In a windowless room on the thirty-second floor of a Houston office tower, a small trading desk has spent the past two years buying long-dated power-capacity contracts from utilities across the American Southeast. The trader-in-charge, a former public-utility-commission staffer named [redacted for original publication], describes the strategy in the ordinary language of arbitrage: the utilities, he says, do not know what their forward capacity is worth, and until they do, the desk will keep buying.

The desk is Enron's, and the strategy is, so far, working. Whether it is working because the arbitrage is real or because the utilities are systematically mispricing their own generation is a question this reporter spent seven months trying to answer. What follows is what he found, and what he did not.

This is an archival excerpt. The full piece runs to roughly eleven thousand words in the November 1997 print edition. — The Editors, 2026.