Energy traders fail to clean up their act

A massive post-Enron crackdown on "sharp practice" in energy trading has failed to clean up the industry and market abuse continues today, say US authorities.

For more than a year, American regulators have devoted themselves to rooting out corruption in markets whose reputations were blackened by the collapse of Enron. Particularly critical was trading in the $140bn-a-year natural gas market, seen as the place where much of the trouble began.

But a new report due this week from the Federal Energy Regulatory Commission (FERC) shows clean-up efforts have not gone nearly far enough. "Evidence indicates that price manipulation has occurred in certain natural gas marketplaces, and may be continuing," it concludes.

Although limited to the US, the findings will reverberate in the UK and Europe, where many international trading companies are based.

Over the past 12 months, the FERC has led the investigations into many hundreds of companies. This has resulted in the filing of criminal charges relating to former employees of the trading giants Enron, Dynergy and El Paso.

But the FERC's report explains that, despite all the revelations, energy companies could still be manipulating wholesale natural gas prices by deliberately reducing storage and distribution of the product itself, or simply by sharing price-sensitive market information with trading partners or their own subsidiaries.

The FERC confirmed that investigations are still ongoing into the practices of specific companies and traders.

One effect of the report will be to strengthen criticism – on both sides of the Atlantic – of deregulation in energy markets. Analysis of the crisis that brought blackouts to California two years ago has shown that volatile and heavily manipulated energy trading was most likely to blame.