El Paso Corp. and Duke Energy late last week joined the ranks of energy companies receiving subpoenas from federal authorities seeking information on questionable trading activities. Both companies received subpoenas from the U.S. Attorney’s Office in Houston regarding a grand jury investigation, and Duke Energy was handed a subpoena by the Commodity Futures Trading Commission (CFTC) as well.

El Paso said its grand jury subpoena, which it received late Friday, demands “any and all” documents related to natural gas round-trip, or “wash,” trading activities that were carried out since Jan. 1, 1999. Duke said the two subpoenas that it was handed Thursday also seek documents and information related to bogus round-trip trading activities. The two companies said they planned to cooperate fully with federal authorities.

The attorney general’s office in Houston confirmed the service of subpoenas, but declined to say what they were for, citing the confidential nature of grand jury investigations. Dynegy also received a subpoena from the Houston U.S. attorney’s office in May when its round-trip trades with CMS were revealed (see NGI, May 27).

And in late May, Reliant Resources was subpoenaed by both the U.S. Attorney’s Office for the Southern District of New York and the U.S. Attorney’s Office for the Southern District of Texas, which includes Houston, according to company spokeswoman Sandy Fruhman. Since then, Reliant has been informed that the cases were consolidated, and are being handled out of New York, she said.

The CFTC also has subpoenaed documents related to the round-trip trading activities of Reliant Resources, Enron affiliate Portland General Electric and Avista Corp. Dynegy is a target of the CFTC investigation as well, but it voluntarily turned over information to the commission about transactions on DynegyDirect, including trades with CMS Energy.

Duke Energy has reported that it participated in $2 billion in round-trip trades; Reliant Resources has admitted to carrying out $6.4 billion in similar trades between 1999 and 2001; and CMS Energy has pegged the value of its round-trip trading activity at about $3 billion, Sen. Dianne Feinstein (D-CA) said during a Senate committee hearing on Wednesday..

CFTC Chairman James Newsome told the same Senate panel that his agency was “deep into a comprehensive investigation” of round-trip energy trading activities, which he said appeared to be “fraudulent,” and he vowed to “aggressively prosecute” violators to the “fullest extent of the law.” He could not say when the CFTC would complete its probe.

In addition to the Department of Justice and CFTC probes, parallel investigations are being carried out by the Federal Energy Regulatory Commission and Securities and Exchange Commission into the bogus trading activities of energy companies. FERC has said it will report on the status of its investigation sometime this month.

On another front, The Charlotte Observer newspaper Friday said in a copyrighted story that it had discovered Duke was one of the highest-priced sellers into the California market during the 2000-2001 energy crisis. The newspaper said it broke the ISO code for bidders, discovering in the process Duke’s bid to sell the state power for $1,170 per MWh on the first day of the blackouts. “The Observer also found bids that match sales that another generator has acknowledged making. That data show that Houston-based Reliant Energy Inc. may have offered the state power at an even higher price than Duke did.”

The newspaper quoted Duke as saying the high prices were dictated by the credit risk involved in selling to the state, which had not paid its bills for previous purchases. “Duke says it is still owed $266 million for power sold to the agency,” according to The Charlotte Observer. It noted that it was unable to break the code for one bidder who offered power to the state for $9,999 MWh.

The news of an added layer of investigations into trading activities took its toll Friday on the stocks of Duke Energy and other major energy companies. Duke Energy closed at around $24.75 a share, down by $3.20 for the day and by almost half of what it was going for a year ago. Dynegy fell 21 cents to $6.30 per share; Williams ended the day at $5.69 for a loss of 13 cents; and El Paso finished out at $17.75 a share, down by 35 cents, compared to $54.05 a year ago. The merchant energy and trading companies had a brief, shining moment Thursday when almost all their stocks went up significantly, while the rest of the stock market treaded water for the day.

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