I am pleased and honored to appear before this Committee this morning to represent my company and the Electric Power Supply Association.

I want to thank Chairman Domenici and Senator Bingaman for their foresight and leadership on issues affecting the energy industry. We’re here today to explore the serious financial challenges my industry now confronts. To put this problem in some kind of context, I’ve worked in the electric industry my entire career – more than 30 years. The financial conditions we are experiencing now are the most difficult that I can remember.

Mr. Chairman, as you are aware, there is a constant need for capital to run our day-to-day operations, build new facilities, and develop new technologies. Many companies, even those that are prudently managed and producing excellent operational results, are facing severe limitations on their ability to access capital.

This is a serious problem and one that must be addressed today if we are to build the 355 gigawatts of new electric capacity the Department of Energy states we’ll need by 2020. The turbulence in our industry already has caused companies to cancel or postpone development of approximately 53 gigawatts of new capacity. And while not all of these cancellations can be blamed directly on the credit crunch, I am very concerned about the impact tomorrow of the financial difficulties facing us today.

I’d like to briefly offer my thoughts on what conditions have contributed to today’s difficulties, as well as what I view as necessary action on the part of industry and government to initiate recovery.

First and most importantly, we need to recognize that today’s credit crisis is partly the result of a sluggish economy, which has reduced the demand for electricity.

Second, part of our problem is self-inflicted. It would be disingenuous not to acknowledge that accounting difficulties, accusations of price manipulation, inaccurate financial reporting, and fudged and fuzzy balance sheets all have contributed to the lack of confidence now being expressed by financial markets and the financial community. The actions of a very small minority have affected the entire sector.

Clearly, our industry must take the lead in restoring the confidence of investors, regulators, policymakers, and customers in our industry and in the value of competition in electricity markets. We are moving aggressively to restore confidence on an industry-wide basis by implementing the EPSA Code of Ethics and the work of the Committee of Chief Risk Officers. On a company- by-company basis, we are shoring up our balance sheets, reducing debt levels, and making sure we live by the new Sarbanes-Oxley requirements. These efforts are essential and will continue.

The third and final part of the problem involves continued uncertainty about the outcome of public policy debate on the future of our industry.

This Committee has asked what Congress can do to help remove barriers to the flow of capital. I think there are four areas on which Congress can and should focus.

1) First, Congress can help address regulatory uncertainty by enabling FERC to move promptly to establish well-designed regional electricity markets across the country. In my view, the minimum requirements for a well-designed market include an independent grid operator; a real-time spot market with a means for managing congestion; a minimum resource adequacy requirement; and a market-monitoring plan to ensure all participants obey the rules.

2) Second, Congress needs to address the current patchwork of state and federal environmental regulations for power plant emissions. My company has been a strong advocate for national emissions caps with market-based compliance mechanisms. This system will provide clear direction on environmental policy and a sound basis on which to make investment decisions about our facilities. I am pleased this topic is on the Congressional agenda, and I encourage Congress to enact multi-pollutant legislation this year.

3) The third issue Congress needs to address is reform of the bankruptcy code. One of the realities of this credit crunch is that some companies will likely face bankruptcy. Our industry has done a very good job in mitigating counter-party risk by negotiating netting provisions in standard contracts. It is important that Congress pass Bankruptcy Reform legislation that ensures these contract netting provisions are honored in bankruptcy proceedings.

4) Finally, I would suggest two changes to the tax code that I believe will help spur investment. The first is accelerated depreciation of generation assets. Companies that build power plants should be provided the same tax treatment as other capital intensive industries. As an example, Mr. Chairman, facilities in shipbuilding and the pulp and paper industry are depreciable over seven years. The chemical and semiconductor industries are on a five-year schedule. Electric generation assets, however, are on a 15 to 20 year depreciation schedule. This is a disparity that should be corrected.

And for any publicly-traded company like PSEG that pays dividends, elimination of the double tax would be a useful and important investment incentive. I realize this is a controversial component of the President’s economic plan. I hope the debate focuses on the merits of the proposal and it goes forward.

Mr. Chairman, competitive power suppliers are responsible for 80 percent of all generation capacity added in the past decade. It’s very important that we address the financial condition of the electricity industry now in order to assure our nation continues to be served by reliable, affordable, secure and environmentally responsible supplies of electric energy.

Thank you again for the opportunity to appear before the Committee this morning. I will be pleased to respond to questions.