FERC, BP Settle Trading Probe

Federal energy regulators approved a settlement Friday with BP Energy Co. of charges that the subsidiary of London-based oil giant BP manipulated Southwestern electricity prices through bogus trades.

Under the agreement with the Federal Energy Regulatory Commission, Houston-based BP Energy will contribute $3 million to low-income energy assistance programs in California and Arizona.

BP was allowed to keep its power trading authority, which FERC had threatened to strip away. But BP, which expanded rapidly in power trading as ailing competitors abandoned the business, will have to abide by strict reporting guidelines for six months in the Western market.

FERC investigators in March accused BP of engaging in coordinated efforts to manipulate electricity prices at Palo Verde, a key Arizona hub where prices are set for electricity trading in the Southwest.

FERC said transcripts of routinely recorded telephone conversations showed that a BP trader and a trader from Houston-based Reliant Resources Inc. engaged in two phony trades to boost the price of electricity in April 2000.

BP and Reliant said the behavior violated company policies, and fired the traders. But the companies have denied they broke any laws or rules; BP admitted no wrongdoing in agreeing to Friday’s settlement.

The investigation of Reliant’s role remains open. A Reliant spokesman could not be reached for comment.

BP spokeswoman Pat Wright said the company settled because “it’s time to move on.... We’re pleased obviously to reach the settlement, and we’re pleased that we are retaining our energy marketing authority.”

BP was one of North America’s top 10 electricity traders during the first quarter, trading 59.6 million megawatt-hours, Wright said. In 2000, however, the company was new to electricity trading and “made very little money,” she said.

BP was determining how to divide the $3 million between California and Arizona, Wright said, adding that the money would be paid within 30 days.