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California

FERC Suspects Price Rigging Is Continuing

A natural gas market study says the industry's collapse has created conditions conducive to manipulation.

January 30, 2003|Jonathan Peterson | Times Staff Writer

WASHINGTON — Federal energy regulators may have found fresh evidence of price manipulation in natural gas markets, officials said Wednesday, despite heightened scrutiny of the industry in the wake of Enron Corp.'s collapse.

"Evidence indicates that price manipulation has occurred in certain natural gas marketplaces and may be continuing," according to a Federal Energy Regulatory Commission report. Regulators are "looking at particular situations where use of market power arising from weak market liquidity appears to have affected prices," the report said.

FERC commissioners revealed no details about which firms might be involved or which regions might be affected.

The concerns were contained in a broader study of the natural gas market, which said the collapse of the energy trading industry has created conditions in which companies can dominate markets -- and use that market power to affect prices.

Despite the report's strong language, however, FERC commissioners Wednesday cautioned against drawing conclusions at this time.

"We are investigating a lot of things," said FERC Chairman Patrick H. Wood III. But Wood noted that recent hikes in natural gas costs appear to stem from normal market forces in a cold winter rather than price manipulation.

"From what I see and know and hear, it's very much tied to a supply-and-demand issue," he said.

The report noted that the natural gas industry is struggling with a "traumatic financial shakeout" in the wake of the 2001 collapse of Houston energy trader Enron.

Since then, at least 14 other companies, including El Paso Energy, American Electric Power Co. and Dynegy Inc., have withdrawn from energy trading or announced plans to reduce their activity.

"Manipulation is more likely where market liquidity is low, price discovery is obscure and capacity is constrained, and this manipulation may move prices in either direction," the report said.

The report added that federal regulators are looking for ways to better detect manipulation in the natural gas marketplace.

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