Duke Energy told federal regulators Tuesday it participated in round-trip, or “wash,” trading activities, but said it did not do so “for the purpose” of inflating reported revenues or influencing prices. Nevertheless, the trades did result in a relatively small gain in revenues, the company said, while also admitting to a small number of bogus transactions that were intended to boost trading volumes.

In a preliminary report submitted to the Securities and Exchange Commission (SEC), the Charlotte, NC-based company said it identified 23 paired power and natural gas transactions that “had the apparent purpose of increasing volumes on the IntercontinentalExchange (ICE),” an electronic trading platform in which Duke Energy is one of 13 equity owners.

The 23 trades on ICE had no effect on Duke Energy’s earnings, the company said in a press statement. The transactions did inflate Duke Energy’s reported revenues by $126 million in 2001, which was about “one-quarter of 1%” of the company’s total $51.4 billion revenues derived from natural gas and electricity trading and marketing activities last year, it noted.

The trades involved 37 Bcf of gas, or 0.73% of Duke Energy’s total gas trades in 2001, and 706 gigawatt hours of electricity, or 0.21% of the company’s annual power trades, according to the company.

In the wake of the SEC report, Standard & Poor’s Tuesday placed the credit ratings for Duke Energy, Duke Capital Corp. and its subsidiaries on CreditWatch with negative implications. While the magnitude of the round-trip trades reported by Duke Energy was “negligible,” the ratings agency said it found “more disturbing” the fact that the company still had 3,000 trades to review.

(Questioned about wash trades reported in the energy industry during his appearance before a congressional committee Tuesday morning, Federal Reserve Chairman Alan Greenspan said he was “puzzled” as to why companies “play those games. I’m not sure it makes any sense whatever,” since “while revenues do rise, margins go down.”)

Duke Energy spokeswoman Cathy Roche said that while the trades did artificially inflate the company’s revenues, that was not the “motivation” behind the trades. “The distinction is these [trades] were not done to increase revenues.” Instead, the objective was to hike trading volumes, she noted.

Because the sham trades were not for the western energy markets, Duke Energy said they didn’t surface in its response to the Federal Energy Regulatory Commission’s investigation into round-trip trading activity involved in the western power crisis. Most of the 23 trades were for eastern markets, said Roche.

The company’s preliminary report to the SEC covered its energy trading activities between Jan. 1, 1999 and May 31, 2002. It still has about 3,000 more trading transactions to analyze and expects to provide an update to the SEC next month, she noted.

Duke Energy has put a trading manager on indefinite leave with pay to “assure the independence of the review” of its trading practices during that period, according to Roche.

The report was in response to a “confidential inquiry” being carried out by the SEC into the round-trip trading activities of Duke Energy. Because of its confidential nature, Roche said the report would not be available to the public.

In addition to the SEC inquiry, Duke Energy received a subpoena from the U.S. attorney’s office in Houston last week for its trading records and documents, and is the target of parallel probes being carried out by FERC and the Commodity Futures Trading Commission into the sham trading practices of energy companies. Duke Energy was given a deadline of Aug. 19 to turn over records to the U.S. attorney’s office, said Roche.

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