The purpose of this hearing is to receive testimony about the impact of the ENRON bankruptcy on energy markets. The problems of accounting misrepresentations, lost pension funds and potential tax abuses are the subject of other hearings. Irrespective of the various financial issues with respect to ENRON's corporate structure, the company played a significant part in the nation's energy infrastructure and markets. In addition to its energy trading operations, ENRON owned and operated several major interstate pipelines, including one that traverses my home state of New Mexico, and the largest electric utility in the state of Oregon. The trading operations have been suspended, but the pipelines and the utility continue to operate and provide reliable service. Before its failure, ENRONOnline was the largest physical marketplace in the United States for energy products. I understand that ENRON also traded unregulated financial instruments, called "swaps," "derivatives" or over-the-counter ("OTC") instruments. By late 2000, the role of ENRON and other energy traders in the highly volatile gas and electricity markets in California had come under increasing public and Congressional scrutiny. In 2001, the Committee held four investigative hearings to evaluate the natural gas and electricity markets in California and the implications for other states in the West. From the first hearing, on January 31, the need for transparent markets, both with respect to pricing and capacity, was identified as one of the most pressing requirements for well functioning electricity markets. ENRON's trading activities were different from those of a regulated exchange. ENRONOnline did not match buyers with sellers; it contracted with each separately so that ENRON was on the other side of every deal. ENRON provided little or no market "transparency"- that is parties were not given information as to the price and volumes offered to others. Market transparency is essential to efficient and competitive energy markets - both in the short-term and over the longer-term. Over the longer-term, the market must signal the need for additional capacity and new fuel supplies to ensure reliable and affordable energy services. Whether adequate capacity was available or not in the West last year should have been apparent in the market before the crisis appeared. As we understand the actual events of this past fall, when ENRON's financial situation became known, many parties who had been trading with ENRON shifted to other physical markets. NYMEX - the New York Mercantile Exchange - also served as a major source of stability. In the end, it is my impression ENRON's demise had little impact on short-term energy markets. The proposed energy legislation, S. 1766, pending before the Senate ensures transparency and real-time reporting of trades. The FERC has increased its oversight of individual companies and has created a new market monitoring function which we hope to hear about today. The states, too, have a critical role in ensuring adequate supply planning and procurement. We look forward to a hearing the testimony of the witnesses then engaging in a thorough discussion of these issues. # # #