http://www.nytimes.com/2006/01/15/business/yourmoney/15traders.html?pagewanted=1 HOUSTON FROM the windows of the trading floor at Centaurus Energy, you can see the glittering tower where Enron once had its headquarters with the crooked "E." But this is no Enron. Created by John D. Arnold, Enron's former wunderkind trader of natural gas, Centaurus is part of a new breed of low-profile hedge funds that dabble in energy. Enron, once the country's seventh-largest company, introduced its modern trading floor on national television and boasted of its ambition to be the world's leading energy company, only to collapse spectacularly in 2001 and set off a wave of investigations into corporate malfeasance. Centaurus eschews most publicity and operates out of the eighth floor of a nondescript building near a highway, its glass doors tinted with light blue to prevent visitors from seeing what happens inside. When Mr. Arnold, 31, created Centaurus in 2002 with $8 million of his own money, the energy trading industry was on its knees, incapacitated by the fraud and irrational exuberance at Enron. Since then, Centaurus has amassed $1.5 billion in assets under management and has hired big-name traders like Greg Whalley, a former Enron president. The industry that Enron made infamous - energy trading - is springing to life again. Volatile energy markets and record-high commodity prices are prompting renewed interest from investors eager to play in the sector. That has pushed banks and a growing number of hedge funds to hire more energy traders and brainy quantitative minds to back their bets on energy prices. In Houston, New York and London, a scramble for top trading talent has ensued that rivals the cutthroat hiring frenzy of the late 1990's. "The whole market is hot right now," said Justin Pearson, managing director of Human Capital, a search firm based in London for energy traders. "Everybody is talking about expansion." And helping to lead the industry's resurgence are traders from Enron like Mr. Arnold, who is not under any legal scrutiny, and those from other companies who lost their jobs after the 2001 blowup. Most have landed on their feet at banks, hedge funds or oil companies like BP and Chevron. BUT with that revival come questions from some financial market analysts about whether energy trading will be better able to withstand another potential meltdown. While banks have stepped in with their superior balance sheets, credit ratings and trading skills to fill the liquidity void left by Enron, the latest ramp-up in trading has also been marked by an air of secrecy underscored by the proliferation of hundreds of hedge funds that are speculating on everything from crude oil to electricity in both regulated and unregulated markets. Many funds are being aided by investments from banks, which are also buying up distressed power plants and other remnants of the collapsed sector. At least two funds suffered big losses last summer. And some industry officials question whether the funds are contributing to higher energy prices, or at least stoking more price volatility. "The government can't assure the public that the over-the-counter market isn't being manipulated," said Randall Dodd, director of the Financial Policy Forum, a nonprofit group in Washington that studies the regulation of financial markets. The resurgence of energy trading comes as investigations continue into the conduct of traders during the years when Enron ruled. Federal officials in Houston and San Francisco have charged 22 traders at six energy companies, including Enron, with crimes. So far, 12 have pleaded guilty or have been found guilty of trying to manipulate markets or falsely report trades to industry publications. The Commodity Futures Trading Commission, which regulates futures exchanges, has settled 30 cases with individual traders and energy companies accused of trading shenanigans, ordering a total of $298 million in civil penalties. Traders at Enron were among those who took advantage of California's poorly constructed deregulation law and helped to bring about the state's energy crisis of 2000 and 2001. They concocted schemes to manipulate electricity markets and to maximize Enron's profit, using names like Fat Boy and Death Star to describe the strategies. Some bantered casually in 2000 about how they were "stealing" from California and sticking it to "Grandma Millie" by overcharging for power, according to audiotapes of their conversations that have been made public. Ultimately, Enron's failure was not tied directly to the actions of traders, who made hundreds of millions of dollars for the company. But company traders were speculating on energy prices - despite the company's assurances to the contrary - and aggressive accounting of risky long-term energy contracts made Enron even more susceptible to a blowup. The taint of scandal and shame can still be felt today in Houston. The days of excess, when young traders held sway at the steakhouses and nightclubs downtown, celebrating their trading success while California suffered, seem long gone. "We don't really discuss what we do," Mr. Arnold said recently while standing on the Centaurus trading floor. "We're not like T. Boone," he added, referring to the legendary Texas oilman and commodities trader T. Boone Pickens, whose views on the natural gas market had just been broadcast on CNBC on a flat-screen television hanging above the trading floor. While having little of Enron's braggadocio, Centaurus derives much of its strength from its collapse. More than half of the 17 traders at Centaurus once worked at the company. After joining Enron out of college in 1995, Mr. Arnold was credited with booking $750 million in profits for Enron in 2001 by trading natural gas contracts. He was 26. He was rewarded with an $8 million bonus, the largest paid to any Enron employee in 2001. But some rivals were skeptical about just how good a trader Mr. Arnold was. He has said that about $150 million of the $750 million in 2001 trading profit had resulted from his role as market maker in gas trades on Enron Online, the company's Internet trading platform. Some traders have said that Enron Online was dominant enough to enable Enron to set market prices. And, they add, his big 2001 followed a rocky 2000 in which he lost more than $200 million. Few doubt his trading abilities these days. Mr. Arnold started Centaurus in August 2002 with three employees trading out of a single large room with a kitchen. Today, the company employs 36 people, including a full-time meteorologist. It has been closed to new investment for two years. "He is in a league of his own," said Peter C. Fusaro, co-founder of the Energy Hedge Fund Center, an online information center created last year to monitor the sector. "He went out and proved everybody wrong," said Jim Schwieger, a former natural gas trader at Enron. Even as Mr. Arnold has become wealthier, he has tried to remain low-key. But last year he attracted some unwanted attention when he demolished a historic home in the stately River Oaks section of Houston. Preservationists bemoaned the loss of the 77-year-old property, known as Dogwoods, valued with its land at $4.9 million, saying that Mr. Arnold acted insensitively. He declined to discuss the situation; a new home is being built there. MOST of the energy traders who lost their jobs have found banks and hedge funds eager to hire them during the industry rebound. Mr. Schwieger, 52, spent 23 years at Enron and was laid off shortly after publicly criticizing Kenneth L. Lay, then Enron's chief executive, at an employee meeting in October 2001, shortly before the company imploded; Mr. Lay is scheduled to stand trial on fraud and conspiracy charges later this month. Last June, Mr. Schwieger joined Citigroup's growing energy trading team in Houston. Vincent J. Kaminski, the former managing director of research at Enron - who warned his superiors at Enron of dangers the company faced - heads a team of quantitative gurus supporting Citigroup's traders. Wall Street banks are notoriously fickle about their commitment to commodities trading. But the eye-popping profits earned by the market leaders, Goldman Sachs and Morgan Stanley, have spurred other banks to get into the game. In 2004, Goldman and Morgan Stanley earned about $2.6 billion combined from commodities trading, most of that from energy, according to Sanford C. Bernstein & Company in New York. Even UBS, the Swiss bank that inherited 600 employees from Enron's former trading operation in Houston but whittled down that number to just 70, has revived its interest in building a stronger trading team and is hiring again. In February 2002, shortly after Enron declared bankruptcy, UBS took over Enron's natural gas and power trading operation and Enron Online. With little volatility to trade around, UBS started firing traders and switched off the Internet trading platform. By May 2003, it had closed the Houston operation, which was in Enron's new tower across the street from its former headquarters, and moved the remaining traders back to its trading base in Stamford, Conn. Today, the 40-story tower where Enron's traders worked briefly is owned and occupied by Chevron. What had been a sixth-floor trading room the size of a city block is now filled with exploration and production geologists and geophysicists working in earth-tone cubicles, said Mickey Driver, a spokesman for Chevron. The oil company has its own energy traders scattered on other floors.