Eagle Energy Partners, the independent energy trading shop that is now part of EDF Trading (by way of Lehman Brothers) says that founder Chuck Watson will be leaving the firm effective May 1.
In a release the firm said Watson’s “close association with Eagle will assure his continued interest with its future business endeavours.”
“I would like to thank Chuck for the invaluable support he has given EDF Trading during our acquisition and integration with Eagle Energy and look forward to the possibility of future business opportunities with him,” said John Rittenhouse, Chief Executive of EDF Trading.
Griff Jones, Chief Executive of Eagle Energy added: “Chuck has been a friend, mentor and business partner for a number of years. As he begins the next phase of his career, we at Eagle look forward to being a part of it.”
Watson is the former Chairman and CEO of Dynegy and founder of its predecessor. He left in May 2002 as the company was facing numerous federal investigations and heading toward what many analysts thought would be bankruptcy in the post-Enron meltdown of the energy business.
He penned an editorial for the Chronicle a little while before stepping down from Dynegy titled “An energy trader and proud of it.” You can read it below. He founded Eagle Energy in 2003.
Watson said in the release Thursday his “continued involvement in the industry” would let him continue to watch Eagle grow, so clearly he’s not going too far.
BEYOND THE UPROAR / An energy trader and proud of it
Byline: CHUCK WATSON
Watson is chairman and chief executive officer of Dynegy Inc., here.
WHO in Houston remains unaware of the intense scrutiny that has been focused on energy companies in the past year, with the demise of Enron amidst allegations of shady accounting practices, document shredding and behind-the-scenes manipulation of power markets in California? The entire industry has been transported from relative obscurity to the front page. Nowhere have people felt the impact as much as those of us in Houston.
Lost behind the headlines is the plain truth that the nation’s energy merchants – in Houston and elsewhere – are good companies, staffed by good people who are doing an important job. Without these companies and these people, our economy simply could not function today as efficiently as it does.
Energy merchants such as Dynegy perform three major functions.
First, we generate electricity and buy the fuel to run the plants. In the last two years, energy merchants have built 160,000 megawatts of new generation capacity in the United States, according to the Department of Energy. By our estimates, that’s a savings to utility ratepayers of approximately $65 billion. Since these new power plants are much more fuel-efficient than old plants, we have significantly reduced air-pollution emissions associated with power generation. Energy merchants also are investing in renewable energy sources like wind, hydroelectric and geothermal power plants.
We also manage the transportation of energy – whether natural gas or electricity – from its origin to its ultimate place of use. Most often, the delivery path is not an energy superhighway. It’s more like a maze of city streets with stop signs, construction zones, dead ends, traffic congestion, and different rules in neighboring towns. We know our way around this system as well as the legendary London taxi drivers know their way around their city. We know the best routes to deliver energy, and use them to benefit our customers.
Lastly, energy merchants protect end-use customers from what could otherwise be wildly fluctuating prices for the energy services they want and need. Through financial arrangements known as hedging, we keep energy prices stable and predictable, even in the face of complex and rapidly changing dynamics in production, transmission and consumption of energy. Our management of the financial risks involved in energy procurement allows people to live their lives and businesses to focus on their core missions, rather than having to worry about energy costs.
Our industry has seen phenomenal growth – real growth for most companies, not just an illusion generated by accounting sleight of hand. But some in our industry stretched rules to their outer boundary – and beyond – in the name of higher profits. Most (and I put my own company squarely in this camp) have sought to make a fair profit in a difficult, competitive business environment, while doing everything possible to ensure that we conduct our business honestly, ethically, and effectively. I welcome the scrutiny to which Dynegy and our industry are being subjected. We have an obligation to do our jobs properly, and to make sure we report our actions appropriately. If our industry has sometimes been opaque in its financial reporting, we need to become more transparent.
If we have depended too much on financial leverage and the assumption that growth will continue unabated, we need to reduce our risk profiles and solidify our balance sheets.
At Dynegy, we understand these points well. We commit ourselves to making whatever changes are needed so that the public will trust our industry and our company, whether they deal with us as investors, customers or neighbors.
What lessons should we draw from recent developments?
First, energy merchants like Dynegy fill an important role in America’s economic future. As the nation’s energy needs grow, energy merchants must grow and continue to expand their vast physical assets (be they power plants, pipelines, electric transmission lines or storage facilities) that deliver real services to the public. To grow, energy merchants will need continued access to capital. Emotional overreactions that cut off access to capital for all energy merchants because of the faults of a few will lead inexorably to future energy shortages that will constrain future economic growth.
Second, energy merchants and, indeed, all of Corporate America, will comply with whatever new rules and regulations society requires of us in response to recent events. But we will need a little time to adjust so that the transition will be smooth. Precipitous overreaction could seriously upset the delicate balance of energy supplies and leave consumers stranded. Also, retroactively applying new rules to past situations would clearly be a mistake.
Third, don’t assume that financial complexity is wrong, evil or unnecessary. Our business is extraordinarily intricate, and we must employ unique and sophisticated financial arrangements to fulfill our dual responsibility to deliver energy safely and manage financial risk. Excessive restrictions on the use of financial (hedging) instruments in the energy industry could mean that the lights will go out and houses are cold – an outcome that nobody desires.
Lastly, let’s not make the mistake of assuming that current problems in the industry mean energy deregulation has failed, or that it was a bad idea. Time and again, in industries ranging from telecommunications to airlines, from trucking to finance, we have seen that deregulation brings significant benefits to consumers, including innovation, better service and lower costs. Since competition first was introduced into the electric utility industry in the mid-1980s, electricity prices have been reduced 31 percent, after adjusting for inflation. (By comparison, the price of gasoline is about the same, inflation adjusted, over the same period.)
Regulation of the electric utility industry was proposed more than a century ago – not by consumer advocates, but by the notorious utility monopolist, Samuel Insull. He recognized that regulation would protect competitors from each other and from their own incompetence. Now we know better: Competition is the best way to make sure companies perform in ways that benefit all consumers.