SEC Steps Up Probe of Dynegy

Dynegy Inc., already under scrutiny for power trading in California, said Wednesday that Securities and Exchange Commission investigators are seeking a formal investigation of natural-gas transactions that inflated how much cash the company generated from operations. The stock fell to a 2 1/2-year low.

Investors and regulators have been reviewing Dynegy and other energy traders more closely since the collapse of Enron Corp. Dynegy’s stock tumbled Tuesday on concern that traders might have to pay more than $1 billion in California refunds after indications by Enron that it manipulated the power market.

The formal investigation, which lets the SEC subpoena documents or testimony, follows a commission inquiry last month. Dynegy is cooperating with the investigation of the “Project Alpha” transaction, the company said.

Shares of Houston-based Dynegy fell $1.11, or 9.1%, to $11.15.

Dynegy declined to comment further on the SEC probe.

The Federal Energy Regulatory Commission on Tuesday told energy traders to preserve all documents relating to strategies they used in California’s energy market during the state’s power crisis in 2000 and 2001.

“If there’s any evidence of illegal market manipulation, this administration will go after it,” White House spokesman Ari Fleischer said. “We’re investigating it now.”