Enron Ascending

Chapter 8Gas Marketing: 1990–1991

Gerald Bennett understood where the interstate market was going. As head of Houston Pipe Line and related operations, he saw how intrastate pipelines were tailoring gas packages for end users. Bennett was at the drawing board in 1988 with a McKinsey & Company consultant tasked by Ken Lay and Richard Kinder to better commoditize interstate gas in order for Enron to increase volume and improve margins.¹

That collaboration with Jeff Skilling resulted in Gas Bank, described in chapter 5, a way to partition gas supply at known prices for future delivery to help long-lived power plants obtain financing for construction in a PURPA world. With demand outstripping long-term supply, Enron’s effort shifted from traditional Enron Gas Marketing (EGM) activity to a new unit, Enron Finance Corp. (EFC), described by a Harvard study as “a developmental laboratory for the financially linked products and services related to [Gas Bank].”

Skilling, the head of McKinsey’s energy and chemical practice and soon to become one of Enron’s top executives, was unique. Ken Lay was very smart and knew it, but he diplomatically labored to get things done. Tough-guy Rich Kinder was approachable and fair, excepting for those times when he had to make earnings in Enron’s hothouse. John Wing was a nonpareil prima donna yet talented enough to survive and thrive. Jeff Skilling was the smartest of the smartest guys in the room, whose strengths and weaknesses would contribute to Enron’s ...