updated 3/29/2007 9:45:49 AM ET 2007-03-29T13:45:49

State regulators on Wednesday recommended $210 million in fines against TXU Corp. after an investigation accused the state's largest utility of manipulating the electric market to its own benefit.

The alleged market abuse was observed between June and September of 2005, according to the Public Utility Commission. It wound up costing consumers $70 million and earned the utility $20 million in extra profits, according to an outside expert whose report was released by state regulators two weeks ago.

TXU, the largest power generator in Texas, sold power to the market at inflated prices and caused electricity prices to rise 15.5 percent during the summer stretch, the PUC said.

A TXU spokeswoman denied wrongdoing and said the Dallas-based company was "very disappointed" in the recommended fine.

"The accusation of any market power abuse is flatly wrong," spokeswoman Sophia Stoller said. "We look forward to exposing the flaws in the analysis as we contest the staffs position."

Stoller said TXU believes it properly followed PUC rules and said the agency was "clearly trying to penalize TXU inappropriately."

TXU has up to 30 days to respond to the state's recommendation, which will then go before the three PUC commissioners, agency spokesman Terry Hadley said.

TXU could either pay the fine or contest it by seeking a hearing before the State Office of Administrative Hearings or a settlement conference. TXU serves 2.3 million customers, mostly in the Dallas-Fort Worth area.

The PUC's recommendation came the same day TXU announced it would cut electricity prices by 6 percent as part of its pending $32 billion acquisition by private investors.

The rate reduction would affect about 1.3 million TXU Energy customers beginning with their next monthly bill. On average, customers using an average of 1,500 kilowatt-hours of electricity per month would save about $150 annually, company officials said. Prices would be cut an additional 4 percent if the deal goes through.

A holding company formed by Kohlberg Kravis Roberts & Co., Texas Pacific Group and other investors announced last month it was trying to acquire TXU Corp. for about $32 billion and the assumption of about $13 billion in debt. It would be the largest private buyout ever.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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