Energy Market Oversight Act

Mr. President, I rise to support the amendment offered by Senators Wyden, Bingaman, Sununu, and Enzi to strike the section of the energy bill providing Federal subsidies for the construction of new nuclear plants.

Title IV of the energy bill includes loans, loan guarantees, and other forms of financial assistance to subsidize the construction of new nuclear powerplants.

In the past 50 years, California has built 5 commercial nuclear powerplants and one experimental reactor. Today, just two of these nuclear powerplants are still operating in the State. The plants at San Onofre and Diablo Canyon are running at diminished capacity but still provide 4,400 megawatts of power in California--close to a fifth of California's energy supply.

Impressive as these numbers may be in terms of the power-generating capacity of nuclear energy, they tell only part of the story of California's experiment with nuclear power. Of six nuclear powerplants built in California, four have been decommissioned due to high operating costs and excessive risk.

In the late 1950s, an experimental reactor at the Rocketdyne site in Ventura County was shut down after a severe meltdown.

In 1967, the Vallecitos plant closed its doors after 20 years of operating because its owner, General Electric, was unable to obtain accident insurance due to the high risk of operating a nuclear power plant.

In 1976, the Plant at Humboldt Bay shut its doors after 13 years of operation as a result of the discovery of a fault line near the plant that would have required millions of dollars in seismic retrofits.

And in 1989, the Rancho Seco plant near Sacramento was closed by public referendum after 14 years of operation plagued by mismanagement that resulted in cost overruns.

Nuclear power is expensive and risky. Yet I believe that if private investors are not willing to put their own money on the line to support new nuclear plants, then the Federal Government should not put taxpayers' money at risk either. However, under the nuclear subsidy provision in this energy bill, taxpayers would be required to subsidize up to 50 percent of construction costs of new nuclear plants--costs that CRS estimates to be in the range of $14-16 billion. CRS also estimates the risk of default on these loan guarantees to be ``very high--well above 50 percent.''

I strongly believe it is not in the public interest for our Nation to subsidize

costly nuclear plants. Instead we should devote more resources to the development of renewable energy.

I strongly believe we should be doing more to encourage the development of renewable power such as, wind, geothermal, and biomass, instead of providing subsidies to an industry that has not built a new powerplant since the 1970s.

Unfortunately, this Energy bill currently has an over-reliance on promoting traditional energy resources, such as nuclear power.

The U.S. nuclear power industry, while currently generating about 20 percent of the Nation's electricity, faces an uncertain long-term future. No nuclear plants have been ordered since 1978 and more than 100 reactors have been canceled, including all those ordered after 1973. No units are currently under construction.

The nuclear power industry's troubles include high nuclear powerplant construction costs, public concern about nuclear safety and waste disposal, and regulatory compliance costs.

Controversies over safety have dogged nuclear power throughout its development, particularly following the March 1979 Three Mile Island accident in Pennsylvania and the April 1986 Chernobyl disaster in the former Soviet Union. These events shaped much of our opinions about nuclear power.

Safety continues to raise concerns today. In a recent example, it was discovered in March 2002 that leaking boric acid had eaten a large cavity in the top of the reactor vessel in Ohio's Davis-Besse nuclear plant. The corrosion left only the vessel's quarter-inch-thick stainless steel inner liner to prevent a potentially catastrophic release of reactor cooling water.

Furthermore, nuclear powerplants have long been recognized as potential targets of terrorist attacks, and I remain skeptical that there are enough safeguards in place to defend against potential terrorist attacks on our nuclear plants.

Concern about nuclear safety and waste disposal makes Californians apprehensive about nuclear power. California has shifted away from nuclear power over the years and activists in the communities surrounding the Diablo Canyon and San Onofre plants continue to express concerns about the safety of the remaining reactors in California.

The construction of new nuclear reactors would also exacerbate the nuclear waste problem. Since the volume of nuclear waste in the United States is expected to exceed capacity at the controversial Yucca Mountain repository by 2010, any new plants will create even more waste storage problems.

I voted with Senator Bingaman to strike these nuclear subsidies in committee and today I will vote with Senator Wyden to do the same.

Mr. President, I inquire as to what the order is.

Mr. President, I send an amendment to the desk on behalf of Senators Fitzgerald, Harkin, Lugar, Cantwell, Wyden, Boxer, and Leahy.

Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. President, I heard the comments of the distinguished ranking member that they had not had an opportunity to see the amendment. Of course, we will allow that opportunity to take place. This amendment closes a major loophole which allows energy trades to take place electronically, in private, with no transparency, no record, no audit trail, or any oversight to guard against fraud and manipulation.

This amendment will close a loophole created in 2000 when Congress passed the Commodity Futures Modernization Act which exempted energy and metals trading from regulatory oversight and excluded them completely if the trade was done electronically.

This amendment was presented by me before. Senator Fitzgerald spoke, Senator Wyden spoke, Senator Cantwell spoke. We got just about a majority. Senator Gramm of Texas argued against it. It did go back to the Agriculture Committee. The Agriculture Committee held hearings and both Senators Harkin and Lugar participated in making changes, which I think has made this a better amendment.

We were hoping for a markup, but the Congress ended without that markup having taken place. Now the Energy bill is before us, and it seems to me this is the time to present this.

This bill has had floor discussion. It has had a committee hearing. It has been modified by the chairman and the ranking member of the Agriculture Committee and is now before us.

Today, if there is no delivery of physical energy, there is no price transparency. By that I mean, if I buy natural gas from you and you deliver it to me, the Federal Energy Regulatory Commission has the authority to ensure that the transaction is transparent--meaning it is available to look at--and that it is reasonably priced. However, many energy transactions no longer result in delivery. In other words, if I sell to you and you sell to Senator Craig who sells to Senator Domenici who sells to somebody else who then delivers it, none of these trades is covered if done electronically. That means there is no record; there is no audit trail; there are no capital requirements; there is no transparency; there is no antifraud or antimanipulation oversight today. It is a huge loophole permitted in the Commodity Futures Modernization Act of 2000.

This lack of transparency and oversight applies to energy and metals trading. It does not apply if you are selling wheat or pork bellies or any other tangible commodity. Why do we include metals? Fraud and manipulation have not been confined to the energy trading sector. For example, in 1996 U.S. consumers were overcharged $2.5 billion from Sumitomo's manipulation of the copper markets.

Furthermore, in 1999 the President's Working Group on Financial Markets recommended excluding only financial derivatives, not energy and metals derivatives, from the CFTC's jurisdiction.

After intense lobbying by, of all people, Enron, a change was made to the Commodity Futures Modernization Act to exempt energy and metals trading from CFTC oversight in 2000. It did not take long for EnronOnline and others in the energy sector to take advantage of this new freedom by trading energy derivatives absent any transparency and regulatory oversight. In other words, a whole new niche was found where you could avoid any scrutiny and do this trading.

After the 2000 legislation was enacted, EnronOnline began to trade energy derivatives bilaterally, without being subject to proper regulatory oversight. It should not surprise anyone that without the transparency, prices soared and games were played.

Three years ago this summer, California's energy market began to spiral out of control. In May of 2000, families and businesses in San Diego saw their energy bills soar. The western energy crisis forced every family and business in California and many of the other States to pay more for energy. The crisis forced the State of California into a severe budget shortfall. It forced the State's largest utility into bankruptcy and nearly bankrupted the second largest publicly owned utility.

Now, 3 years and $45 billion in costs later, we have learned how the energy markets in California were gamed and abused. Originally everyone around here said: Oh, it's the problem of the 1996 deregulation law. I will admit that law is a faulty law. However, you cannot have the price of energy 1 year being $7 billion throughout the whole State and the next year it is $28 billion and say that is supply and demand. You cannot have a 400 percent increase just based on supply and demand. Clearly, you do not have a 400 percent increase in demand in a 1-year period of time. Nor did that happen in a 1-year period of time.

In March of this year, the Federal Energy Regulatory Commission issued a report titled ``Price Manipulation In Western Markets,'' which confirmed that there was widespread and pervasive fraud and manipulation during the western energy crisis. According to the FERC report, the abuse in our energy markets was pervasive and unlawful. Yet this Energy bill does not prevent another energy crisis from occurring nor does it curb illegal Enron-type manipulation.

Just last week, the FBI arrested former Enron trader John M. Forney, saying he was a key architect of Enron's well-known trading schemes blamed for worsening California's energy crisis in 2000 and 2001.

Mr. Forney was charged with a single count each of wire fraud and conspiracy. He is the third Enron trader accused by the Justice Department of criminal manipulation of western energy markets but the first who did not reach a plea agreement, leading to his arrest last Tuesday. According to the criminal complaint, Forney is allegedly the architect of the Enron trading strategies with the now infamous names of Ricochet, Death Star, Get Shorty, Fat Boy, and others.

These Enron strategies were first revealed on Monday, May 6, 2002, when the Federal Energy Regulatory Commission posted a series of documents on their Web site that revealed Enron manipulated the western energy market by engaging in these suspect trading strategies.

Under one such trading strategy called Death Star, which was also called Forney's Perpetual Loop, for John Forney, Enron would ``get paid for moving energy to relieve congestion without actually moving energy or relieving any congestion,'' according to an internal memo. It was a fraud.

It was a fraud. A was a trading strategy which was clearly and simply fraudulent and manipulative.

In another strategy detailed in these memos, Enron would ``create the appearance of congestion through the deliberate overstatement of loads'' to drive up prices.

The above-mentioned strategies reveal an intentional and coordinated attempt to manipulate the Western energy market for profit.

This is an important piece of the puzzle that has been uncovered. Some former Enron traders helped fill in the blanks.

CBS News reported in May 2002 that former Enron traders admitted the company was directly responsible for local blackouts in California. Yet, interestingly enough, no one has followed up on this report.

According to CBS News reporter Jason Leopold, the traders said Enron's former president Jeff Skilling pushed them to trade aggressively in California and told them, ``If you can't do that, then you need to find a job at another company or go trade pork bellies.''

The CBS article mentions that Enron traders played a disturbing role in blackouts that hit California. The report mentions specific manipulative behavior by Enron on June 14 and 15 in the summer of 2000 when traders said they intentionally clogged Path 26--a key transmission path connecting Northern and Central California.

Here is what one trader said about the event:

What we did was overbook the line we had the rights on

during a shortage or in a heat wave. We did this in June 2000

when the Bay Area was going through a heat wave and the ISO

couldn't send power to the North. The ISO has to pay Enron to

free up the line in order to send power to San Francisco to

keep the lights on. But by the time they agreed to pay us,

rolling blackouts had already hit California and the price

for electricity went through the roof.

In other words, they waited for the weather. They calculatedly overbooked the line to clog the lines so that power could not be transmitted to the north. Therefore, what power was transmitted went sky high in terms of price. Second, a blackout resulted.

California lost billions. Yet according to the traders, Enron made millions of dollars by employing this strategy alone.

On top of all this, traders disclosed that Enron's manipulative trading strategies helped force California to sign expensive long-term contracts. It is no surprise that Enron and others were able to profit so handsomely during the crisis.

Now, after 3 years, the FBI and the Justice Department are beginning to

bring these traders to justice. In February, Jeffrey Richter, the former head of Enron's Short-Term California energy trading desk, pled guilty to conspiracy to commit fraud as part of Enron's well known schemes to manipulate Western energy markets.

Richter's plea followed that of head Enron trader Tim Belden in the fall of 2002. Belden admitted that he schemed to defraud California during the Western energy crisis and also plead guilty to conspiracy to commit wire fraud.

Nobody can believe this didn't happen, because it did. Two people have pled guilty, and a third was just arrested for doing just what we hope to prevent happening with this amendment.

The plea by Jeff Richter came on the heels of FERC's release of transcripts from Reliant Energy in January of this year that reveal how their traders intentionally withheld power from the California market in an attempt to increase prices. This is one of the most egregious examples of manipulation and it is clear and convincing evidence of coordinated schemes to defraud consumers.

Let me read just one part of the transcript to demonstrate the greed behind the market abuse by Reliant and its traders.

On June 20, 2000 two Reliant employees had the following conversation that reveals the company withheld power from the California market to drive prices up:

Reliant Operations Manager 1. I don't necessarily foresee

those units being run the remainder of this week. In fact you

will probably see, in fact I know, tomorrow we have all the

units at Coolwater off.

The Coolwater plant is a 526 Megawatt plant.

Reliant Plant Operator 2. Really?

Reliant Operations Manager 1. Potentially. Even number

four. More due to some market manipulation attempts on our

part. And so, on number four it probably wouldn't last long.

It would probably be back on the next day, if not the day

after that. Trying to uh . . .

Reliant Plant Operator 2. Trying to shorten supply, uh?

That way the price on demand goes up.

Reliant Operations Manager 1. Well, we'll see.

Reliant Plant Operator 2. I can understand. That's cool.

Reliant Operations Manager 1. ``We've got some term

positions that, you know, that would benefit.

That is what existed. That is the kind of thing that went on, and it has to stop. It has to be made illegal and it has to have heavy penalties.

Let's turn to some other examples.

On January 27, 2003, Michelle Marie Valencia, a 32-year-old former senior energy trader for Dynegy, was arrested on charges that she reported fictitious natural gas transactions to an industry publication.

On December 5, 2002, Todd Geiger, a former vice president on the Canadian natural gas trading desk for El Paso Merchant Energy, was charged with wire fraud and filing a false report after allegedly telling a trade publication about the prices for 48 natural gas trades that he never made in an effort to boost prices and company profit.

In other words, he is telling an energy trade publication about 48 gas trades that were never made. It was bogus information which was given out. Why? Simply to boost the market.

These indictments are just a few examples of how energy firms reported inaccurate prices to trade publications to drive energy prices higher.

Industry publications claimed they could not be fooled by false prices because deviant prices are rejected, but this claim was predicated on the fact that everyone was reporting honestly which we now know they weren't doing.

CMS Energy, Williams, American Electric Power Company, and Dynegy have each acknowledged that its employees gave inaccurate price data to industry participants. On December 19 Dynegy agreed to pay a $5 million fine for its actions.

Let us turn to other types of fraudulent trades that many energy firms have admitted to.

Dynegy, Duke Energy, El Paso, Reliant Resources Inc., CMS Energy Corp., and Williams Cos. all admitted engaging in false ``round-trip'' or ``wash trades.''

What is a ``round-trip'' trade, one might ask?

``Round-trip'' trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever actually changes hands, but when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company.

How widespread are ``round-trip'' trades? Well, the Congressional Research Service looked at trading patterns in the energy sector over the last few years and reported, ``this pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place.''

Yet since most of the energy trading market is unregulated by the government, we have only a slim idea of the illusions being perpetrated in the energy sector.

Consider the following confessions from energy firms about ``round- trip'' trades:

Reliant admitted 10 percent of its trading revenues came from ``round-trip'' trades. The announcement forced the company's President and head of wholesale trading to both step down.

These are bogus traders.

CMS Energy announced 80 percent of its trades in 2001 were ``round- trip'' trades.

Eighty percent of all of the trading this company did was bogus.

Remember, these trades are sham deals where nothing was exchanged, yet the company booked revenues from the trades. This is exactly what our legislation aims to stop.

Duke Energy disclosed that $1.1 billion worth of trades were ``round- trip'' since 1999. Roughly two-thirds of these were done on the InterContinental Exchange owned by banks that oppose this legislation.

Let me repeat that. Duke Energy disclosed that $1.1 billion worth of trades were bogus ``round-trip'' trades since 1991. And two-thirds of those were done on the InterContinental Exchange, which is an electronic exchange. That means that thousands of subscribers would have seen false price signals.

A lawyer for J.P. Morgan Chase admitted the bank engineered a series of ``round-trip'' trades with Enron. Dynegy and Williams have also admitted to this ``round-trip'' trading. And although those trades mostly occurred with electricity, there is evidence to suggest that ``round-trip'' trades were made in natural gas and even broadband.

By exchanging the same amount of a commodity at the same price, these companies have not engaged in meaningful transactions but in deceptive practices to fool investors and drive up energy prices for consumers. It is, therefore, imperative that the Department of Justice, the Federal Energy Regulatory Commission, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and every other oversight agency conduct an aggressive and vigorous investigation into all of the energy companies that may have committed fraud and abuse in the western energy market.

Beyond that, I believe strongly that Congress must reexamine what tools the Government needs to keep a better watch over these volatile markets that, frankly, are little understood. In the absence of vigilant Government oversight of the energy sector, firms have the incentive to create the appearance of a mature liquid and well functioning market, but it is unclear whether such a market exists. And I don't believe, for a minute, that such a market exists.

The ``round-trip'' trades, the Enron memos, the FERC report on ``Price Manipulation in the Western Markets'' raise questions about the energy markets of our country. To this end, I believe it is critical for the Senate to approve this amendment, which would provide more regulatory oversight of online energy trading.

When the Senate Energy Committee marked up the Energy bill in April, there was a consensus to include some provisions of the Energy Market Oversight Act, S. 509, I introduced earlier this year. The Energy bill, S. 14, does include higher criminal and civil penalties for violations of the Federal Power Act and the Natural Gas Act.

Under section 1173 of the bill now on the floor, fines will be $1 million instead of the current $5,000 for a one-time violation of the statutes. I thank

the chairman of the committee for this. Jail time will be raised to 5 years instead of the current 2 years. And I thank the chairman of the committee for this. Fines will be $50,000 per violation per day instead of the current $500 per violation per day for violations of the statutes. And I thank the chairman of the committee for this.

Furthermore, section 1174 of the Energy bill will eliminate the unnecessary 60-day waiting period for FERC to grant refunds. I thank both Senator Domenici and Senator Bingaman, the chairman and the ranking member of the Energy Committee, for their efforts to include provisions of S. 509, the Energy Market Oversight Act, in this Energy bill.

Now let me turn to the specifics of the amendment.

I am offering this amendment--and I am hopeful that Senator Fitzgerald will come to the floor; I know he intends to speak on this amendment, and I hope he does--I am offering this amendment to subject electronic exchanges, such as EnronOnline, the InterContinental Exchange, and any other electronic exchange, to the same oversight, reporting, and capital requirements of other commodity exchanges, such as the Chicago Mercantile Exchange, the New York Mercantile Exchange, and the Chicago Board of Trade.

Why should there be one secret trading venue where fraud and manipulation can take place abbondanza? I do not think there should be. I do not think it is in the interests of our citizens to have that happen. And the western energy market should be a major case in point.

I am very pleased that Senators Fitzgerald, Harkin, Lugar, Cantwell, Wyden, Leahy, Durbin, and Boxer have again signed on to this amendment. I was very proud of the work we did in the 107th Congress, and I hope we can adopt this amendment on this Energy bill because without this type of legislation, there is insufficient authority to investigate and prevent fraud and price manipulation since parties making the trades are not required to keep a record. That is the problem.

The CFTC will say: Oh, we are already doing that. But in the law there is no requirement to keep a record. There is a specific exemption in the law. So I do not see how the CFTC has the adequate tools to do what they need to do without this amendment because this amendment closes that loophole which exists just for energy and just for metals and, because of its existence, has allowed EnronOnline and a number of other exchanges--Dynegy had one; InterContinental Exchange had one as well--to do all these things in secret with no audit trail, no record, no capital requirements. Nobody has a responsibility to set any capital requirements. There is no audit trail and no antifraud and antimanipulation oversight. Clear and simple, it is a travesty.

Right now, energy transactions are regulated by FERC. When there is actual delivery, that is taken care of. If Senator Reid sells me energy and I deliver it, that is covered by FERC. But interim trades are not covered by anybody. They are on their own in secret.

Many energy transactions no longer result in delivery, so this giant loophole where there is no government oversight--when these transactions are done on electronic exchanges--is major. I think it is mega. I think a number of companies have jumped into this void simply because they thought they could make a quick buck by gaming the system, and in fact they have done just that.

As I mentioned, in 2000 Congress passed the Commodity Futures Modernization Act, which exempted energy and metals from regulatory oversight, and excluded it completely if the trade was done electronically. So today, as long as there is no delivery, there is no price transparency, there is no record, there is no audit trail, there is no capital requirement, there is no antifraud, antimanipulation oversight.

This lack of transparency and oversight only applies to energy. It does not apply if you are selling wheat or pork bellies or any other tangible commodity. And financial derivatives are not included in this amendment.

It did not take long for Enron and others to take advantage of this new freedom by trading derivatives absent any regulatory oversight. Thus, after the 2000 legislation was enacted, EnronOnline, as I said, began to trade energy derivatives bilaterally without being subject to regulatory oversight. It should not be a surprise to anyone that prices soared.

In March, Warren Buffett published a warning in Fortune magazine saying:

Derivatives are financial weapons of mass destruction.

In his annual warning letter to shareholders about what worries him about the financial markets, Warren Buffett called derivatives and the trading activities that go with them ``time bombs.''

In the letter, Mr. Buffett states:

In recent years some huge-scale frauds and near-frauds have

been facilitated by derivatives trades. In the energy and

electric utility sectors, for example, companies used

derivatives and trading activities to report great

``earnings''--until the roof fell in when they actually

tried to convert the derivatives-related receivables on

their balance sheets into cash.

We clearly saw this with Enron. Was Enron and its energy derivative trading arm, Enron Online, the sole reason California and the West had an energy crisis? No. Was it a contributing factor to the crisis? I believe it was.

Unfortunately, because of the energy exemptions in the 2000 Commodities Futures Modernization Act, which took away the CFTC's authority to investigate, we may never know for sure. In the 107th Congress, this legislation was debated during consideration of the Senate Energy bill, and it was a subject of a hearing in the Senate Agriculture Committee. As I said, time ran out before it could be marked up and passed. Since that time, both Senators Lugar and Harkin have made significant improvements to the legislation.

So today I am pleased to note that the following companies and organizations are supporting this legislation: the National Rural Electric Cooperative Association; the Derivatives Study Center; the American Public Gas Association; the American Public Power Association; the California Municipal Utilities Association; Southern California Public Power Authority; the Transmission Access Policy Study Group; U.S. Public Interest Research Group; the Consumers Union; the Consumers Federation of America; Calpine; Southern California Edison; Pacific Gas and Electric; and the FERC Chairman Pat Wood.

Here is a quick explanation of what this amendment does. It applies antifraud and antimanipulation authority to all exempt commodity transactions. An exempt commodity is a commodity which is not financial and not agricultural and mainly includes energy and metals. The bill sets up two classes of swaps for those made between sophisticated persons, basically institutions and wealthy individuals, that are not entered into on a trading facility, for example, an exchange. Antifraud and antimanipulation provisions apply and wash trades are prohibited. The following regulations would apply to all swaps made on an electronic trading facility and a ``dealer market'' which includes dealers who buy and sell swaps in exempt commodities and the entity on which the swap takes place. Antifraud and antimanipulation provisions and the prohibition of wash trades apply.

If the entity on which the swap takes place serves a pricing or price discovery function, increased notice, reporting, bookkeeping, and other transparency requirements are provided. The requirement to maintain sufficient capital is commensurate with the risk associated with the swap. We don't determine that in this legislation. The Commodities Futures Trading Commission would determine that. In other words, they would determine what kind of net capital requirement there will be, and that would be commensurate with the degree of risk involved in the transaction.

Except for the antifraud and antimanipulation provisions, the CFTC has the discretion to tailor the above requirements to fit the character and financial risk involved with the swap or entity. While the CFTC could require daily public disclosure of trading data, such as opening and closing prices, similar to the requirement of futures exchanges, it could not require real-time publication of proprietary trading information or prohibit an entity from selling their data. So proprietary information is protected.

The CFTC may allow entities to meet certain self-regulatory responsibilities as provided in a list of core principles. If an entity chooses to become a self regulator, these core principles would obligate the entity to monitor trading to prevent fraud and manipulation, as well as assure that its other regulatory obligations are met.

The penalties for manipulation are greatly increased. The civil monetary penalty for manipulation is increased from $100,000 to $1 million. Wash trades are subject to the monetary civil penalty for each violation and imprisonment of up to 10 years.

The FERC is required to improve communications with other Federal regulatory agencies. A shortcoming in the main antifraud provision of the CEA is also corrected by allowing CFTC enforcement of fraud to apply to instances of either defrauding a person for oneself or on behalf of others.

This would also require the FERC and the CFTC to meet quarterly and discuss how energy derivative markets are functioning and affecting energy deliveries. So they are required to look at this, to monitor it closely, and to sit quarterly and see how these markets are, in fact, functioning.

This would grant the FERC the authority to use monetary penalties on companies that don't comply with requests for information. This is essentially the same authority the SEC has today.

It would make it easier for FERC to hire the necessary outside help they need, including accountants, lawyers, and investigators for investigative purposes. And it would eliminate the requirement that FERC receive approval from the Office of Management and Budget before launching an investigation or price discovery of electricity or natural gas markets involving more than 10 companies.

This amendment is not going to do anything to change what happened in California and the West. But it does provide the necessary authority for the CFTC and the FERC which will help protect against another energy crisis. No one is immune from this kind of thing. The gaming, the fraud, the manipulation has been extraordinary.

Just the chutzpah to do Death Star, Get Shorty, Ricochet, just the chutzpah to do these kinds of trades in secret, it is a bunco operation. It is nothing else but. And who is buncoed? The consumer is buncoed. That is why consumer organizations feel strongly about this.

When regulatory agencies have the will but not the authority to regulate, Congress must step in and ensure that our regulators have the necessary tools. Unfortunately, sometimes an agency has neither. In this case, I am glad to have the support of FERC, and I hope the CFTC will reconsider its position and support this amendment.

I note that Senator Fitzgerald is on the floor. I would like to yield to him. But before I do, may I just say one quick thing.

Pardon me?

I am not?

I thank the Chair for the clarification.

I wish to make one comment about this amendment. This amendment has been in the Agriculture Committee. It has had a hearing. It has been reviewed by both staffs, Republican and Democratic. The Democratic chairman of the committee, Senator Harkin, worked on this. The ranking member at the time, Senator Lugar, worked on this. They have both concurred. They are supporting this legislation. The staffs have reviewed it.

We believe it is bona fide, that it is solid, and that it will stand the test of time.

I thank the Chair. I yield the floor.

Mr. President, I ask unanimous consent the order for the quorum call be rescinded.

Madam President, I rise to thank the Senator from Illinois. We have worked on this now through two Congresses. It was very clear to me that he has a great deal of knowledge in this area. His advice, his support, his efforts have been very helpful. I think he has very clearly stated the facts of this legislation.

There are those who, for purposes I do not understand, want to make this legislation out to be much more than it is, some heavy requirement of Government. Really, all we are saying is, if you are going to trade online, energy and metals and broadband, those trades are subject to recordkeeping, to an audit trail, and to antifraud and antimanipulation oversight.

That is the same as any other finite commodity. Anywhere else does this same thing. But this loophole, at the request, as the Senator from Illinois said, of Enron--by the House, and then in a conference in 2000 they dropped the requirement for coverage from the Commodity Futures Modernization Act. Therefore, this loophole was created into which these companies jumped and began to set up these online trading exchanges.

I couldn't believe my eyes when I saw that one company announced that 80 percent of the trades they did in 2001 were round trip or wash trades.

Senator Fitzgerald just explained that very clearly, what a round trip or a wash trade is.

I certainly will.

Yes, it was CMS Energy. The year was 2001. They announced that.

Additionally, Duke Energy disclosed that $1.1 billion worth of trades were round trip, wash trades, since 1999; roughly two-thirds of these were done on the InterContinental Exchange, which means that thousands of subscribers would have seen these false price signals.

I could finish this, if you like? A class action suit accused the El Paso Corporation of engaging in dozens of round trip energy wash trades that artificially bolstered its revenues and trading volumes over the last 2 years.

CMS Energy Corp. has admitted conducting wash energy trades that artificially inflated its revenue by more than $4.4 billion.

So this is important. I have a hard time, I think, as you do, that if I sell something to you and you just sell it back to me and we both boost sales and yet nothing is really sold, that that is a legitimate way of doing business.

That is absolutely correct. That is what we are trying to do. For the life of me, I don't understand why people are against it.

The only thing I can figure is they want to do it. They want the unabashed ability to conduct the bogus trades. That would be the only reason they would want this little, dark, hidden place through electronic trading because there is no oversight for fraud or manipulation. There is no record kept. There is no audit trail.

That is right.

That is exactly right. That is why we suspect it. It is hard to prove.

Again, there have been three arrests of Enron traders who devised these schemes. Actually two were plea-bargained. There was a recent arrest last week of this fellow who apparently set these trading schemes up for Enron.

To have a transparent marketplace, I think, gives confidence to the 50 percent of the people who are small investors who would want to participate in the market. You have to show there is oversight. You have to show it is up and up, that it is a legitimate bona fide marketplace with trades that mean something.

In my heart of hearts, I believe that a lot of this kind of activity is what amounted to a 400-percent increase in the cost of power in 1 year in California alone.

I was not at the hearing. I do not recall that. But I think whomever that was, they are certainly correct because that would give confidence to their company and to people to invest in that company which is on the up and up, which is regulated and which has transparency.

I think particularly now after what we know has transpired over the past that this is one of the reasons why our economy has had problems in that people have lost confidence. They have seen these companies go down.

The Senator mentioned some of the big companies that have gone down that have done just this kind of thing. At some point, Peter has to pay Paul. If they don't have the capital to handle it, there is a problem.

The Senator is asking me to hypothesize. I sure wouldn't do it. I can only assume that some sophisticated trader has worked out some scheme and was utilizing it in this venue and knew that he or she was safe because there was no way to pin it on them. There were no records kept.

That is correct.

The Senator is absolutely correct. When we had this vote in the last Congress, if I recall correctly, we got 48 votes. It wasn't really crystal clear what the excesses were at that time. Now we have documentation of the excesses. We have literally billions of dollars of fraudulent trades, wash trades, round-trip trades, whatever you call them, but fraudulent trades. So we know. We also know that Mr. Fortney was arrested and two others have plead guilty to creating these schemes. To continue to allow that kind of thing to exist would be a real dereliction of this Congress.

CMS Energy admitted to conducting wash energy trades that artificially inflated its revenue by $4.4 billion.

Right. May I ask the Senator a question? Some, I understand, may come to the floor and want a study. The study has already been done, and it is the ``Final Report On Price Manipulation in Western Energy Markets, Fact-Finding Investigation of Potential Manipulation of Electric and Natural Gas Prices.'' It was prepared by the staff of the Federal Energy Regulatory Commission. It was put out in March of this year.

I would like to read one section of it to the Senator and see if he is aware of this. It reads:

Recommend that Congress consider giving direct authority to

a Federal agency to ensure that electronic trading platforms

for wholesale sales of electric energy and natural gas in

interstate commerce are monitored and provide market

information that is necessary for price discovery in

competitive energy markets.

That is correct. This is the report. It is a final report. It was done in March 2003, so it has been circulated for a few months.

Additionally, our legislation has the support of the chairman of the Federal Energy Regulatory Commission. We have kept in touch with him so he is aware of what is in the report, and, of course, the former chairman of the Agriculture Committee, Senator Harkin, and former ranking member of the Agriculture Committee, Senator Lugar.

Madam President, I would also like to point out another study that has been done in a CRS report for Congress, and that was dated January 28 of this year, pointing out that this bill was presented in the last Congress and probably would be presented in this Congress. One of the points it makes is that if over-the-counter derivatives dealers were required to keep and make available for inspection records of all trades and to disclose information about trading volume and prices, abuses like the ones we have been talking about would be easier to detect and, thus, presumably less likely to occur.

That is really the purpose of this: not to allow sort of a secret niche in the trading arena where people could go to hide and trade, but to bring the sunshine into that niche and to provide--and it is very conservative--regulation of what they must do.

I know my friend and senior Senator from Nevada has proposed an amendment. Regrettably, I have to vote against the amendment. This bill had been worked out with Senator Harkin

and Senator Lugar. My understanding is they believe we should close the loophole entirely, not leave one area sort of in the dark, so to speak.

I am troubled by the amendment because our reading of the amendment indicates that it effectively exempts metals entirely without any oversight or regulation by the CFTC, even less than under current law. In good conscience, I cannot do that.

So I think we made the arguments, Madam President. And with what has happened--and now that we know the extent of the fraud that has taken place online--not to close that loophole, I think, would be a terrible blot on this Congress.

So I am hopeful we will have a positive vote.

I thank the Chair for your indulgence and yield the floor.

Madam President, I rise in support of the Efficient Energy through Certified Technologies Act which I have cosponsored along with Senator Olympia Snowe of Maine.

The EFFECT Act will provide tax incentives to encourage homeowners and businesses to improve the energy efficiency of their buildings and equipment. This legislation will stimulate the economy, cut energy bills, reduce energy usage, and reduce pollution.

This bill was originally introduced in the 107th Congress to address the Western energy crisis which, as we all know, created exorbitantly high prices for power and rolling blackouts. This legislation incorporates improvements based on last year's Senate energy tax bill.

While conditions in the West have improved because there are more plants coming online and families and businesses have reduced their energy usage, it is important to take steps to continue to increase our energy efficiency and reduce energy consumption.

Simply put, there are only two things one can do when there is not enough power to go around: increase supply or decrease demand.

Without a doubt, the quickest way to address future demand and supply imbalances is to provide incentives to increase energy efficiency to reduce demand.

This bill creates economic incentives for Americans to increase energy efficiency by establishing the following tax deductions and tax credits for commercial and residential properties using specific energy efficient technologies:

A tax deduction of $2.25 per square foot for newly constructed or remodeled commercial buildings, including schools and other public buildings as well as rental housing, that achieve a 50-percent reduction in total annual energy costs, compared to existing national standards.

A $2,000 tax credit to builders of new homes that use 50 percent less energy than a national model standard.

A performance-based tax credit of as much as $6,000 for installing solar technology.

A tax credit of as much as $300 if businesses install a super- efficient, new electric heat pump, a new central air-conditioner, or a new gas or electric water heater.

A tax credit of as much as $500 if homeowners, tenants, or landlords retrofit their homes to achieve a 30 percent or 50 percent reduction in annual energy costs.

The benefits of increasing energy efficiency are immense.

First, increasing energy efficiency will cut heating, cooling, and electricity costs. Homeowners and businesses spend over $250 billion each year on heat, air-conditioning, and related energy costs for their businesses and homes. If we can reduce energy costs by increasing energy efficiency, money will be freed to fuel the economy in other areas and create new jobs. Furthermore, increasing energy efficiency will reduce the impact of future energy price spikes that harm families and businesses. And the incentives will cause businesses to invest in producing more efficient equipment and services beginning immediately after the bill is enacted.

Second, increasing energy efficiency will reduce air pollution. Energy generation to heat, cool, and light our homes and offices produces 35 percent of the air pollution emitted nationwide. If we increase efficiency, then less energy will be needed to power our buildings, and consequently, we will be able to reduce emissions from powerplants.

Third, increasing energy efficiency will help maintain the reliability of our Nation's electricity supply. Since most of our peak electricity demand comes from heating, cooling, or lighting needs, increasing energy efficiency will lower the probability of blackouts or brownouts.

In fact, with this legislation in place, peak electricity demand in the summer would be reduced by tens of thousands of negawatts nationwide after a decade--or the equivalent output produced by hundreds of large powerplants.

This could result in over 10,000 MW of savings over the summer just in our State and much more on the Western grid that California shares with neighboring States.

Meanwhile, this legislation will also create a market for firms to develop more energy-efficient products, such as air-conditioners, heat pumps, lighting equipment, windows, insulation, water heaters, and solar panels.

Just think how conditions could have improved in California during the Western energy crisis if we had been able to reduce our energy consumption instead of purchasing power at exorbitant rates from out- of-State suppliers.

According to the Department of Energy, California is already one of the most energy-efficient States in the Nation--ranking fourth in overall energy efficiency and second in electricity efficiency.

Nevertheless, Californians responded to the crisis and further increased their energy efficiency. This legislation will take energy efficiency to the next level and create the opportunity for all families and businesses nationwide to make energy efficient improvements.

Instead of waiting for the next energy emergency to occur, we should take steps now to reduce energy consumption across the board.

The bill introduced in the 107th Congress had the support of California Governor Gray Davis, the California Energy Commission, the Sacramento Municipal Utility District, the Natural Resources Defense Council, Union of Concerned Scientists, the California Building Industry Association, most California utilities and many other organizations and businesses. We expect similar widespread support for the bill we are reintroducing today.

This bill is an important step to help reduce demand. It provides financial incentives to offset some of the costs of building new energy-efficient buildings and homes, and improving existing structures to make them more energy efficient.

I urge my colleagues to support this important legislation.

Madam President, yesterday the State of California submitted a filing to the Federal Energy Regulatory Commission which provides a wholesale indictment of energy companies and shows how a number of energy firms engaged in deceptive trading practices to drive up prices in the Western Energy Market. I have called on FERC to make this evidence public

and I want to reiterate my request again.

I am also introducing a bill with Senators Fitzgerald, Harkin, Lugar, Cantwell, Wyden, and Leahy to close a loophole which allows energy trades to take place electronically, in private, with no transparency, record, audit trail or any oversight to guard against fraud and manipulation.

But before I reintroduce this bill, I want to reiterate the important revelations that have been uncovered in the past year and detail what we know about yesterday's filing at FERC.

Last week I came to the floor to update the Senate on recent evidence of fraud and manipulation in the energy sector. Today I want to pick up where I left off and introduce the Energy Market Oversight Act.

Mr. President, I draw my colleagues' attention to a filing made at FERC. This ``Public Version'' is a 27-page summary of the filing with confidential information removed, but it provides a detailed overview of the fraud and manipulation carried out by energy companies during the Western energy crisis.

In addition to testimony by expert witnesses, 348 exhibits, transcripts of depositions, tapes of trader telephone conversations, emails, and other data, the California parties submitted a 161-page brief to FERC. The document I have inserted into the Record includes the Table of Contents, the Introduction and Overview, and the Conclusion of this 161-page document. To be clear, it is part, but not all of the brief filed by the State of California.

Mr. President, the filing submitted by the State of California yesterday shows that there was an extensive and coordinated attempt by energy companies to engage in the following schemes to drive up prices in the Western Energy Market:

1. Withholding of Power--driving up prices by creating

false shortages;

2. Bidding to Exercise Market Power--suppliers bid higher

after the California ISO declared emergencies, knowing the

State would need power and be willing to pay any price to get

it;

3. Scheduling of Bogus Load, aka ``Fat Boy'' or ``Inc-

ing''--suppliers submitted false load schedules to increase

prices;

4. Export-Import Games, aka ``Ricochet or ``Megawatt

Laundering''--suppliers exported power out of California and

imported it back into the State in an attempt to sell power

at inflated prices;

5. Congestion Games, aka ``Death Star''--suppliers created

false congestion and were then paid for relieving congestion

without moving any power;

6. Double-Selling--suppliers sold reserves, but then failed

to keep those reserves available for the ISO;

7. Selling of Non-Existent Ancillary Services, aka ``Get

Shorty''--suppliers sold resources that were either already

committed to other sales or incapable of being provided;

8. Sharing of Non-Public Generation Outage Information--the

largest suppliers in California shared information from a

company called Industrial Information Resources that provided

sellers detailed, non-public information on daily plant

outages;

9. Collusion Among Sellers--sellers were jointly

implementing or facilitating Enron-type trading strategies;

10. Manipulation of the Nitrous Oxide (NOX)

Emission Market--sellers manipulated the market for

NOX emissions in the South Coast Air Quality

Management District through a series of wash trades that

created the appearance of a dramatic price increase that may

have been fabricated. For example, Dynegy, together with AES

and others, entered into a series of trades of NOx

credits in July and August of 2000 by which Dynegy would sell

a large quality of credits and then simultaneously buy back a

smaller quantity of credits at a higher per credit price.

We can assume that the thousands of pages filed by the California parties at FERC detail these examples of market abuse. At this point we cannot know all of the instances because the specifics remain confidential, but we have plenty to go on.

Yesterday I wrote another letter to FERC Chairman Pat Wood asking the Commission to lift its ``Protective Order'' to make this information public so that families and businesses harmed during the Western Energy Crisis can know the extent of fraud and manipulation that occurred.

I believe the filing yesterday presents a key decision for FERC. Clearly the Commission cannot ignore this mountain of new evidence submitted--especially since it comes at a time when other disclosures have been made to show pervasive fraud and manipulation in the Western Energy Market.

Last month Jeffrey Richter, the former head of Enron's Short-Term California energy trading desk, pled guilty to conspiracy to commit fraud as part of Enron's well known schemes to manipulate Western energy markets. Richter's plea follows that of head Enron trader Tim Belden in the fall of 2002. Belden admitted that he schemed to defraud California during the Western energy crisis and also plead guilty to conspiracy to commit wire fraud.

The Enron plea came on the heels of FERC's release of transcripts from Reliant Energy that reveal how their traders intentionally withheld power from the California market in an attempt to increase prices. This is one of the most egregious examples of manipulation and it is clear and convincing evidence of coordinated schemes to defraud consumers.

Let me read just one part of the transcript to demonstrate the greed behind the market abuse by Reliant and its traders.

On June 20, 2000 two Reliant employees had the following conversation that reveals the company withheld power from the California market to drive prices up:

Reliant Operations Manager 1: ``I don't necessarily foresee

those units being run the remainder of this week. In fact you

will probably see, in fact I know, tomorrow we have all the

units at Coolwater off.'' (The Coolwater plant is a 526

Megawatt plant.)

Reliant Plant Operator 2: ``Really?''

Reliant Operations Manager 1: ``Potentially. Even number

four. More due to some market manipulation attempts on our

part. And so, on number four it probably wouldn't last long.

It would probably be back on the next day, if not the day

after that. Trying to uh . . .''

Reliant Plant Operator 2: ``Trying to shorten supply, uh?

That way the price on demand goes up.''

Reliant Operations Manager 1: ``Well, we'll see.''

Reliant Plant Operator 2: ``I can understand. That's

cool.''

Reliant Operations Manager 1: ``We've got some term

positions that, you know, that would benefit.''

Six months after this incident, as the Senate Energy Committee was attempting to get to the bottom of why energy prices were soaring in the West, the President and CEO of Reliant testified before Congress that the State of California ``has focused on an inaccurate perception of market manipulation.''

Reliant's President and CEO went on to say, ``We are proud of our contributions to keep generation running to try to meet the demand for power in California. Reliant Energy's plant and technical staffs have worked hard to maximize the performance of our generation.''

These transcripts prove otherwise and reveal the truth about market manipulation in the energy sector.

Despite this clear and convincing evidence of fraud, on January 31 of this year, the Federal Energy Regulatory Commission chose to only give Reliant a slap on the wrist for this behavior. The company paid only $13.8 million to sweep this criminal behavior under the rug and settle with FERC.

Let me turn to some other recent examples that demonstrate how other energy companies manipulated the Western Energy Market as Reliant did. On December 11th, FERC finally released audio tapes that show how traders at Williams conspired with AES Energy plant operators to keep power offline and drive prices up.

The tapes depict how on April 27, 2000, Williams outage coordinator Rhonda Morgan encouraged an AES operator at the company's Alamitos plant to extend a plant outage because the California grid operator was paying ``a premium'' for power at the time. The Williams employee stated, ``that's one reason it wouldn't hurt Williams' feelings if the outage ran long.''

Later that day, Eric Pendergraft, a high-ranking AES employee called to confirm with Ms. Morgan that Williams wanted the plant to stay offline by saying, ``you guys were saying that it might not be such a bad thing if it took us a little while longer to do our work?'' ``I don't want to do something underhanded,'' Ms. Morgan responded, ``but if there is work you can continue to do . . .'' At this point Mr. Pendergraft interrupted to cut off their suspicious conversation, saying, ``I understand. You don't have to talk anymore.''

Clearly, this is evidence of a calculated intent to withhold power to raise prices. I find it unconscionable.

Let's turn to some other examples.

On January 27, 2003, Michelle Marie Valencia, a 32-year-old former senior energy trader for Dynegy was arrested on charges that she reported fictitious natural gas transactions to an industry publication.

On December 5, 2002, Todd Geiger, a former vice president on the Canadian natural gas trading desk for El Paso Merchant Energy, was charged with wire fraud and filing a false report after allegedly telling a trade publication about the prices for 48 natural gas trades that he never made in an effort to boost prices and company profit.

These indictments are just the latest examples of how energy firms reported inaccurate prices to trade publications to drive energy prices higher.

Industry publications claimed they could not be fooled by false prices because deviant prices are rejected, but this claim was predicated on the fact that everyone was reporting honestly--which we now know they weren't doing.

CMS Energy, Williams, American Electric Power Company, and Dynegy have each acknowledged that its employees gave inaccurate price data to industry participants. On December 19th Dynegy agreed to pay a $5 million fine for its actions.

In September an Administrative Law Judge at FERC issued a landmark ruling concluding that El Paso Corporation withheld natural gas from California and recommended penalty proceedings against the company. Since the El Paso Pipeline carries most of the natural gas to Southern California, this ruling has tremendous implications. The FERC Commissioners are expected to take up this case for a final judgement soon.

These have been the latest revelations in a series of energy disclosure bombshells that began on Monday, May 6th when the Federal Energy Regulatory Commission posted a series of documents on their website that revealed Enron manipulated the Western Energy Market by engaging in a number of suspect trading strategies.

These memos revealed for the first time how Enron used schemes called ``Death Star,'' ``Get Shorty,'' ``Fat Boy,'' and ``Ricochet'' to fleece families and businesses in the West.

The filing made yesterday to FERC shows how other companies did engage in these Enron-type trading strategies. The brief submitted by the State of California and others states that suppliers ``were jointly implementing or facilitating Enron-type trading strategies.''

Let us turn to other types of fraudulent trades that many energy firms have admitted to.

Dynegy, Duke Energy, El Paso, Reliant Resources Inc., CMS Energy Corp., and Williams Cos. all admitted engaging in false ``round-trip `` or ``wash trades.''

What is a ``round-trip'' trade, one might ask?

``Round-trip'' trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever actually changes hands, but when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company.

How widespread are ``round-trip'' trades? Well, the Congressional Research Service looked at trading patterns in the energy sector over the last few years and reported, ``this pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place.''

Yet, since most of the energy trading market is unregulated by the government, we have only a slim idea of the illusions being perpetrated in the energy sector.

Consider the following recent confessions from energy firms about ``round-trip'' trades:

Reliant admitted 10 percent of its trading revenues came

from ``round-trip'' trades. The announcement forced the

company's President and head of wholesale trading to both

step down.

CMS Energy announced 80 percent of its trades in 2001 were

``round-trip'' trades.

Remember, these trades are sham deals where nothing was exchanged, yet the company booked revenues from the trades.

Duke Energy disclosed that 1.1 billion dollars-worth of

trades were ``round-trip'' since 1999--roughly two-thirds of

these were done on InterContinental Exchange, which means

that thousands of subscribes would have seen these false

price signals.

A lawyer for J.P. Morgan Chase admitted the bank engineered

a series of ``round-trip'' trades with Enron.

Dynegy and Williams have also admitted to this round-trip

trading.

And although these trades mostly occurred with electricity,

there is evidence to suggest that ``round-trip'' trades were

made in natural gas and even broadband.

By exchanging the same amount of a commodity at the same price, I believe these companies have not engaged in meaningful transactions, but deceptive practices to fool investors and possibly drive energy prices up for consumers.

It is therefore imperative that the Department of Justice, FERC, the SEC, the Commodities Futures Trading Commission and every other oversight agency conduct an aggressive and vigorous investigation into all of the energy companies who participated in Western Energy Market.

Beyond that I believe Congress must re-examine what tools the government needs to keep a better watch over these volatile markets that are little understood. In the absence of vigilant government oversight of the energy sector, firms have the incentive to create the appearance of a mature, liquid, and well-functioning market, but it is unclear whether such a market exists.

The ``round-trip'' trades, the Enron memos, and the filing at FERC raise questions about illusions in the energy market.

To this end, I believe it is critical for the Senate to act soon on the legislation I offered last April to regulate online energy trading.

I am re-introducing this legislation to subject electronic exchanges like Enron On-Line to the same oversight, reporting and capital requirements as other commodity exchanges like the Chicago Mercantile Exchange, the New York Mercantile Exchange and the Chicago Board of Trade.

I am pleased Senator Fitzgerald, Senator Harkin, Senator Lugar, Senator Cantwell, Senator Wyden, and Senator Leahy have again signed on to this legislation. I am proud of the work we did in the 107th Congress and I hope we can complete action on this bill soon.

Without this type of legislation, there is insufficient authority to investigate and prevent fraud and price manipulation since parties making the trade are not required to keep a record.

Right now, energy transactions are regulated by the Federal Energy Regulatory Commission (FERC) when there is actual delivery.

For example, if I buy natural gas from you, and you deliver that natural gas to me, FERC has the authority to ensure that this transaction is transparent and reasonably priced.

However, many energy transactions no longer result in delivery. A giant loophole has opened where there is no government oversight when these transactions are done on internet exchanges.

In 2000, Congress passed the Commodity Futures Modernization Act in 2000 which exempted energy and metals trading from regulatory oversight and excluded it completely if the trade was done electronically.

So today, as long as there is no delivery, there is no price transparency. Again, this lack of transparency and oversight only applies to energy. It does not apply if you are selling wheat or pork bellies or any other tangible commodity.

And it did not take long for Enron Online, and others in the energy sector, to take advantage of this new freedom by trading energy derivatives absent any regulatory oversight.

Thus, after the 2000 legislation was enacted, Enron OnLine began to trade energy derivatives bilaterally without being subject to proper regulatory oversight. It should not surprise anyone that without the transparency, prices soared.

Just yesterday Warren Buffett published a warning in Fortune Magazine saying that ``Derivatives are financial weapons of mass destruction.'' In his annual warning letter to shareholders about what worries him about the financial markets, Warren Buffett called derivatives and the trading activities that go with them ``time bombs.''

In the letter, Warren Buffett states, ``In recent years some huge- scale frauds and near-frauds have been facilitated by derivatives trades. In the energy and electric utility sectors, for example, companies used derivatives and

trading activities to report great `earnings'--until the roof fell in when they actually tried to convert the derivatives-related receivables on their balance sheets into cash.''

We clearly saw this with Enron.

Was Enron and its energy derivative trading arm, Enron-On-Line the sole reason California and the West had an energy crisis? No.

Was it a contributing factor to the crisis? I certainly believe that it was. Unfortunately, because of the energy exemptions in the 2000 CFMA, which took away the CFTC's authority to investigate, we may never know for sure.

In the 107th Congress, this legislation was debated during consideration of the Senate Energy Bill and it was the subject of a hearing in the Agriculture Committee, but time ran out before the legislation could be marked up and passed.

Since that time, Senators Lugar and Harkin have made significant improvements to the legislation and we have added stronger penalties for market abuse and wrongdoing.

Today I am pleased to note that the following companies and organizations are supporting this legislation:

The National Rural Electric Cooperative Association,

The Derivatives Study Center,

The American Public Gas Association,

The American Public Power Association,

The California Municipal Utilities Association,

The Southern California Public Power Authority,

The Transmission Access Policy Study Group,

The U.S. Public Interest Research Group,

The Consumers Union,

The Consumers Federation of America,

Calpine,

Southern California Edison,

Pacific Gas and Electric, and

FERC Chairman Pat Wood.

I ask unanimous consent that the letters of support from these organizations and companies be printed in the Record.

Mr. President, here is an explanation of what this bill does: It applies anti-fraud and anti-manipulation authority to all exempt commodity transactions--an exempt commodity is a commodity which is not financial and not agricultural and mainly includes energy and metals.

The bill sets up two classes of swaps. For those made between ``sophisticated persons,'' basically institutions and wealthy individuals, that are not entered into on a ``trading facility''--for example, an exchange--anti-fraud and anti-manipulation provisions apply and wash trades are prohibited.

The following regulations would apply to all swaps made on an ``electronic trading facility'' and a ``dealer market'', which includes dealers who buy and sell swaps in exempt commodities, and the entity on which the swap takes place: anti-fraud and anti-manipulation provisions and the prohibition of wash trades apply; if the entity on which the swap takes place serves a pricing or price discovery function, increased notice, reporting, bookkeeping, and other transparency requirements; and the requirement to maintain sufficient capital commensurate with the risk associated with the swap;

Except for the anti-fraud and anti-manipulation provisions, the CFTC has the discretion to tailor the above requirements to fit the character and financial risk involved with the swap or entity. While the CFTC could require daily public disclosure of trading data like open and closing prices, similar to the requirements of futures exchanges, it could not require real-time publication of proprietary trading information or prohibit an entity from selling their data.

The CFTC may allow entities to meet certain self-regulatory responsibilities- as provided in a list of ``core principles.'' If an entity chose to become a

self-regulator, these core principles would obligate the entity to monitor trading to prevent fraud and manipulation as well as assure that its other regulatory obligations are met.

The penalties for manipulation are greatly increased. The civil monetary penalty for manipulation is increased from $100,000 to $1 million. Wash trades are subject to the monetary civil penalty for each violation, and imprisonment up to 10 years.

The FERC is required to improve communications with other Federal regulatory agencies. A shortcoming in the main anti-fraud provision of the CEA is also corrected by allowing CFTC enforcement of fraud to apply to instances of either defrauding a person for oneself or on behalf of others.

It requires the FERC and the CFTC to meet quarterly and discuss how energy derivative markets are functioning and affecting energy deliveries.

It grants the FERC the authority to use monetary penalties on companies that don't comply with requests for information. It is essentially the same authority that the SEC has.

It makes it easier for FERC to hire the necessary outside help they need including accountants, lawyers, and investigators for investigative purposes.

It eliminates the requirement that FERC receive approval from the Office of Management and Budget before launching an investigation or price discovery of electricity or natural gas markets involving more than 10 companies.

It increases the penalty amounts to $1 million instead of the current $5,000 for violations of the Federal Power Act and the Natural Gas Act; five years instead of the current two for violations of the statute; and, $50,000 per violation per day instead of the current $500 for violations of rules or orders under the Federal Power Act and Natural Gas Act.

The Commission's authority to impose civil penalties is broadened to all sections of Part II of the Federal Power Act and the penalty amount is increased from $10,000 to $50,000 per violation per day.

It modifies Section 206 of the Federal Power Act to allow for an earlier refund effective date to increase the opportunity for refunds as a deterrent to fraudulent and manipulative behavior in the energy markets.

This legislation is not going to do anything to change what happened in California and the West. But it does provide the necessary authority for the CFTC and FERC which will help protect against another energy crisis.

When regulatory agencies have the will but not the authority to regulate, Congress must step in and ensure that our regulators have the necessary tools. Unfortunately, sometimes an agency has neither. In this case I am glad to have the support of FERC and I hope that the CFTC will reconsider and support this legislation.

Madam President, yesterday the State of California submitted a filing to the Federal Energy Regulatory Commission which provides a wholesale indictment of energy companies and shows how a number of energy firms engaged in deceptive trading practices to drive up prices in the Western Energy Market. I have called on FERC to make this evidence public

and I want to reiterate my request again.

I am also introducing a bill with Senators Fitzgerald, Harkin, Lugar, Cantwell, Wyden, and Leahy to close a loophole which allows energy trades to take place electronically, in private, with no transparency, record, audit trail or any oversight to guard against fraud and manipulation.

But before I reintroduce this bill, I want to reiterate the important revelations that have been uncovered in the past year and detail what we know about yesterday's filing at FERC.

Last week I came to the floor to update the Senate on recent evidence of fraud and manipulation in the energy sector. Today I want to pick up where I left off and introduce the Energy Market Oversight Act.

Mr. President, I draw my colleagues' attention to a filing made at FERC. This ``Public Version'' is a 27-page summary of the filing with confidential information removed, but it provides a detailed overview of the fraud and manipulation carried out by energy companies during the Western energy crisis.

In addition to testimony by expert witnesses, 348 exhibits, transcripts of depositions, tapes of trader telephone conversations, emails, and other data, the California parties submitted a 161-page brief to FERC. The document I have inserted into the Record includes the Table of Contents, the Introduction and Overview, and the Conclusion of this 161-page document. To be clear, it is part, but not all of the brief filed by the State of California.

Mr. President, the filing submitted by the State of California yesterday shows that there was an extensive and coordinated attempt by energy companies to engage in the following schemes to drive up prices in the Western Energy Market:

1. Withholding of Power--driving up prices by creating

false shortages;

2. Bidding to Exercise Market Power--suppliers bid higher

after the California ISO declared emergencies, knowing the

State would need power and be willing to pay any price to get

it;

3. Scheduling of Bogus Load, aka ``Fat Boy'' or ``Inc-

ing''--suppliers submitted false load schedules to increase

prices;

4. Export-Import Games, aka ``Ricochet or ``Megawatt

Laundering''--suppliers exported power out of California and

imported it back into the State in an attempt to sell power

at inflated prices;

5. Congestion Games, aka ``Death Star''--suppliers created

false congestion and were then paid for relieving congestion

without moving any power;

6. Double-Selling--suppliers sold reserves, but then failed

to keep those reserves available for the ISO;

7. Selling of Non-Existent Ancillary Services, aka ``Get

Shorty''--suppliers sold resources that were either already

committed to other sales or incapable of being provided;

8. Sharing of Non-Public Generation Outage Information--the

largest suppliers in California shared information from a

company called Industrial Information Resources that provided

sellers detailed, non-public information on daily plant

outages;

9. Collusion Among Sellers--sellers were jointly

implementing or facilitating Enron-type trading strategies;

10. Manipulation of the Nitrous Oxide (NOX)

Emission Market--sellers manipulated the market for

NOX emissions in the South Coast Air Quality

Management District through a series of wash trades that

created the appearance of a dramatic price increase that may

have been fabricated. For example, Dynegy, together with AES

and others, entered into a series of trades of NOx

credits in July and August of 2000 by which Dynegy would sell

a large quality of credits and then simultaneously buy back a

smaller quantity of credits at a higher per credit price.

We can assume that the thousands of pages filed by the California parties at FERC detail these examples of market abuse. At this point we cannot know all of the instances because the specifics remain confidential, but we have plenty to go on.

Yesterday I wrote another letter to FERC Chairman Pat Wood asking the Commission to lift its ``Protective Order'' to make this information public so that families and businesses harmed during the Western Energy Crisis can know the extent of fraud and manipulation that occurred.

I believe the filing yesterday presents a key decision for FERC. Clearly the Commission cannot ignore this mountain of new evidence submitted--especially since it comes at a time when other disclosures have been made to show pervasive fraud and manipulation in the Western Energy Market.

Last month Jeffrey Richter, the former head of Enron's Short-Term California energy trading desk, pled guilty to conspiracy to commit fraud as part of Enron's well known schemes to manipulate Western energy markets. Richter's plea follows that of head Enron trader Tim Belden in the fall of 2002. Belden admitted that he schemed to defraud California during the Western energy crisis and also plead guilty to conspiracy to commit wire fraud.

The Enron plea came on the heels of FERC's release of transcripts from Reliant Energy that reveal how their traders intentionally withheld power from the California market in an attempt to increase prices. This is one of the most egregious examples of manipulation and it is clear and convincing evidence of coordinated schemes to defraud consumers.

Let me read just one part of the transcript to demonstrate the greed behind the market abuse by Reliant and its traders.

On June 20, 2000 two Reliant employees had the following conversation that reveals the company withheld power from the California market to drive prices up:

Reliant Operations Manager 1: ``I don't necessarily foresee

those units being run the remainder of this week. In fact you

will probably see, in fact I know, tomorrow we have all the

units at Coolwater off.'' (The Coolwater plant is a 526

Megawatt plant.)

Reliant Plant Operator 2: ``Really?''

Reliant Operations Manager 1: ``Potentially. Even number

four. More due to some market manipulation attempts on our

part. And so, on number four it probably wouldn't last long.

It would probably be back on the next day, if not the day

after that. Trying to uh . . .''

Reliant Plant Operator 2: ``Trying to shorten supply, uh?

That way the price on demand goes up.''

Reliant Operations Manager 1: ``Well, we'll see.''

Reliant Plant Operator 2: ``I can understand. That's

cool.''

Reliant Operations Manager 1: ``We've got some term

positions that, you know, that would benefit.''

Six months after this incident, as the Senate Energy Committee was attempting to get to the bottom of why energy prices were soaring in the West, the President and CEO of Reliant testified before Congress that the State of California ``has focused on an inaccurate perception of market manipulation.''

Reliant's President and CEO went on to say, ``We are proud of our contributions to keep generation running to try to meet the demand for power in California. Reliant Energy's plant and technical staffs have worked hard to maximize the performance of our generation.''

These transcripts prove otherwise and reveal the truth about market manipulation in the energy sector.

Despite this clear and convincing evidence of fraud, on January 31 of this year, the Federal Energy Regulatory Commission chose to only give Reliant a slap on the wrist for this behavior. The company paid only $13.8 million to sweep this criminal behavior under the rug and settle with FERC.

Let me turn to some other recent examples that demonstrate how other energy companies manipulated the Western Energy Market as Reliant did. On December 11th, FERC finally released audio tapes that show how traders at Williams conspired with AES Energy plant operators to keep power offline and drive prices up.

The tapes depict how on April 27, 2000, Williams outage coordinator Rhonda Morgan encouraged an AES operator at the company's Alamitos plant to extend a plant outage because the California grid operator was paying ``a premium'' for power at the time. The Williams employee stated, ``that's one reason it wouldn't hurt Williams' feelings if the outage ran long.''

Later that day, Eric Pendergraft, a high-ranking AES employee called to confirm with Ms. Morgan that Williams wanted the plant to stay offline by saying, ``you guys were saying that it might not be such a bad thing if it took us a little while longer to do our work?'' ``I don't want to do something underhanded,'' Ms. Morgan responded, ``but if there is work you can continue to do . . .'' At this point Mr. Pendergraft interrupted to cut off their suspicious conversation, saying, ``I understand. You don't have to talk anymore.''

Clearly, this is evidence of a calculated intent to withhold power to raise prices. I find it unconscionable.

Let's turn to some other examples.

On January 27, 2003, Michelle Marie Valencia, a 32-year-old former senior energy trader for Dynegy was arrested on charges that she reported fictitious natural gas transactions to an industry publication.

On December 5, 2002, Todd Geiger, a former vice president on the Canadian natural gas trading desk for El Paso Merchant Energy, was charged with wire fraud and filing a false report after allegedly telling a trade publication about the prices for 48 natural gas trades that he never made in an effort to boost prices and company profit.

These indictments are just the latest examples of how energy firms reported inaccurate prices to trade publications to drive energy prices higher.

Industry publications claimed they could not be fooled by false prices because deviant prices are rejected, but this claim was predicated on the fact that everyone was reporting honestly--which we now know they weren't doing.

CMS Energy, Williams, American Electric Power Company, and Dynegy have each acknowledged that its employees gave inaccurate price data to industry participants. On December 19th Dynegy agreed to pay a $5 million fine for its actions.

In September an Administrative Law Judge at FERC issued a landmark ruling concluding that El Paso Corporation withheld natural gas from California and recommended penalty proceedings against the company. Since the El Paso Pipeline carries most of the natural gas to Southern California, this ruling has tremendous implications. The FERC Commissioners are expected to take up this case for a final judgement soon.

These have been the latest revelations in a series of energy disclosure bombshells that began on Monday, May 6th when the Federal Energy Regulatory Commission posted a series of documents on their website that revealed Enron manipulated the Western Energy Market by engaging in a number of suspect trading strategies.

These memos revealed for the first time how Enron used schemes called ``Death Star,'' ``Get Shorty,'' ``Fat Boy,'' and ``Ricochet'' to fleece families and businesses in the West.

The filing made yesterday to FERC shows how other companies did engage in these Enron-type trading strategies. The brief submitted by the State of California and others states that suppliers ``were jointly implementing or facilitating Enron-type trading strategies.''

Let us turn to other types of fraudulent trades that many energy firms have admitted to.

Dynegy, Duke Energy, El Paso, Reliant Resources Inc., CMS Energy Corp., and Williams Cos. all admitted engaging in false ``round-trip `` or ``wash trades.''

What is a ``round-trip'' trade, one might ask?

``Round-trip'' trades occur when one firm sells energy to another and then the second firm simultaneously sells the same amount of energy back to the first company at exactly the same price. No commodity ever actually changes hands, but when done on an exchange, these transactions send a price signal to the market and they artificially boost revenue for the company.

How widespread are ``round-trip'' trades? Well, the Congressional Research Service looked at trading patterns in the energy sector over the last few years and reported, ``this pattern of trading suggests a market environment in which a significant volume of fictitious trading could have taken place.''

Yet, since most of the energy trading market is unregulated by the government, we have only a slim idea of the illusions being perpetrated in the energy sector.

Consider the following recent confessions from energy firms about ``round-trip'' trades:

Reliant admitted 10 percent of its trading revenues came

from ``round-trip'' trades. The announcement forced the

company's President and head of wholesale trading to both

step down.

CMS Energy announced 80 percent of its trades in 2001 were

``round-trip'' trades.

Remember, these trades are sham deals where nothing was exchanged, yet the company booked revenues from the trades.

Duke Energy disclosed that 1.1 billion dollars-worth of

trades were ``round-trip'' since 1999--roughly two-thirds of

these were done on InterContinental Exchange, which means

that thousands of subscribes would have seen these false

price signals.

A lawyer for J.P. Morgan Chase admitted the bank engineered

a series of ``round-trip'' trades with Enron.

Dynegy and Williams have also admitted to this round-trip

trading.

And although these trades mostly occurred with electricity,

there is evidence to suggest that ``round-trip'' trades were

made in natural gas and even broadband.

By exchanging the same amount of a commodity at the same price, I believe these companies have not engaged in meaningful transactions, but deceptive practices to fool investors and possibly drive energy prices up for consumers.

It is therefore imperative that the Department of Justice, FERC, the SEC, the Commodities Futures Trading Commission and every other oversight agency conduct an aggressive and vigorous investigation into all of the energy companies who participated in Western Energy Market.

Beyond that I believe Congress must re-examine what tools the government needs to keep a better watch over these volatile markets that are little understood. In the absence of vigilant government oversight of the energy sector, firms have the incentive to create the appearance of a mature, liquid, and well-functioning market, but it is unclear whether such a market exists.

The ``round-trip'' trades, the Enron memos, and the filing at FERC raise questions about illusions in the energy market.

To this end, I believe it is critical for the Senate to act soon on the legislation I offered last April to regulate online energy trading.

I am re-introducing this legislation to subject electronic exchanges like Enron On-Line to the same oversight, reporting and capital requirements as other commodity exchanges like the Chicago Mercantile Exchange, the New York Mercantile Exchange and the Chicago Board of Trade.

I am pleased Senator Fitzgerald, Senator Harkin, Senator Lugar, Senator Cantwell, Senator Wyden, and Senator Leahy have again signed on to this legislation. I am proud of the work we did in the 107th Congress and I hope we can complete action on this bill soon.

Without this type of legislation, there is insufficient authority to investigate and prevent fraud and price manipulation since parties making the trade are not required to keep a record.

Right now, energy transactions are regulated by the Federal Energy Regulatory Commission (FERC) when there is actual delivery.

For example, if I buy natural gas from you, and you deliver that natural gas to me, FERC has the authority to ensure that this transaction is transparent and reasonably priced.

However, many energy transactions no longer result in delivery. A giant loophole has opened where there is no government oversight when these transactions are done on internet exchanges.

In 2000, Congress passed the Commodity Futures Modernization Act in 2000 which exempted energy and metals trading from regulatory oversight and excluded it completely if the trade was done electronically.

So today, as long as there is no delivery, there is no price transparency. Again, this lack of transparency and oversight only applies to energy. It does not apply if you are selling wheat or pork bellies or any other tangible commodity.

And it did not take long for Enron Online, and others in the energy sector, to take advantage of this new freedom by trading energy derivatives absent any regulatory oversight.

Thus, after the 2000 legislation was enacted, Enron OnLine began to trade energy derivatives bilaterally without being subject to proper regulatory oversight. It should not surprise anyone that without the transparency, prices soared.

Just yesterday Warren Buffett published a warning in Fortune Magazine saying that ``Derivatives are financial weapons of mass destruction.'' In his annual warning letter to shareholders about what worries him about the financial markets, Warren Buffett called derivatives and the trading activities that go with them ``time bombs.''

In the letter, Warren Buffett states, ``In recent years some huge- scale frauds and near-frauds have been facilitated by derivatives trades. In the energy and electric utility sectors, for example, companies used derivatives and

trading activities to report great `earnings'--until the roof fell in when they actually tried to convert the derivatives-related receivables on their balance sheets into cash.''

We clearly saw this with Enron.

Was Enron and its energy derivative trading arm, Enron-On-Line the sole reason California and the West had an energy crisis? No.

Was it a contributing factor to the crisis? I certainly believe that it was. Unfortunately, because of the energy exemptions in the 2000 CFMA, which took away the CFTC's authority to investigate, we may never know for sure.

In the 107th Congress, this legislation was debated during consideration of the Senate Energy Bill and it was the subject of a hearing in the Agriculture Committee, but time ran out before the legislation could be marked up and passed.

Since that time, Senators Lugar and Harkin have made significant improvements to the legislation and we have added stronger penalties for market abuse and wrongdoing.

Today I am pleased to note that the following companies and organizations are supporting this legislation:

The National Rural Electric Cooperative Association,

The Derivatives Study Center,

The American Public Gas Association,

The American Public Power Association,

The California Municipal Utilities Association,

The Southern California Public Power Authority,

The Transmission Access Policy Study Group,

The U.S. Public Interest Research Group,

The Consumers Union,

The Consumers Federation of America,

Calpine,

Southern California Edison,

Pacific Gas and Electric, and

FERC Chairman Pat Wood.

I ask unanimous consent that the letters of support from these organizations and companies be printed in the Record.

Mr. President, here is an explanation of what this bill does: It applies anti-fraud and anti-manipulation authority to all exempt commodity transactions--an exempt commodity is a commodity which is not financial and not agricultural and mainly includes energy and metals.

The bill sets up two classes of swaps. For those made between ``sophisticated persons,'' basically institutions and wealthy individuals, that are not entered into on a ``trading facility''--for example, an exchange--anti-fraud and anti-manipulation provisions apply and wash trades are prohibited.

The following regulations would apply to all swaps made on an ``electronic trading facility'' and a ``dealer market'', which includes dealers who buy and sell swaps in exempt commodities, and the entity on which the swap takes place: anti-fraud and anti-manipulation provisions and the prohibition of wash trades apply; if the entity on which the swap takes place serves a pricing or price discovery function, increased notice, reporting, bookkeeping, and other transparency requirements; and the requirement to maintain sufficient capital commensurate with the risk associated with the swap;

Except for the anti-fraud and anti-manipulation provisions, the CFTC has the discretion to tailor the above requirements to fit the character and financial risk involved with the swap or entity. While the CFTC could require daily public disclosure of trading data like open and closing prices, similar to the requirements of futures exchanges, it could not require real-time publication of proprietary trading information or prohibit an entity from selling their data.

The CFTC may allow entities to meet certain self-regulatory responsibilities- as provided in a list of ``core principles.'' If an entity chose to become a

self-regulator, these core principles would obligate the entity to monitor trading to prevent fraud and manipulation as well as assure that its other regulatory obligations are met.

The penalties for manipulation are greatly increased. The civil monetary penalty for manipulation is increased from $100,000 to $1 million. Wash trades are subject to the monetary civil penalty for each violation, and imprisonment up to 10 years.

The FERC is required to improve communications with other Federal regulatory agencies. A shortcoming in the main anti-fraud provision of the CEA is also corrected by allowing CFTC enforcement of fraud to apply to instances of either defrauding a person for oneself or on behalf of others.

It requires the FERC and the CFTC to meet quarterly and discuss how energy derivative markets are functioning and affecting energy deliveries.

It grants the FERC the authority to use monetary penalties on companies that don't comply with requests for information. It is essentially the same authority that the SEC has.

It makes it easier for FERC to hire the necessary outside help they need including accountants, lawyers, and investigators for investigative purposes.

It eliminates the requirement that FERC receive approval from the Office of Management and Budget before launching an investigation or price discovery of electricity or natural gas markets involving more than 10 companies.

It increases the penalty amounts to $1 million instead of the current $5,000 for violations of the Federal Power Act and the Natural Gas Act; five years instead of the current two for violations of the statute; and, $50,000 per violation per day instead of the current $500 for violations of rules or orders under the Federal Power Act and Natural Gas Act.

The Commission's authority to impose civil penalties is broadened to all sections of Part II of the Federal Power Act and the penalty amount is increased from $10,000 to $50,000 per violation per day.

It modifies Section 206 of the Federal Power Act to allow for an earlier refund effective date to increase the opportunity for refunds as a deterrent to fraudulent and manipulative behavior in the energy markets.

This legislation is not going to do anything to change what happened in California and the West. But it does provide the necessary authority for the CFTC and FERC which will help protect against another energy crisis.

When regulatory agencies have the will but not the authority to regulate, Congress must step in and ensure that our regulators have the necessary tools. Unfortunately, sometimes an agency has neither. In this case I am glad to have the support of FERC and I hope that the CFTC will reconsider and support this legislation.

Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Madam President, I rise today to support my colleague from California, Senator Feinstein, and her amendment, which I have cosponsored, which would very simply close the so-called Enron loophole in the commodity futures trading laws of this country.

This really is not that complex an issue. A few years ago, we passed a reauthorization of the Commodity Futures Trading Commission. I am very familiar with the commodities industry because we are the heart of it in my State of Illinois, particularly the city of Chicago, where they have the largest derivative exchanges in the country in the Board of Trade, in the Mercantile Exchange in Chicago. Those exchanges trade all sorts of commodities from pork bellies to Treasury bonds. They trade financial commodities as well as agricultural commodities, corn and soybeans.

The Board of Trade and the Mercantile Exchange, like the NYMEX, the New York Mercantile Exchange in New York, or the New York Board of Trade, are fully regulated exchanges. The reauthorization of the Commodity Futures Trading Commission, which we passed a few years ago, continued that regulation that we have had in this country over our boards of trades and our other derivatives or futures transaction trading facilities in this country.

Somehow, when we were working on that legislation in the House and the Senate--it is funny how little codicils, little paragraphs and sentences get added when the bills go to conference committees between the House and the Senate. I believe what happened is when that bill was over in the House, a couple of congressmen added some language that exempted from all regulation by the CFTC--and there is no regulation by the SEC in this area--online facilities that trade energy, metals, and broadband derivatives contracts or futures contracts. Online exchanges that trade those kinds of contracts are completely exempt from regulation. This is the so-called Enron loophole.

At the time, Enron owned EnronOnline and they had an online platform for trading energy contracts, which when Enron went bankrupt later they sold.

Now that EnronOnline was totally exempted from regulation--as Senator Feinstein very eloquently and very thoroughly described for us all of the bogus trades that were done on online derivative exchanges that trade metals and energy contracts, and she described the wash trades that were discovered when Enron fell apart. In fact, many energy companies were simply engaging in round trip trades with trading partners. A round trip trade, as Senator Feinstein noted, is when one party sells a commodity to another party at a certain price, and the other party sells that same commodity back at the very same price. Nothing really transpired in that transaction except that the other party books revenue from a sale and this party books revenue from a sale, but nothing really happened from an economic point of view.

If party A sells a barrel of oil to party B for $30, and party B simultaneously sells a barrel of oil back to party A for $30, nothing has really happened. Everybody is still the same. What we saw in the energy industry with a whole bunch of energy companies, not just Enron, is they were artificially boosting their revenues by engaging in wash trades, round trip trades with other energy partners.

I recall one energy company after this came to light had to restate its revenues downward by $7 billion when new auditors came in and made them cancel out all these wash trades.

Senator Feinstein's amendment simply closes this Enron loophole. It says the CFTC will be able to ban wash trades on these online derivatives transaction facilities. That is all we are trying to do. She does not impose full-scale regulation by the CFTC like we have at the Board of Trade or Mercantile Exchange in Illinois or the New York Mercantile Exchange in New York. They have far more regulation. However, we will put a light level of regulation on online derivative transactions facilities that trade energy, metals, and broadband online. Do not forget, Enron was a big trader of broadband, as well. In fact, that is why the Enron loophole as it got written in the House created a special carve-out for energy, metals, broadband, and also weather contracts.

The question is--why are we picking out energy, metal, broadband, and weather contracts and saying these contracts when traded online cannot be regulated by anyone? What is the public policy rationale for this special carve-out? Why didn't they also include corn and soybeans in this carve-out? Or other commodities? The fact is, this was a special interest carve-out for a hand full of companies.

Now, there is a company owned by a number of banks and energy companies called the InterContinental Exchange. I believe it is opposed to our amendment. Why they are opposed--I gather some of their owners are, in fact, for this--but the majority of the owners of this exchange are opposed. They do not want to be regulated. Our obligation is not to those banks that own the InterContinental Exchange or to the energy companies that own the InterContinental Exchange. Our obligations here

are to investors around the country and to consumers around the country.

We saw what kind of wool can be pulled over people's eyes when online exchanges are allowed to go on without any regulation. Not only were a bunch of energy companies such as Enron doing round-trip trades to artificially boost their own revenues but they were also doing fictitious round-trip trades to set artificial prices.

Indeed, although I was very skeptical at first whether that was happening in California but, in fact, it was. The online exchanges would tell California that this is the price that has been trading on our online exchange, so that is the price you have to pay for the energy. But, in fact, it was a fictitious market and most of the trades were fictitious and no one could regulate it.

All we are trying to do is have a light level of regulation to ban wash trades, round-trip trades, ban fraud and abuse, and protect consumers and investors, have some price discovery so people can know what the prices are for the commodities that are traded on these online exchanges, a very light level of regulation to protect the integrity of our derivatives market.

My good friend and colleague from the State of Nevada, the senior Senator from Nevada, Mr. Reid, has proposed exempting metals contracts from the amendment Senator Feinstein and I have put together. In other words, he would go along with closing the Enron loophole with respect to energy and broadband but he wants to keep a carve-out for metals. I don't think that is a good idea. We should not have to wait until we have fraudulent transactions involving a metals contract, say, of gold, silver, or platinum, before we act. We have already had fraudulent transactions in energy markets on the online exchanges and we need to stop that. But certainly we can foresee the same problem could occur in an online contract of metals that is traded on one of these online exchanges. All commodities of which there is a finite supply should be treated equally. We should not have a special carve-out either for energy or for metals or for broadband.

In 1999, a working group was put together on the financial markets and the working group was put together ahead of our rewrite of the Commodity Futures Modernization Act. The panel comprised in the working group was made up of Federal Reserve Chairman Alan Greenspan, the Treasury Secretary, the Chairman of the SEC, and the Chairman of the CFTC at the time. In their report, the President's Working Group on Financial Markets, as it was called, that group concluded:

Due to the characteristics of markets for nonfinancial

commodities with finite supplies [energy, metals broadband

all fit that category; they are nonfinancial commodities and

there are finite supplies of energy and of metals] the

working group is unanimously recommending that the exclusion

not be extended to agreements involving such commodities. The

exclusion should not extend to any swap agreement that

involves a nonfinancial commodity with a finite supply.

In other words, the President's working group was saying there should be oversight, there should be regulation of swap agreements, of futures contracts, of derivatives contracts, involving nonfinancial commodities with finite supplies. They separated that category of commodities from financial commodities that have an infinite supply, say, interest rates futures, or futures contracts or derivative contracts based on currencies. With those types of financial commodities, it is very difficult for someone to corner the market in interest rates, for example. I don't think it is possible. There is not a finite supply of interest rates. No one could corner the market there. So they wanted to provide legal certainty for derivatives involving financial commodities with infinite supplies and they have done that. We did not touch financial derivatives. We allow that legal certainty to remain for the financial commodities. We do not upset that. Instead, we simply treat energy, metals, and broadband, as the other finite commodities such as corn and soybeans and other agricultural commodities are treated.

The President's working group made this recommendation that all nonfinancial commodities with finite supplies be treated the same. I have to ask my colleagues, what possible public policy rationale could explain the carve-out in the commodity futures reauthorization bill for energy and metals transactions? If it is proper to exempt these finite physical commodities from CFTC regulation, why not exempt agricultural commodities such as corn, soybeans, and pork bellies? It does not make any sense and we should close this loophole.

Some have argued that we shouldn't have regulation in this area. I know, particularly on my side of the aisle, there are a lot of conservative Republicans, and I am certainly a conservative Republican, and very pro-free markets. I am always reluctant to see Government regulation and I always question the need for it. However, I point out that a light level of Government regulation can actually be healthy in promoting markets.

There is no finer example than our security markets in the United States. Prior to the adoption of the Securities and Exchange Commission Act in the early 1930s, average people remained very leery of ever investing in the stock market. They thought it was a fool's game that was rigged for the insiders on Wall Street and it was very risky. In fact, by regulating the securities markets and making it safe for average people to invest in the markets by having some laws against the insider dealing and so forth, and requiring a thorough dissemination of information so it could be widely shared, we have gotten to the point where over 50 percent of Americans in this country invest in the stock market.

I point to that example as an area where we have pretty light regulations in our security laws. They are simply disclosure laws. Publicly traded companies have to file disclosure and there is not much more regulation than that, but that disclosure is very important in maintaining the integrity of our markets.

I believe Senator Feinstein and I have an amendment that is very light regulation, that simply will help restore the faith of people who may want to trade, of institutions that may want to trade in an online derivatives facility. It will restore their faith in that market, give them more trust in that market and make them more likely to use that market.

Since we have had this scandal in the energy industry, the InterContinental Exchange's volume has just plummeted and people who wanted to hedge their positions in energy and metals have been flocking back to the fully regulated exchange in New York, the New York Mercantile Exchange.

So the point here, the moral of this story, I think, is by opposing this regulation, the InterContinental Exchange has, in fact, hurt their own cause because people are staying away from their market. They do not trust it, they know there is no price discovery, they know there is no regulator there who is going to prevent them from being defrauded. There is no cop there so nobody wants to trade there.

So if the InterContinental Exchange and the banks that own it want to encourage all the Senators here to vote against this, I think they are actually working against their own self-interest in the long run, just as Wall Street would have been working against its own self-interest back in the 1930s if they had come to Washington and tried to block the implementation of the Securities Exchange Commission Act.

All the bill does, and Senator Feinstein has gone through it very thoroughly--but specifically it requires reporting, notification, and recordkeeping. In addition, it requires these energy and metal trading venues to keep books and records and maintain sufficient capital to operate soundly. Those are just commonsense requirements. Why anybody would be against this, I don't know.

Finally, on a somewhat more parochial basis, as someone who represents the exchanges in Chicago, the Board of Trade and the Mercantile Exchange, they have a much heavier degree of regulation than we are asking of these online exchanges that trade in energy and metals. I, frankly, think it is unfair to impose super-regulations on one type of trading facility and then no regulation at all on another type of facility. I think that unfairness in the disparate treatment between different derivatives transaction facilities is a disparity and disparate treatment that should be eliminated in the name of fairness.

The bottom line is, while there has been a lot of hype surrounding this

issue, I think those who study it closely will realize, will recognize it is good public policy. It is in the public's interest.

I urge my colleagues to support this amendment. It is very well drafted. Senator Lugar and Senator Harkin have both signed on as cosponsors. It was the subject of a hearing in the Agriculture Committee, as Senator Feinstein pointed out, and the Agriculture Committee, of course, is where legislation dealing with the Commodity Futures Trading Commission goes. The Agriculture Committee has worked on this, and they produced very good legislation that will prevent, if we adopt it, the kind of abuses we have seen in online derivatives transactions in the last couple of years. It is a commonsense amendment. It simply will make it easier to act against fraudulent or bogus energy or metals or broadband trades. It is common sense. I urge my colleagues to adopt it.

Unless anyone further wishes to talk, I suggest the absence of a quorum.

Will the Senator yield for a question?

I ask Senator Feinstein, I was wondering, you said one company said 80 percent of its trades had been wash trades, just round trip trades. Was that an energy firm?

Madam President, I ask Senator Feinstein if it is true that under the current law no one can do anything about these wash trades because of this Enron loophole that is in the law. We are trying to take that out, so somebody could actually ban this kind of fraudulent trading practice. Isn't that correct?

Does the Senator know why people would oppose the authority of regulators to ban wash trades? Has anybody explained that to the Senator?

And no one can find out what prices they were trading at, either. There is no price discovered.

They do not do these wash trades at the exchange in New York because all of that would be transparent to the public.

Because they were simply trading back and forth amongst themselves at a price that really was not determined on an arms' length basis. They were just engaging in bogus trades back and forth to artificially set a price or to artificially increase revenues for the companies on both sides of the trade. Some of these transactions were done on the InterContinental Exchange.

As I recall, when we had the hearing before the Senate Agriculture Committee, either early this winter or maybe even last fall, some shareholder on the InterContinental Exchange came before the committee and testified that notwithstanding the official position of the exchange they, as an owner of the exchange, disagreed with the policy of the InterContinental Exchange on this, and they favored our elimination of this Enron online loophole in the commodities laws; they thought that the company in which they were a shareholder would be better off if there were some regulation of their business.

Does the Senator recall that?

If we had the same problem somewhere in the stock market and people couldn't figure out the price of a stock by looking in the newspaper or looking on the Internet to see what the published price of a stock was on the exchange, if instead you had a similar situation with a stock as you have with these online energy derivatives exchanges, and a customer had to call the exchange and ask what the price of oil is trading at, but you just had somebody telling you the price of oil is such and such but you had no way of verifying that, I think no one would want to invest in the stock market if you couldn't discover the price, or if there was no price discovery.

Why does the Senator think anybody would even want to trade on an online exchange in which there is no price discovery, or where there is no regulator protecting the customers from fraud, manipulation, or abuse? Why is it that someone would even want to trade on such an exchange? Isn't it true that, in fact, the InterContinental Exchange volume, the last I heard, was dropping and their legitimate customers were going back to trading on a fully regulated exchange in New York, the NYNEX?

If someone is operating a corrupt exchange and there is no price discovery and no regulation, isn't it true that a customer could call into that exchange and say, I want to trade oil at $30 a barrel, and the broker could tell them he could get some oil at $35 a barrel and just require the customer to pay more than that customer really should have had to pay because the market wasn't that high, there is no way for the customer to know what the real market price is? The broker could make up a price and then keep the difference for himself or for the exchange. Isn't that correct, if there is no price discovery?

It seems to me that this is an absolute no-brainer to close this indefensible loophole. I can't imagine that anybody is going to want to defend the concept that we can have an online exchange that is open for business with the public, although not retail customers, I gather, but institutional customers, where it is just a black hole which no one can regulate and can't ban wash trades where there is no price discovery. What in the world would be the objection to closing this loophole and having some modicum of oversight to protect the people who may want to use this exchange and to protect the integrity of the market?

There really is a difference between this year's vote and last year's. Last year when the Senator and I had this amendment on the floor, it was in the immediate aftermath of all those energy companies collapsing. There were some initial reports out there about possibly bogus trades but we didn't have that proof yet. We had 48 votes, 2 votes shy of passing it.

Since that time, and in the intervening year, we have had all the hard evidence come out proving everything the Senator and I were saying last year on the floor of this body--that there were, in fact, bogus wash trades not only in the millions of dollars but in the billions of dollars. How big were some of those?

That was probably a huge percentage of their revenues--all fictitious--from doing wash trades on an online exchange with no economic purpose. But that fictitious revenue was fooling the investing public, making people think that company had more revenue than it actually did. They were all just ``wash'' trades.

So you are saying the FERC has done a study in which they have already concluded that we basically need to close this loophole so there can be some price discovery and some monitoring of these energy markets?

Madam President, and my dear colleague from California, I think this is simply commonsense legislation and long overdue. I think it is unfortunate that we made the mistake when passing the Commodity Futures Modernization Act back a few years ago, which created that special carve-out for energy and metals and broadband contracts that were traded in an online exchange, that they could be exempt from regulation by anybody. Because had we not made that mistake, had Congress not made that mistake, it might have prevented the manipulation and fraud and abuse that was done at the hands of a whole bunch of energy companies. We might have prevented that, if we had not allowed this loophole to be included in that Commodity Futures Modernization Act. And I think it is high time we simply close that loophole.

Madam President, I will be interested to see who comes to the floor to make an argument that we should still have this loophole so that energy and metals contracts can be traded without any oversight by any regulator, so no one can discover the price, so that there is no protection for the customers of these exchanges.

I will be interested to see who comes to the floor and what their argument is in favor of this because, I have to tell you, on most pieces of legislation that come before this body, it is pretty easy to see what the arguments will be on the other side. There is normally at least a plausible public policy rationale on both sides of the issue. But in this case, I have to say that, looked at very objectively, it is hard to understand how anybody could oppose this commonsense measure to protect the integrity of our energy and metals trading markets in this country. It seems like a very commonsense piece of legislation.

I compliment Senator Feinstein. She has been tenacious in bringing this up, and she has been persistent to make sure that we had the opportunity to offer the amendment on the floor.

Madam President, I yield the floor.

Mr. President, I express my appreciation to the Senator from New Hampshire for allowing me to speak. I have to speak at a memorial service in just a short time, and but for his kindness and generosity I would have had to either miss the ability to debate this matter or be late to debate this matter. So I appreciate very much the comity of my friend from New Hampshire.

I express my appreciation to my longtime friend and colleague, Senator Wyden, for this legislation. I also say the way this legislation has been approached is the way to approach legislation. This is a bipartisan amendment. This is a good debate we are having on the Senate floor.

My friend from New Mexico, the manager of this bill, believes very deeply in the renewal of nuclear power. I understand how he feels about this.

As I say, this is the way legislation should be handled. This is a good, fair, open debate. I approach this more from an environmental perspective than my friend from New Hampshire does. Even though he has been here just a short period of time, the Senator from New Hampshire is always focused on numbers, taxpayer dollars.

I rise in support of this amendment offered by my colleagues, the Senator from Oregon and the Senator from New Hampshire. I really do appreciate their efforts to bring to light the tremendous financial risks this Energy bill places on the backs of American working men and women and their families.

Let me underline and underscore, my opposition to this amendment has nothing to do with the longstanding, seemingly never-ending debate on nuclear waste. This has nothing to do with nuclear waste.

This Energy bill contains a provision, which this amendment would strike, that would make the Federal Government the guarantor of the costs of building new nuclear powerplants.

The Energy bill would allow the Secretary of Energy to enter into agreements with nuclear powerplant owners to give Federal loan guarantees for loans to construct new reactors or to enter into new contracts for guaranteed purchases of power from these reactors.

According to the Congressional Budget Office, what we refer to as CBO, this is an extremely risky financial endeavor. In fact, the CBO considers ``the risk of default on such a loan guarantee to be very high--well above 50 percent.''

That means the American taxpayer will be footing the bill for construction of these nuclear powerplants, the way the Senator from Oregon indicated we would have really a socialization of the costs and the nonbenefits of this legislation. If this provision remains in the bill, the Federal Government will be entering into loan guarantees and power purchase agreements that could cost at least $14 billion.

CBO is not alone in its assessment of the financial risk of backing the new reactor construction.

We have from Standard & Poor's a document I ask unanimous consent to print in the Record.

I will only read one sentence:

But the industry's legacy of cost growth, technology

problems, cumbersome political and regulatory oversight, and

the newer risks brought about by competition and terrorism

concerns may keep credit risk too high for even the Senate to

overcome.

In addition, we have the Economist magazine of May 19 which says, among other things:

That is why the real argument over nuclear's future should

rest on economics. Given the industry's history of cost

overruns and wasted billions, the claim of dramatically

improved economics would, if true, support a revival. Alas,

as our special report makes clear . . . the claim is dubious.

Why in the world should a mature, well-capitalized industry

receive subsidies, such as government liability insurance or

help the costs of waste disposal and decommissioning?

The article closes by saying:

If the private sector wishes to build new nuclear plants in

an open and competitive energy market, more power to it. As

subsidies are withdrawn, however, that possibility will

become ever less likely. Nuclear power, which early advocates

thought would be ``too cheap to meter'', is more likely to be

remembered as too costly to matter.

These statements hardly sound like a sound investment for the Federal Government to make at this time. The simple truth is if investors on Wall Street won't invest in new nuclear powerplants, we should not force the families on Main Street to back them with their hard-earned income. We have an obligation to protect the American taxpayer from having his or her money guarantee investments by the Federal Government in these risky programs. This amendment is not about whether you support or oppose nuclear power; it is about keeping the Federal Government from making risky investments.

A wide range of national taxpayer, environmental, and public interest groups understand these risks. That is why more than a dozen of these groups signed a letter supporting the Wyden-Sununu amendment. The groups include the National Taxpayers Union, Taxpayers for Common Sense, Council for Citizens Against Government Waste, the U.S. Public Interest Research Group, and the National Resources Defense Counsel.

I ask unanimous consent that a letter from these organizations be printed in the Record.

Mr. President, I also have a letter signed by the League of Conservation Voters indicating they will consider including the vote on this amendment in their yearly environmental scorecard. I ask unanimous consent that that letter be printed in the Record.

The nuclear power industry is a mature, developed industry. It has had more than 30 years to convince the wizards on Wall Street of its financial merit. The truth is Wall Street is not convinced, and until Wall Street is convinced, Congress should stay out of the risky financial deals.

The New York Times today had an article about the empty energy bill. One of the paragraphs from the New York Times article reads:

The biggest addition to this dreary lineup [of matters in

this bill] is a huge $30 billion subsidy for nuclear power.

It goes on to say that this is simply bad. Even pronuclear allies regard this package as being excessive.

The Washington Post today says:

. . . taxpayers should not be asked to provide subsidies

for new nuclear power plants either. As it stands, Senate

legislation would provide loan guarantees for up to half of

the construction costs of new nuclear plants.

If the Senate wants to encourage nuclear power plant

construction, it should find means to do so that don't risk

such a high price to the [American] taxpayer.

I don't believe my colleagues should guarantee these loans, and that is what we are doing. They wouldn't do it with their own money, so we should not allow the Federal Government to do it with taxpayer money.

I commend and applaud the sponsors of the amendment, the Senator from Oregon and the Senator from New Hampshire. I hope their amendment will pass.

I announce that the Senator from Connecticut (Mr. Lieberman) is necessarily absent.

You are not yielding to Senator Fitzgerald.

Madam President, I send an amendment to the desk.

Madam President, I ask unanimous consent that the reading of the amendment be dispensed with.

Madam President, first, I commend the senior Senator from California and her cosponsor, the junior Senator from Illinois, for their amendment and their work on this very difficult issue dealing with derivatives and how to regulate them.

To critics of the amendment, I suggest you put yourself in Senator Feinstein's shoes. She represents the largest State in the United States and one of the largest governments in the world. The State of California's GDP is larger than most countries' of the world.

In the West, we are still feeling shock waves from the energy crisis that threatened California's and Nevada's prosperity and brought home to all of us that we are in uncharted territory with energy deregulation.

Senator Feinstein inadvertently included metal derivatives with the energy derivatives that are the intended target of her amendment. Unlike energy derivatives which raise questions because of the recent energy crisis, metal derivatives have been sold over the counter for decades. The amendments in 2000 to the Commodities Exchange Act did not change this, and that was proper. They only clarified and confirmed the legality of these markets.

Lumping metal derivatives together with energy derivatives would impose regulatory burdens that never existed even before the 2000 amendments and, of course, without justification; therefore, I offer this second-degree amendment to restore metal derivatives trading to exempt commodity status. Metals would be treated as if they were under the Commodity Futures Modernization Act of 2000.

Like other derivatives, metal derivatives markets help companies manage the risk of sudden and large price changes.

In recent years, derivatives and so-called hedging transactions helped the mining companies in the State of Nevada, which is the third largest producer of gold in the world, second only to Australia and South Africa, with a steadily declining gold price by selling mining production forward.

A large mining company in Nevada, Barrick Gold, had no layoffs during this period of time as a result of these forward selling programs. The last couple of years illustrate the function and value in the marketplace of such transactions. Some companies decided not to hedge, betting the gold price would rise and hedging contracts would lock them into below-market prices. Most of those companies are no longer around because the gold price has stayed relatively low.

In contrast, other companies hedged some or most of their production. These companies have survived or even thrived, for the most part. By choosing to manage their risk, they accepted the risk that the gold price could rise, but they stabilized company performance, continued to provide jobs and contribute to communities in rural Nevada where they are so important.

The gold mining business in America is so important. It is important because it is one of the few areas where we are a net exporter, and that is the way it has always been. The Feinstein amendment includes metal derivatives citing fraud in the metals markets, but there is no example of fraud on any occasion regarding the metals markets in the past decade.

Examples of such fraud that did take place a long time ago are cases such as the Hunt brothers in silver and Sumitomo in copper. These were regulated markets and over the counter trades did not exist at that time. The Hunt brothers just went out and bought silver on the free market. Neither of these fraud cases are addressed by the Feinstein amendment.

The attempt, as I indicated, by the Hunt brothers in 1979 to ``corner the silver market'' involved manipulation of the physical silver market. The

Hunt silver scandal involved trading on regulated exchanges, not in the over-the-counter derivatives markets. The trading abuses involved the physical accumulation of 200 million ounces of silver. It did not involve over-the-counter derivatives.

I say in passing, I had a great friend. His name was Forrest Mars, one of the richest men in the world. He lived in Las Vegas in a very small apartment above his candy store. But as you know, this giant of commerce was a multi-multibillionaire. After the Hunt brothers had manipulated the market, he told me: These guys are so dumb. They should have come to me. I could have told them you cannot have monopolies. They do not work. I tried it a couple times.

He said: For example, once I went out and tried to corner the market on black pepper. Black pepper has been part of commerce for so many centuries, and he figured he could corner the market on all black pepper, and he did. He owned every producing facility, farm, and manufacturing facilities related to black pepper in the world. But he said: They outfoxed me because all they did was dye white pepper and ruined my monopoly.

I say this because the Hunt brothers fiasco in 1979 was an effort to have a monopoly, and it did not work for a lot of reasons.

The Sumitomo situation involved the alleged manipulation of the copper market by a Japanese company acting through a rogue trader acting in London and Tokyo. The trading abuses occurred on a fully regulated exchange, not in the over-the-counter derivatives market. The trading abuses involved manipulation of the price of copper on the London Metal Exchange, a futures exchange which is fully regulated by the UK's Financial Services Authority. Further, the manipulation took place overseas, not in United States markets.

I repeat, we owe Senator Feinstein and Senator Fitzgerald a debt of gratitude for their interest in this issue and their work in proposing changes to the Commodity Exchange Act that will ensure trading in energy derivatives when it is done over the counter with transparency, in a way that inspires public confidence in the markets.

I urge my colleagues to eliminate metals from this amendment. I think it would help the adoption of their amendment. If they decide not to do that, I urge my colleagues to support my amendment which strikes metal derivatives from the Feinstein amendment. My amendment would not allow metal derivatives markets and participants to trade derivatives without accountability and transparency. Adequate recordkeeping needs to be in place. The Commodity Exchange Act already requires some recordkeeping for these otherwise ``exempt'' transactions.

Derivatives are essential to the health of the metals market, and fraud in metals markets did not involve over-the-counter derivatives.

I suggest the absence of a quorum.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I have been working with the two sponsors of this legislation. They have agreed to take my amendment. I have spoken with the majority and they say, no, they didn't want it to be done tonight, maybe tomorrow. I would simply say that we in good faith have worked, as I told the majority leader I would do, to try to move this bill along. Moving this bill along does not mean they are only going to be happy if we offer amendments that they like. The Senator from California in good faith offered this amendment. Whether people like it or not, if we are going to move this Energy bill along, we have to vote on it in some way. But it is my understanding that tonight nothing is going to happen.

It is pretty obvious nothing is going to happen. There has been nobody here. There has been nobody here to oppose her amendment. Of course, no other amendments can be offered until this one is set aside.

I just want the record to so reflect at a later time, when people come and say, we should try to move this bill along, and there have been statements on the floor made by the manager and the majority leader that they wanted to finish this bill this week.

I was asked at lunchtime, how did I feel about finishing the bill this week. I said to the reporters asking me: When you step back a little bit, there is about as much chance of our finishing this bill this week as my turning a back flip here in front of the two of you.

The record should reflect, I can't turn a back flip and never have been able to.

My point, I repeat, is that I am doing my very best to cooperate as I have been advised by the Democratic leader we should do everything we can to help with this bill. But help is a two-way street. When an amendment is offered that people don't like, you just can't have them leave rather than a single word being spoken against the amendment of the Senator from California other than my amendment which they have agreed to accept.

Having said that, wanting to continue to move this important piece of legislation, I note the absence of a quorum.