U.S. Reps. Peter DeFazio (D-OR) and Greg Walden (R-OR) have introduced two bills that seek to bar energy suppliers from engaging in questionable “round-trip” and “wash” trading transactions for electricity. The measures do not address similar trades for natural gas, a DeFazio spokeswoman said, but she noted the lawmakers may add gas later.

H.R. 4826, the “Truth in Electricity Trading Act,” would amend the Federal Power Act to prohibit such trades, while H.R. 4827, the “Truth in Electricity Revenue Reporting Act,” would amend the Securities Exchange Act to ban the recording of revenue from round-trip sales of electric power. H.R. 4826 calls for the Federal Energy Regulatory Commission to impose penalties on violators, similar to those levied for price manipulation. H.R. 4827 would subject violators to fines from the Securities and Exchange Commission.

Several energy companies — such as Dynegy Inc., CMS Energy and Reliant Resources — have admitted to engaging in round-trip trading of energy in California and other western markets during 2000-2001, as part of FERC’s sweeping probe into irregularities by traders. Reliant Resources acknowledged that more than 70% of its electricity trades since 1999 were the result of “wash” trades, which are designed mostly to pump up trading volumes and revenues.

The practice of round-trip, or “wash,” energy trading involves selling energy at a fixed amount and cost and simultaneously purchasing the energy back at the same volume and price. The wash trades primarily occur on unregulated, over-the-counter markets, rather than regulated exchanges, the lawmakers said. While the practice may be considered unscrupulous, it currently is not illegal, they noted.

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