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From Edison to Enron: The Business of Power and What It Means for the Future of Electricity
By Richard Munson


 


Product Description:

The blackout of 2003 illuminated just how dependent America is on electricity. It was not just that some 50 million people in eight states and Ontario were cut off from their televisions, microwaves, ATMs, and email. Without the electrical juice to keep their sockets alive, factory managers were forced to close production lines, city managers shut down water deliveries, grocery store clerks watched their frozen inventory slowly melt away. Economists estimated that the blackout cost Americans $5 billion even as energy analysts were predicting that a similar blackout could happen again. The catastrophe forced us to marvel at the unusual ability of sub-microscopic particles to move like waves inside a wire and cause bulbs to glow. It highlighted the complex requirements for managing the massive generators, transformers, transmission lines, and switch boxes needed to tap and deliver flowing electrons. It encouraged us to recognize the profound impact of electricity on all aspects of commerce and culture. Such events as the blackout, the Enron debacle, and the California "brownouts" also reveal the cracks in a 100-year-old industry structure that have been building ever since Thomas Edison, George Westinghouse, and their contemporaries first managed to harness electricity and make it available to the masses, and tycoons, such as Sam Insull and George Norris, began to concentrate financial control and political influence. From Edison to Enron traces the controversial history of this $210 billion industry--the nation's largest--showcasing the key individuals, technological innovations, corporate machinations, and political battles that have been waged over its domination. Munson maintains that today's technological and regulatory infrastructure, as a function of its history, is a relic that has long outlived its usefulness; he points out that two-thirds of the fuel burned to generate electricity is lost, that Americans pay roughly $100 billion too much each year for heat and power, and that environmentally unfriendly generators are the nation's largest polluters. Meanwhile, innovations in technology and business models are being blocked by entrenched monopolies. Ultimately, Munson argues that current policies and practices, including those favored by the Bush Administration, are preventing entrepreneurs from producing more efficient, healthy, and sustainable power supplies. Moreover, he presents an agenda for business and policy reforms that will stimulate economic development in the United States and around the world.



Summary: Several Factual Errors
Rating: 1

This book contains a number of factual errors.
To site a few:
pg. 57 "Illinois Senator (and future president) Willian McKinley... When Frank Smith declared he would run against McKinley, Insull opened up his pocketbook and provided more than $25,000, a substanital sum in the 1920s." What!?! McKinley was from Ohio, not Illinios. He served in the House and as Ohio's governor. He was never a senator. And he was assassinated in 1898.

pg. 119 "Eron... declared bankruptcy on December 2, 1997" Wrong. Enron declared bankruptcy in 2001.

pg. 108 "providing energy payments from utilities that rose from 5.6 cents per kilowatt in 1984 to 10.1 cents in 1983 and even to 15 cents in 1998" Huh? that doesn't make sense. Did this book have an editor?

There are way too many errors in this book to take it seriously.



Summary: Grand History and Practical Prognostication
Rating: 5

Richard Munson offers a unique and entertaining look at the 20th century by tracing the efforts to capture and capitalize on electricity. His profiles of Thomas Edison, George Westinghouse, Nikola Tesla, Samuel Insull, and others are first rate. He also clearly documents how this unique form of energy has changed our lives and altered our landscapes.

Munson paints a clear-headed critique of our outmoded and inefficient electricity system. He also offers a balanced view of the opportunities for efficiency and innovation.

If you can read but one energy book -- particularly in light of concerns about pollution, climate change, reliable supplies, and economic development -- I strongly recommend "From Edison to Enron."



Summary: A Good Historical Treatment, But A Bit Too Pro-Innovation and Pro-Competition
Rating: 3

Electrification is the single greatest achievement in the 20th century. Electricity revolutionized commerce and transportation and improved both the standard of living and the quality of life for all who had access to it. Economic progress without it would be slow and tortuous. Like water in any society, electricity has become a critical resource (or rather, service) in modern society, and like any other critical resource, it is subject to often intense politics.

Edison set the stage when he perfected the humble light bulb, and Tesla got things moving when he discovered the interesting properties of alternating current and the transformer. Edison also put into play the first combined heat and power plant, for which many today (including the author) feel is the future of electricity. However, these knaves fail to acknowledge that on the one hand, electricity is high-grade energy, one that can be used far from its source of production, while heat is low grade energy which must be put into play immediately where it is produced. Lord Kelvin and Westinghouse, seeing the benefits of alternating current, each played a role in setting the stage for centralized, monopoly electricity production. However, it was Samuel Insull who championed for the formation of the traditional, investor-owned-utility (IOU) that most every ratepayer is familiar with today. A slew of politicians, from Democrat FDR to Republican George Norris, turned electricity into a populist cause, and basically ensured that the CEO of every IOU henceforth would be a rabid Republican.

Some say that the greatest technological achievement of the 20th century belongs to computers, or to antibiotics, but these individuals overlook one important thing. Electricity is the great enabler, as it allows people to free themselves from the whims of natural rhythms, escape lives of tedium and drudgery, and above all, achieve a level of convenience and prosperity unheard of in recorded history.

The key thing here is convenience. Electricity made possible a whole slew of appliances, from the humble stove and refrigerator to the mighty microwave and washing machine, that made life easier for all who access to it. Once it was proven safe and (more or less) reliable, the key thing then was to ensure access to service for all that needed it or wanted it. This was the operating paradigm up until 1970 or so, when things first began to change. Given the state of the technology in that period, transmission and distribution of the electricity presented itself as the key stumbling block, and given the massive investment required to make access available to all, it seemed logical to let one supervised player control all aspects of the service, from generation to transmission and distribution. In return for earning a known return for his investment, this player agreed to strict regulation in exchange for the exclusive right to provide the service to consumers in a given area.

The author seeks to make the case that the technology has progressed to the point where consumers can be their own producers of electricity, and meet their own needs. He neglects to tell the reader that electricity consumers have had this ability for at least four decades now, and the reason that most do not pursue production is because it is more convenient (and cheaper) to let the utility do it for them. Those that need to produce can produce, but most of us do not need to produce what we consume. The author also claims that the traditional IOUs hamper innovation via their monopolistic position and practices. While true to some extent, he neglects to inform the reader of a few things, particularly the fact that most consumers, especially residential ratepayers, do not want innovation; they want the convenience of power at preferably cheap rates.

Because of the populist nature of electricity, for the longest time, business has been in effect subsidizing residential ratepayers via high rates, and only recently has this state of affairs reversed, in part because of greater competition brought about by the rise of the merchant generator and innovative (but not necessarily new) technologies. Nowadays, you essentially have two classes of ratepayer- business and residential. Like most commentators on the subject, the author is openly more interested in the welfare of the business ratepayer (who without a doubt has benefited from de-regulation, seeing prices come down by more than half in some cases), while neglecting the plight of the friendly neighborhood, wage-earning, rent-paying residential ratepaying schmuck (who without a doubt has been the loser in deregulation, seeing her prices actually go up). These two ratepaying classes take access for granted, and nowadays have very different concerns and priorities. The over-riding concern of the residential ratepayer is the same then as now- convenience (about all they know about the service is vaguely who to send the bill to... most months!). The business ratepayer has two concerns- lowering his costs thus increasing his profits, and ensuring a steady, reliable supply of energy to ensure that he can deliver his good or service so as to thus avoid lost business.

Perhaps the author's biggest omission is this: electricity is a commodity that it seems no one, either the business or residential consumer, wants to shoulder the full cost for. This key omission holds considerable horrors for anyone looking to be involved in this industry (especially on the investment side). In sum, the experience with (electric) utilities has shown that competition is indeed good for some, particularly big business consumers, and innovation, though very cool and sounding very nice, takes a back seat to both convenience and cost concerns for business and residential customers alike.



Summary: Insightful
Rating: 5

Electricity is perhaps our most important industry. It certainly is our largest. It also is our least understood. That's where Richard Munson provides such a valuable service. He offers an engaging historical overview -- with first-rate profiles of Thomas Edison, George Westinghouse, Samuel Insull, George Norris, and other industry giants -- and he also provides an insightful review of the current issues and challenges facing the electricity business. This book is a real resource for university history as well as business (and even engineering) classes, and it offers an entertaining read for the general reader interested in the environment and the economy.

I was particularly taken by Munson's comparison of Samuel Insull -- an energy tycoon of the 1920s and 1930s -- and Enron's Kenneth Lay. The author reveals both men's accomplishments and deceits, but he also highlights how each brought change to the industry.

Munson also is effective when he discusses the potential for improvements in the power business. While noting the industry's stagnant efficiency, pollution, and lack of reliability, he argues for removing the regulatory barriers that were developed over the last century to promote and protect monopolies, which have had no incentive to innovate. He describes clearly several innovative technologies and profiles some of the entrepreneurs trying to bring those innovations to the market. Munson is even handed, showing how some utility executives as well as environmental activists are protecting the status quo and blocking efficiency.

The book is well written, effectively integrating information from history, politics, as well as engineering. It is the best business book of the last year.



Summary: Really Good
Rating: 5

As you consider Enron's Kenneth Lay going to trial, "From Edison to Enron" provides the necessary historical context. Unlike any of the other Enron books, Richard Munson's explains where Enron fits within the power business. Munson also provides good portraits of Thomas Edison, George Westinghouse, and Samuel Insull, who has amazing simililarities to Ken Lay, although 70 years ago. This is a really good book.