An unregulated division of PG&E Corp. engaged in potentially deceptive energy-trading practices during the California power crisis that drove the company's utility into filing for bankruptcy, according to documents filed Friday.
In its quarterly report to the Securities and Exchange Commission, San Francisco-based PG&E said its National Energy Group participated in at least 44 transactions that created the appearance of energy trades from January 2000 through May of this year.
The illusory practice, commonly known as "washing" or "round-tripping," involves two traders swapping the same amount of power for the same price.
PG&E said it banned the practice after uncovering the transactions during an internal inquiry prompted by federal regulators.
The "washing" technique can be used to artificially inflate revenue to improve a company's income statement or to generate a sales commission for a trader. If enough traders launder megawatts at the same time, it can drive up market prices, said Frank Wolak, a Stanford University economist who chairs California's power market surveillance committee.
Bethesda, Md.-based National Energy believes "there could have been legitimate reasons" for round-tripping, said David Mold, a spokesman for the energy trader. National Energy isn't certain of the motive behind the transaction because all but four were initiated by other traders, Mold said.