CMS Energy Admits to Bogus Power Trades

CMS Energy Corp. said it engaged in bogus electricity trades that inflated revenue and expenses by $4.4 billion over 18 months in an attempt to become a leading energy trader.

Dearborn, Mich.-based CMS said it stopped “wash” trades, in which traders buy and resell electricity without profit or loss, in mid-January. The company said an internal review found the bogus trades accounted for nearly 80% of electricity traded in 2001, and more than 70% the year before.

The company also said it restated revenue and expenses downward by $3.4 billion for the first three quarters of 2001, which was reflected in its annual filing done in March.

All CMS trades were done with units of Dynegy Inc. and Reliant Resources Inc., leading energy trading companies that already have acknowledged the sham transactions. Revelation of the bogus trades last week sent the shares of all three companies plunging.

Dynegy fell 9% to $8.35 and Reliant Resources fell nearly 11% to $7.73, but shares CMS rose 20 cents to $17.23.

CMS said the bogus trades had no effect on its earnings, cash flow or balance sheet for 2001 or 2000.