In wash trades, a company simultaneously buys and sells energy to the same counterparty. The practice inflates a company's trading volume and can tilt market prices.

Republican Rep. Billy Tauzin of Louisiana, who chairs the Senate-House panel of negotiators working on an energy bill, said he supported banning such trades.

"They need to be made illegal - particularly practices like round-trip trades, practices that were designed to inflate volume in a fraudulent way," he told reporters.

He spoke after negotiators met to discuss conservation, weatherization funding and other minor provisions of the energy bill.

California Democrats have already called for a ban on wash trading, which they blamed for worsening the state's electricity crisis of 2000-01. A tenfold jump in prices then led to blackouts and the bankruptcy of a major utility.

Bill negotiators have until Sept. 16 to work out provisions that would prohibit wash trading and reform other aspects of the U.S. electricity market, Tauzin said.

Negotiators aim to complete all work by Sept. 30 on a wide-ranging package that includes proposals to drill in an Alaskan wildlife refuge and tighten automobile gasoline mileage standards. That would give the full Senate and House a week to debate and vote on final energy legislation before Congress' scheduled Oct. 4 adjournment.

$1 MILLION PENALTY

Recent wash trading admissions by CMS Energy , Reliant Resources Inc. , Duke Energy Corp. and others have propelled a sharp sell-off in energy stocks and a crisis of confidence in deregulated wholesale power markets.

"Let's just ban them so you can't do it," said Republican Rep. Joe Barton of Texas. Draft legislative language proposed by Barton would amend the Federal Power Act to do just that.

He proposed setting penalties of up to $1 million for companies that "simultaneously arrange a financially offsetting trade ... with an intent to deceptively affect reported revenues, trading volumes, or prices.

"I think a $1 million penalty gets peoples' attention," Barton said.

Pat Wood, chairman of the Federal Energy Regulatory Commission, on Wednesday said he would support a ban on round-trip trades. However, he said another effective deterrent was the skid in stock market prices for companies that have admitted to some of those practices.

Earlier this summer, FERC launched an investigation of wash trading to determine the role it played in the California electricity crisis. The agency has promised to release an interim report on its investigation by early August.

Other probes are underway by the Securities and Exchange Commission and by a federal grand jury in Houston.

PRICES WOULD BE PUBLISHED

Republicans on the House-Senate negotiating panel said they also want to require the FERC to publish wholesale electricity market prices on a real-time basis, aimed at giving regulators the ability to spot unfair practices.

The measure, supported by Tauzin, would require the FERC to create an electronic information system.

Every "broker, exchange, or other market-making entity" that buys or sells wholesale power would have to provide data on interstate trades "as soon as practicable and updated as frequently as practicable," according to the draft language.

Legislators are closely watching the current plight of energy companies like Williams Cos Inc. and Dynegy Inc. , which have seen their share prices plummet.

The top 12 energy companies have lost 86 percent of their market capital since May of 2001, or $222 billion in value, according to data circulated by lawmakers. That is roughly the annual value of all trades in the U.S. wholesale power market.