The Federal Energy Regulatory Commission (FERC) said Enron would be able to sell power, but at much less competitive prices, virtually shutting down the company’s ability to compete. It can resume regular business once it emerges from bankruptcy proceedings and gets FERC approval.

FERC chairman Pat Wood said it was the first time the commission had imposed its so-called “death penalty” on power sellers. “We must send a clear signal that competitive markets must work in the interest of customers and the public interest,” he said.

Enron, which has still been doing business since it went bankrupt, must file its Chapter 11 reorganisation plan this summer. Wood said the commission would also uphold the validity of long-term contracts in California and other Western states that were signed at the height of the energy crisis in 2000 and 2001. California and several Western utilities had argued that the long-term prices were linked to the manipulation by Enron and other companies.