II.

Enron’s Origins

Enron began business in 1986 as a result of the merger of two natural gas companies intent on creating the first nationwide natural gas pipeline. At that time, energy production was a government-sanctioned monopoly. The government regulated the construction of power plants, the rates to be charged for power, and the maximum profits energy companies could earn. That all changed after the federal government deregulated the natural gas industry in the late 1980s and the electricity industry in the 1990s.

Under the leadership of its president, Kenneth Lay, Enron decided to take advantage of the newly deregulated markets for energy. In addition to delivering natural gas, Enron became a market middleman for energy, bringing together buyers and sellers of energy. Enron dominated the trading of energy contracts and financial instruments known as derivatives.