, as well as most of the power for the state of Arizona, is generated by these plants. Pinnacle West owns three coal plants Cholla Power Plant , Four Corners Generating Station , and Navajo Generating Station (operated by Salt River Project). The coal is primarily supplied by long-term leases from landowners in the Navajo Nation. The Navajo generating plant ceased operations in 2019. Cholla

16352-581: The quake and destroyed by the subsequent fire. Its San Francisco Gas and Electric Company subsidiary in particular suffered significant infrastructure loss, as its distribution systems—miles of gas mains and electric wires—were dissevered. Only two gas and two electric plants, all located far from the city, survived the destruction. These functioning facilities—including the new 4,000,000-foot crude oil gas works at Potrero Generating Station —played critical roles in San Francisco's rebuilding efforts. Many of PG&E's utility competitors ceased operation following

16498-572: The quality of cash flow or profits, in order to get a better rating for their performance review. Additionally, accounting results were recorded as soon as possible to keep up with the company's stock price. This practice helped ensure deal-makers and executives received large cash bonuses and stock options. Enron was constantly emphasizing its stock price. Management was compensated extensively using stock options , similar to other U.S. companies. This policy of stock option awards caused management to create expectations of rapid growth in efforts to give

16644-863: The rates that PG&E could charge customers and required them to provide as much power as the customers wanted at rates set by the CPUC. In the summer of 2001 a drought in the northwest states and in California reduced the amount of hydroelectric power available. Usually PG&E could buy "cheap" hydroelectric power under long-term contracts with the Bonneville Dam and other sources. Drought and delays in approval of new power plants and market manipulation decreased available electric power generation capacity that could be generated in state or bought under long-term contracts out of state. Hot weather brought on higher usage, rolling blackouts , and other problems. With little excess generating capacity of its own, PG&E

16790-552: The rationale that no official letter had stated that the project was cancelled. This method was known as "the snowball", and although it was initially dictated that such practices be used only for projects worth less than $ 90 million, it was later increased to $ 200 million. In 1998, when analysts were given a tour of the Enron Energy Services office, they were impressed with how the employees were working so vigorously. In reality, Skilling had moved other employees to

16936-407: The regulated utility, and a non-regulated energy business. In the later 1990s, under electricity market deregulation this utility sold off most of its natural gas power plants . The utility retained all of its hydroelectric plants, the Diablo Canyon Power Plant and a few natural gas plants, but the large natural gas plants it sold made up a large portion of its generating capacity. This had

17082-405: The resultant price volatility and asked for increased regulation, strong lobbying on the part of Enron and others prevented such regulation. Enron changed from being a natural gas producer and supplier to a trader of energy derivative contracts with the assistance of Jeffrey Skilling, who joined the company as a consultant before rising to the position of chief operating officer. As Enron became

17228-414: The reversal of the verdict. In Enron's natural gas business, the accounting had been fairly straightforward: in each time period , the company listed actual costs of supplying the gas and actual revenues received from selling it. However, when Skilling joined Enron, he demanded that the trading business adopt mark-to-market accounting, claiming that it would represent "true economic value". Enron became

17374-412: The risk of buying and selling products, merchants are allowed to report the selling price as revenues and the products' costs as cost of goods sold. In contrast, an " agent " provides a service to the customer, but does not take the same risks as merchants for buying and selling. Service providers, when classified as agents, may report trading and brokerage fees as revenue, although not for the full value of

17520-455: The same or rising income." Despite potential pitfalls, the U.S. Securities and Exchange Commission (SEC) approved the accounting method for Enron in its trading of natural gas futures contracts on January 30, 1992. However, Enron later expanded its use to other areas in the company to help it meet Wall Street projections. For one contract, in July 2000, Enron and Blockbuster Video signed

17666-472: The same priority as bondholders, they would only be paid in proportion to their claim size if anything is left after secured and priority claims are paid; this nearly ensured that they will not get paid in full. PG&E had a deadline of June 30, 2020 to exit bankruptcy in order to participate in the California state wildfire insurance fund established by AB 1054 that helps utilities pay for future wildfire claims. On August 16, 2019, liability for

17812-408: The state line, and near the town of Hinkley, California . With the introduction of natural gas, the company began retiring its polluting gas manufacturing facilities, although it did keep some plants on standby. Today a network of eight compressor stations linked by "40,000 miles of distribution pipelines and over 6,000 miles of transportation pipelines" serves "4.2 million customers from Bakersfield to

17958-741: The state's natural reserves. In 1947, PG&E entered into a contract with the Southern California Gas Company and the Southern Counties Gas Company to purchase natural gas through a new 1,000-mile pipeline running from Texas and New Mexico to Los Angeles. Another agreement was reached with the El Paso Natural Gas Company of Texas for gas delivery to the California-Arizona border. In 1951, PG&E completed

18104-493: The ticker symbol AZP. 1985 earnings reached a new record high at almost US$ 290 million, and by the end of the year the stock price had doubled from its 1984 low. In 1987, AZP Group changed its name to Pinnacle West Capital Corporation, and began trading under the new ticker symbol PNW. The utility continued to operate as its principal subsidiary. By then Pinnacle's long-term debt had grown to almost US$ 2.4 billion. Earnings had declined to US$ 260 million in 1986, but were recovering by

18250-482: The time when there was a growing antinuclear-power movement. David Roe, who was an environmentalist and the Environmental Defense Fund 's West Coast general counsel, "mounted an assault on the longstanding assumption that steady growth in coal- and nuclear-generating capacity was the only solution to the nation's energy needs". He based his arguments on an economic analysis "aimed at showing that

18396-454: The top 200 highest-paid employees received $ 193 million from salaries, bonuses, and stock. Two years later, the figure jumped to $ 1.4 billion. Before its demise, Enron was lauded for its sophisticated financial risk management tools. Risk management was crucial to Enron not only because of its regulatory environment, but also because of its business plan . Enron established long-term fixed commitments which needed to be hedged to prepare for

18542-400: The transaction. Although trading companies such as Goldman Sachs and Merrill Lynch used the conventional "agent model" for reporting revenue (where only the trading or brokerage fee would be reported as revenue), Enron instead elected to report the entire value of each of its trades as revenue. This "merchant model" was considered much more aggressive in the accounting interpretation than

18688-404: The transactions were approved by the Enron board, the asset transfers were not true sales and should have been treated instead as loans. In 1999, Fastow formulated two limited partnerships: LJM Cayman. L.P. (LJM1) and LJM2 Co-Investment L.P. (LJM2), for the purpose of buying Enron's poorly performing stocks and stakes to improve its financial statements. LJM 1 and 2 were created solely to serve as

18834-503: The wildfire victims fund, threatening to take the money from individual wildfire victims if PG&E did not pay, and Cal OES had an overlapping $ 2.3 billion request, but they later settled for $ 1 billion after all wildfire victims are paid. Enron scandal The Enron scandal was an accounting scandal involving Enron Corporation , an American energy company based in Houston , Texas. When news of widespread fraud within

18980-548: Was at the high end of what Enron's Risk Assessment and Control Group advised. But as pressure to outbid all others and win the deal grew more intense with the approaching IPO, the Azurix executives decided to up their bid. They eventually bid $ 438.6 million, which turned out to be about twice as much as the next highest sealed bid. But when Enron executives arrived at the Argentine facilities, they found them in shambles, with all of

19126-524: Was discovered, which required the discontinuation of Enron's prior accounting method for Chewco and JEDI. This disqualification revealed that Enron's reported earnings from 1997 to mid-2001 would need to be reduced by $ 405 million and that the company's indebtedness would increase by $ 628 million. Whitewing was the name of a special purpose entity used as a financing method by Enron. In December 1997, with funding of $ 579 million provided by Enron and $ 500 million by an outside investor, Whitewing Associates L.P.

19272-662: Was dramatically altered by the discovery of massive natural gas fields throughout the American Southwest beginning in 1918. The fuel was cleaner than manufactured gas and less expensive to produce. While natural gas sources were abundant in Southern California, no economical sources were available in Northern California. In 1929, PG&E constructed a 300-mile pipeline from the Kettleman oil field to bring natural gas to San Francisco. The city became

19418-511: Was extraordinary in any industry, including the energy industry, which typically considered growth of 2–3% per year to be respectable. For just the first nine months of 2001, Enron reported $ 138.7 billion in revenues, placing the company at the sixth position on the Fortune Global 500 . Enron also used creative accounting tricks and purposefully misclassified loan transactions as sales close to quarterly reporting deadlines, similar to

19564-532: Was forced to buy electricity out of state from suppliers without long-term contracts. Because PG&E had to buy additional electricity to meet demand, some suppliers took advantage of this requirement and manipulated the market by creating artificial shortages and charged very high electrical rates, as exemplified by the Enron scandal . The CPUC refused to adjust the allowable electric rates. Unable to change rates and sell electricity to consumers for what it cost them on

19710-408: Was formed. Two years later, the entity's arrangement was changed so that it would no longer be consolidated with Enron and be counted on the company's balance sheet. Whitewing was used to purchase Enron assets, including stakes in power plants, pipelines, stocks, and other investments. Between 1999 and 2001, Whitewing bought assets from Enron worth $ 2 billion, using Enron stock as collateral . Although

19856-458: Was hired, Lay developed a staff of executives that – by the use of accounting loopholes, the misuse of mark-to-market accounting , special purpose entities , and poor financial reporting – were able to hide billions of dollars in debt from failed deals and projects. Chief Financial Officer Andrew Fastow and other executives misled Enron's board of directors and audit committee on high-risk accounting practices and pressured Arthur Andersen to ignore

20002-587: Was indicted and convicted, but died before being sentenced. Arthur Andersen LLC was found guilty of illegally destroying documents relevant to the SEC investigation, which voided its license to audit public companies and effectively closed the firm. By the time the ruling was overturned at the Supreme Court , Arthur Andersen had lost the majority of its customers and had ceased operating. Enron employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices. As

20148-420: Was later criticized for its brief meetings that would cover large amounts of material. In one meeting on February 12, 2001, the committee met for an hour and a half. Enron's audit committee did not have the technical knowledge to question the auditors properly on accounting issues related to the company's special purpose entities. The committee was also unable to question the company's management due to pressures on

20294-480: Was offering $ 8.4 billion for fire damages, Cal Fire, and FEMA. If more than 500 homes were completely destroyed by the Kincade Fire , and PG&E was found to be at fault, then the parties agreeing to the settlements may have the option to back out of the agreements. Later PG&E offered a $ 13.5 billion fund to cover claims of the wildfire victims. FEMA originally requested PG&E for $ 3.9 billion from

20440-533: Was opened by Pinnacle West in Flagstaff in 1997. In the wake of the Enron scandal , Pinnacle West lost over $ 13 million dollars. This represents 25% of their expected earnings for that quarter. Prior to 2010, Pinnacle West developed real estate through its Suncor subsidiary. On September 8, 2011, there was a widespread power outage affecting a region spreading west from Yuma, Arizona, to San Diego, California, and affecting parts of Northern Mexico. The outage

20586-437: Was part of a larger effort to reduce net metering . In 2017, this resulted in the complete stoppage of net metering. Pinnacle West plans to build 1200MW of energy storage. This would be nearly all of Arizona's energy storage capacity. Pinnacle West has plans to increase renewable energy production by 50% of its 2023 level by 2025. Pacific Gas and Electric Company The Pacific Gas and Electric Company ( PG&E )

20732-599: Was priced at $ 83.13 and its market capitalization exceeded $ 60 billion, 70 times earnings and six times book value , an indication of the stock market's high expectations about its future prospects. In addition, Enron was rated the most innovative large company in America in Fortune' s Most Admired Companies survey . Enron's complex financial statements were confusing to shareholders and analysts. In addition, its complex business model and unethical practices required that

20878-539: Was still able to "attract large sums of capital to fund a questionable business model, conceal its true performance through a series of accounting and financing maneuvers, and hype its stock to unsustainable levels." Although Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the system contributed to a dysfunctional corporate culture that became obsessed with short-term earnings to maximize bonuses. Employees constantly tried to start deals, often disregarding

21024-534: Was superseded by the Restructuring Support Agreement (RSA) of December 9, 2019 and by the approved bankruptcy reorganization plan, wherein PG&E accepted liability for the Tubbs Fire. Liability for the Kincade Fire that started October 23, 2019 was potentially added, because initially it was unknown whether or not PG&E was at fault for the fire. On July 16, 2020, which was after PG&E exited bankruptcy, Cal Fire reported that

21170-622: Was the largest integrated utility system on the Pacific Coast. The company handled 26 percent of the electric and gas business in California. Its operations spanned 37,000 square miles across 30 counties. The company expanded in the 1920s through strategic consolidation. Important acquisitions during this period included the California Telephone and Light Company, the Western States Gas and Electric Company and

21316-485: Was the result of 23 events that occurred on five power grids in a span of 11 minutes including the APS North Gila Substation. Federal, regional and local officials are investigating what happened and why the outage cascaded the way it did. Most of the areas affected were served by San Diego Gas & Electric , which saw its entire service area lose power. The outage appears to have been caused by

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