PG&E;, Calpine Say They Engaged in ‘Wash’ Trades
The trading arms of PG&E; Corp. and Calpine Corp. told federal regulators that they participated in so-called wash trades, but said the transactions did not affect their financial statements and were done for legitimate business purposes.
The two California companies were among more than 100 to file sworn statements Friday with the Federal Energy Regulatory Commission about whether they engaged in “sell-buyback” transactions with the same company for the same amount of electricity at the same price.
Such sham transactions are seen as a way to falsely boost trading revenue or the price of electricity posted by independent indexes published by Dow Jones, Bloomberg and Platts.
Most of the power sellers denied using wash or round-trip trading in 2000 and 2001 in Western markets, but some attached qualifications to their denials.
San Jose-based Calpine said it participated in 31 wash trades in 2001 of more than 72,000 transactions during the year.
Calpine said in its filing that the trades were not done to increase trading volume or corporate revenue, to influence market prices or “for any other illegitimate business purpose.”
The company said in a news release that it used the trades, with unnamed partners, for risk management. The trades represented about one-tenth of 1% of Calpine’s revenue in 2001, the company said.
Calpine’s media representatives did not return calls seeking an explanation of how a company might use such transactions to manage risk.
PG&E; Corp.’s National Energy Group said it uncovered 12 wash trades in 2000 and 2001 of more than 25,000 electricity trades during those years.
The trades were initiated by NEG’s trading partner and represented less than one-fifth of 1% of company revenue, said spokesman David Mould.
Mould declined to identify the trading partner.
“None of these trades were designed to inflate our trading volume,” Mould said. “None of them were involved in market manipulation.”
NEG said its trades were reported to Dow Jones, which publishes an index of electricity prices.
Calpine said the individual trades were not reported to any index publisher, but Calpine said it could not determine if the trades were included in a range of transaction prices reported to such publishers.
Reliant Resources Inc. and CMS Energy Corp. have acknowledged heavy use of wash trades, but largely outside of Western markets.
Dynegy Inc. also participated in wash trading, but said CMS initiated the trades.
Federal energy regulators sought the information on wash trades as part of their investigation into possible market manipulation during the California energy crisis.
