The Federal Energy Regulatory Commission staff has further expanded the scope of its three-month investigation into the activities of energy sellers in western markets to include round-trip, or so-called “wash” trading transactions.

In the wake of recent disclosures by Reliant Resources, CMS Energy and Dynegy that they engaged in questionable wash transactions to boost their trading volumes and revenues, the Commission staff Tuesday ordered about 140 municipal providers, marketers, traders, utilities, independent power producers and federal power administrations to “admit or deny” in an affidavit that they participated in similar trades during 2000 and 2001. Their responses are due at FERC before May 31.

Staff said it was unable to glean the extent of the wash trading activity from the information that western sellers had supplied on April 2 about their physical and financial transactions for 2000-2001. “The responses submitted indicate that the financial transaction data were not reported in a consistent manner, so that it cannot be used to identify so-called ‘wash,’ ’round-trip,’ or ‘sell/buyback’ type transactions.”

Failure to respond in a “timely and complete fashion” by the deadline may result in enforcement action against suppliers, including possible revocation of a public utility’s authority to sell wholesale electricity and/or ancillary services at market-based rates, staff said.

If a supplier admits to participating in “wash” trades, FERC staff has directed them to report “transaction-by-transaction details” for each trade, including: 1) the methods and rationale used to arrive at the value or compensation of the trade or trades; 2) whether the trades were reported to a price indexing newsletter or any other organization that monitors, publishes or reports trading data; 3) all transactions that were published or reported; 4) all traders who participated in the trades, by name and company position; 5) how the transactions were executed; and 6) all policies and procedures that have been implemented to prevent future trades of this type. The Commission staff also ordered suppliers to turn over all “communications or correspondence” and/or other materials that refer to the wash trading activities.

The Commission’s action comes nearly two weeks after it ordered wholesale energy suppliers serving western markets to “admit or deny” that they used strategies patterned after those allegedly employed by Enron Corp. to manipulate prices during the height of the California energy crisis in 2000 and the early part of 2001 (see Daily GPI, May 9). The gaming strategies — some of which were dubbed Death Star, Fat Boy, and Ricochet — were described in three internal memos that Enron turned over to FERC and the Department of Justice earlier this month. The suppliers’ responses are due at FERC Wednesday.

FERC has requested the information on “wash” trades and selling strategies as part of its wide-ranging investigation into allegations that Enron and possibly other energy suppliers manipulated power and natural gas prices in California and other western states. The agency initiated the probe in February at the urging of lawmakers on Capitol Hill, and hopes to provide Congress with a report on the results this summer.

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