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According to the LA Times The collapse of the Enron Corporation so far a political legal and investor crisis is now imposing widespread costs on the US economy according to a range of companies energy experts and bankers

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Also other energy companies have suffered losses in the hundreds of millions of dollars because of their relationship to Enron

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Such concerns have hurt the stock prices of big firms such as Tyco International Ltd and General Electric Co as well as less wellknown companies such as franchiser Cendant Corp and Irish drugmaker Elan Corp Others suffering from increased worries about accounting issues include the stocks of telecom giant WorldCom Inc energy producer Reliant Resources Inc power producer Calpine Corp networkequipment maker Enterasys Networks Inc energy services firm Williams Cos and PNC Financial Services Group

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Meanwhile General Electric has long been lauded as among the nations bestrun corporations

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Energy company Williams Cos lost ground after saying it might have to pay as much as 24 billion to cover debt payments for Williams Communications which the parent company spun off last April

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Mr Chairman we have a duty to protect consumers from gouging to protect the environment from pollution and to protect investors from sham accounting that hides huge losses in energy markets

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Because I think that our economy is so far back on its rear end that demand is so low for energy products across the country and the markets were not under the same pressure they were prior to that when we were having hearings a year ago

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And as we look at this whole issue of regulation coming from Oregon which of course is the one utility Portland General Electric in Oregon that Enron owned we were fortunate that frankly our Public Utility Commission was pretty strong in terms of putting some boundaries around what Enron could or could not take out of Portland General Electric

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It is an important step in our exploration of the Enron debacle

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Mr Chairman I know and I share your dedication to removing as appropriate barriers that exist to healthy electricity markets that benefit customers

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But I am sure that you would agree that it is best that we evaluate the causes and consequences of Enrons astonishing fall before we move forward on a electricity bill

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Todays hearing will help advance that understanding but I imagine that it will take more than what we can accomplish here today for us to unravel Enrons business practices and their effects on energy markets

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I would also add that I dont think we ought to allow Enron to derail our longer standing efforts to overcome the significant impediments to workable energy markets that still exist

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Right now the electricity industry and their consumers are stuck in the middle of a transition to competitive markets and there is very little certainty about where those markets are heading

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So I hope that today begins a renewed effort to ensure that the rules that we use to create viable regional electricity markets are both effective and enforceable

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It is an important step in our exploration of the Enron debacle

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Mr Chairman I know and share your dedication to removing barriers that exist to healthy electricity markets that benefit consumers

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But it is best that we evaluate the causes and consequences of Enrons astonishing fall before we can consider moving forward on an electricity bill

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Todays hearing will help to advance our understanding but I imagine that it will take a good deal more time for us to unravel Enrons business practices and their effects on the energy markets

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But I will also add that we should not allow Enron to derail our longerstanding efforts to overcome the significant impediments to workable energy markets that still exist

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Right now the electricity industry and their consumers are stuck in the middle of a transition to competitive markets and there is very little certainty about where those markets are heading

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So I hope that today begins a renewed effort to ensure that the rules that we use to create viable regional electricity markets are both effective and enforceable

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It seems to me that one lesson that is emerging from our investigation of Enrons collapse is that it is primarily the product of an arrogant corporate leadership choosing to flaunt securities rules and exploit loopholes in standard accounting practices not the inevitable product of electricity restructuring

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I expect that we will hear testimony from todays panel about the possibility that Enron manipulated prices in the energy futures markets in which it was heavily involved

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The marktomarket accounting standard allowed Enron to take the expected value of its longterm energy contracts and place that expected income on its current income statements

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Part of that work will be trying to make energy trading markets more transparent and ensuring that energy consumers continue to receive protection from the manipulation of prices on a product that is a necessity of modern life

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But I am especially interested in this panels view on the continued exemption of overthecounter energy derivatives trading from CFTC oversight

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I think that I would like to begin by saying that it is my most sincere wish that we take from this unfortunate event a list of improvements that we make in our energy markets so that we might not see a catastrophe like this and of this proportion again

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Evidence has come to light that energy markets may have been manipulated especially during the Western energy crisis of 2000

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And it will also provide further testament to the instability and the malleable nature of energy markets which all of you are very aware of

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Restating earnings has a very negative effect on the credit worthiness of a company and we have to be realistic when assessing the future of the energy markets if the major players dont have access to the capital enabling them to proceed with generation progeny

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We are not here to ensure the future of major corporations but it is our duty I think to ensure the future of our citizens and in closing Mr Chairman as a member from the oil patch let me urge my colleagues as did Mr Sawyer who is exactly right in his assessments not to tar all other energy companies with an Enron brush

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There are many many wellrun energy companies that are conservatively managed and treat their creditors their employees their shareholders and those that expect to retire with a pension treat them fairly

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Oil and natural gas and yes electricity markets are evolving but lets be careful that we dont act hastily and undo the progress that these markets have made and as problems are uncovered lets correct them but dont throw out the premise that competitive markets are innately

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I want to thank you Mr Chairman for holding todays hearings on the effects of the Enron bankruptcy on energy markets

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Still many including Enron were unconvinced playing a tune of free and efficient markets Enron was the pied piper of stand alone PUHCA repeal and while many in government were not swayed by its song there were many more in positions of power and influence who listened and marched blindly forward following the songs of Enron

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Supporters of PUHCA repeal argue that the serious reconsideration of how Congress moves toward electricity restructuring is unnecessary even in light of the Enron collapse

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Time and time again they point out that despite the political and regulatory shock waves sent out by the collapse of Enron energy markets barely flinched in response

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That said I am convinced and encouraged by FERCs willingness to launch an investigation into whether Enron used its long term energy contracts to manipulate energy markets in the West

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A company that controlled 20 percent of the energy contracts disappeared overnight and what happened

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Illinois the last two winters ago we experienced a shock of what happens when natural gas prices go skyrocketing

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And in the whole guise of the energy debate issue I look forward and I think it is timely Mr Chairman and I will just yield back my time

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Mr Chairman thank you for convening this hearing to examine the effect of the Enron bankruptcy on the functioning of energy markets

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What is significantly less clear at this point is the effect of Enrons practices and subsequent bankruptcy had on the functioning of energy markets

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I recognize that many of the witnesses that we will hear from today assert that there has been no noticeable disruption to the functioning of energy markets in terms of price fluctuation generation or trading

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If further investigations by FERC and others confirm this initial impression what does this tell us about the state and structure of our energy markets given the collapse of Enron a major energy trader whose transactions comprised an estimated 15 to 25 percent of wholesale energy trades seemingly has had such a negligible effect

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Furthermore I am particularly interested in looking at how these initial impressions might be skewed within the context of a falling energy price market

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Obviously we need to examine this dynamic further before reaching conclusions about the entire wholesale electricity market

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Competition if structured and implemented appropriately has brought benefits to electricity consumers

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You have worked extremely hard on the issue of electricity restructuring and I had hoped to move the bill out of the subcommittee before you left so you could participate in that markup

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It is a great committee and we deal with a number of really significant issues for our country and I really believe that in the near future dealing with the electricity restructuring that we need so desperately in this country is a very important issue in terms of establishing a really sound national energy policy

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The markets worked when it punished a bad actor in the form of Enron and the markets have continued to work when you take a major player like Enron out of the market and you see the electricity

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And particularly when it comes to the Tennessee Valley Authority which was a particularly interesting subject for the both of us in terms of their structure inside the electricity marketplace

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Some have rushed to say Mr Chairman after the Enron scandal broke that this has nothing to do with electricity on natural gas markets

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They say this is merely a matter of accounting and securities fraud and that Enron could have just as easily been trading widgets as natural gas or electricity

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But I simply do not know how anyone can say right now that Enrons demise has absolutely no implications for the energy markets

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Sherron Watkins memo mentioned markettomarket valuation problems with Enron Energy Services and other investments

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The CFTCs authority to regulate Enrons energy trading was gutted by the Futures Trading Practices Act of 1992

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And finally the FERC had the authority to regulate many of Enrons trading activities including setting accounting standards and regulating its electricity rates but choose not to use these authorities until the California meltdown began to force action

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So just what was it doing in the natural gas and electricity markets

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Some of the prepared testimony we have received today suggests that Enrons trading activities may have contributed to increased volatility in the natural gas and electricity markets

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This testimony suggests that Enrons online trading activities had a negative impact on electricity markets and significantly increased volatility in those markets

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I have long been supportive of moving toward competitive energy markets but I have repeatedly emphasized that I favor demonopolization and not deregulation

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The tragedy of what has happened in our energy markets is that the old regulatory structure of regulated monopolies is being torn down

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And I would encourage you to consider after his testimony that we take a trip and visit his subsidiary Aquila which is one of the power marketing firms that I went on the trading floor to better understand the task before us as we take a look at electric utilities and restructuring and the future of power in this country

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Roy Blunt a Representative in Congress from the State of Missouri Mr Chairman thank you for holding this hearing today in an effort to shed light on the Enron bankruptcy and the functioning of energy markets

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I would like to introduce to the committee a witness from Missouri Mr Richard Green Chairman of UtiliCorp United Inc Mr Green is here to testify on behalf of the Electric Power Supply Association

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It is the responsibility of this committee to oversee many of the energy accounting consumer protection and pension issues raised by Enron

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Mr Greens testimony will address the energy markets reaction to the Enron failure the use of derivatives and suggest actions to make the markets more transparent

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George Radanovich a Representative in Congress from the State of California Mr Chairman thank you for holding this hearing today on the effects of Enrons bankruptcy on the functioning of energy markets

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The collapse of Enron Corp has caused the nations electricity markets to be surrounded by many scandalous rumors

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It is our job today to find out if there is any solid evidence to prove that Enrons collapse was related to rules or the absence of rules governing trading in energy contracts

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We must also thoroughly investigate allegations that Enron may have manipulated electricity and gas markets in order to build investor confidence

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With respect to consumer confidence I believe people can take comfort knowing our nations energy markets have remained solid throughout the Enron debacle

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Given the size of Enrons activity within the gas and electricity markets the absence of a massive disruption in energy markets reiterates the stability of the marketplace

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Supplies of gas and electricity have continued to be delivered to consumers throughout the collapse of Enron

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The bottom line is that the energy delivery system has remained reliable

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Since there is no proof that the growing trend toward competition caused or contributed to Enrons collapse we must continue to support fair and effective wholesale competition in electricity and gas markets

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Bill Luther a Representative in Congress from the State of Minnesota Thank you Mr Chairman for holding todays hearing on the effects of the Enron bankruptcy on national energy markets

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At this point most conclude that the Enron bankruptcy did not result in mass wholesale energy price disruptions

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However there are many aspects to the Enron debacle as it relates to the overall state of energy transmission selling and generation businesses that need to be examined

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Especially troubling are reports that energy prices in Western markets dropped due to Enrons absence in the region

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It must also be noted that Enron with the exception of the Oregon utility Portland General Electric did not own generation facilities

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These items must be further examined before any conclusions can be reached and specifically I urge this committee to address the troubling reports of reduced energy prices in Western markets following the bankruptcy

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Furthermore I dont believe we can make the argument that simply because energy markets did not collapse in the wake of the Enron debacle this is a sign that we need to pass aggressive federal restructuring legislation

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Therefore I would urge this committee to proceed extremely cautiously with proposals to repeal the Public Utility Holding Company Act and eliminate federal merger review authority that have the potential to decrease even further federal oversight of energy sales to our nations energy consumers

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However while the solutions may be broadly applied I dont believe that it is very reasonable to conclude that the problems with Enron are universally applied to other energy companies around the country

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But I think we should be very very careful and not rush to judgment or rush to indict all of the wholesale energy companies as being possibly the next Enron

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You know it hasnt been very long agoit was right at a yearthat we had a lengthy debate in this committee and on full committee about the electricity crisis in the West and the challenges that we must overcome to ensure a reliable and affordable supply of electricity

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Should the economy begin to recover many of the problems that we faced last year will emerge again unless we continue to expand the wholesale energy markets

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I also believe that if we do not overcome some of these crises in confidence that currently exist with regards to companies engaged in wholesale power in the power markets that consumers will be faced once again with high prices and brownouts in the next couple of years

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Mr Chairman my second observation is that I support the recommendations of my colleague from Chackbay Louisiana when he recently said at this subcommittee that we should be very careful in proceeding with a markup of electricity legislation until we really have a very good handle on the conclusion and investigations and rendering a judgment about what we can learn from what has happened over the past few months

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The policy issues surrounding electricity restructuring are very complicated and they are complicated enough that I dont believe that it would be constructive to allow a legitimate debate on legislation become confused with Enrons collapse

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The prepared statement follows David J Tudor President and Chief Executive Officer ACES Power Marketing LLC My name is David J Tudor and I am the President and Chief Executive Officer of ACES Power Marketing LLC APM

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APM is an energy risk management company headquartered in Indianapolis Indiana

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APM is owned by seven Generation and Transmission Electric Cooperatives GTs which operate in five National Electric Reliability Council NERC Regions

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Because these GTs are themselves controlled by electric distribution cooperatives the ultimate owners of APM are more than 24 million consumers located in 13 states

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APM also provides services to twelve other cooperative GT clients whose focus is on risk management related to the delivery of energy to ultimate consumers

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My entire professional career has been spent in the energy industry

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I first became involved in energy trading with the deregulation of natural gas during the early 1980s and I have remained involved with energy trading and risk management since that time