$40–$45B cost to California
Three Enron traders who manipulated California's energy market pleaded guilty, costing the state an estimated $40–$45 billion in unnecessary electricity costs.
Where this was said
The California Energy Crisis: Manufactured Blackouts and 'Burn Baby Burn'
At 22:21 · chapter starts 18:15
This is the chapter where the story turns viscerally disturbing. California had deregulated its electricity market through a patchwork of laws with exploitable loopholes, and Enron's traders drove a truck through them. The scheme — nicknamed 'Ricochet' — involved physically moving electricity out of California, waiting for the state to need it, and selling it back at massively inflated prices. Traders also called power plants directly to order them offline to spike demand. The results were catastrophic: California went from 1 blackout in the 6 months before Enron's manipulation to dozens in the 6 months after. Recordings played in the documentary capture traders laughing at the misery of elderly people unable to afford air conditioning, and cheering 'Burn, baby, burn' at wildfires that damaged pipelines. Three traders — Jeffrey Richter, John Forney, and Timothy Belden — eventually pleaded guilty, acknowledging they had cost California between $40 and $45 billion. Josh and Chuck also note the darker political dimension: Ken Lay secretly met with Arnold Schwarzenegger at the Peninsula Hotel during this period, and the resulting public anger over the energy crisis fueled the recall of Governor Gray Davis.
Enron's Political Coup: Replacing Gray Davis with Schwarzenegger
While strangling California with fake blackouts, Ken Lay hosted a private meeting at the Peninsula Hotel in LA with Arnold Schwarzenegger — long before Schwarzenegger had declared any political ambitions. The resulting public fury over blackouts fueled a recall election that removed Governor Gray Davis and installed a governor far more friendly to Enron.
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Fortune magazine named Enron America's Most Innovative Company for 6 consecutive years (1996–2001), even as its finances were fraudulent.
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