Duke Energy (DUK) on Friday became the latest U.S. utility to face a probe from federal regulators into alleged sham trading in the power industry.

Shares in the Charlotte, North Carolina-based company fell as much as 14 percent after it said it had received subpoenas from federal agencies requesting documents relating to its trading activities. 

Several U.S. power companies, including Dynegy Inc. and Reliant Resources Inc., are being investigated for the use of "round trip" trades -- trades between two counterparties of similar volume at the same price used to inflate volumes and revenues. 

Various government agencies have opened investigations into strategies employed by power traders, especially after state officials in California blamed them for widespread aggressive behavior to increase profits while the state fought to keep the lights on during its power crisis two years ago. 

Shares of Duke reached a session low of $24.05 in the morning and finished down $3.20, or 11.45 percent, at $24.75 on the New York Stock Exchange. That marked a new 52-week low for the company's stock. 

"I think the market has continued concerns over the uncertainty regarding the regulatory investigations of energy trading, and the recent announcement only adds to that uncertainty," said Jeff Gildersleeve, an analyst at Argus Research. 

Duke said the subpoenas were from the Commodity Futures Trading Commission (CFTC), which has served similar notices to other energy companies for information on their trading activities. 

It also received a subpoena from the Houston office of the U.S. attorney general regarding a grand jury investigation. 

Duke said both subpoenas request information and documents relating to trading activities, including round-trip trades. 

COOPERATING WITH AGENCIES 

The company, which has said it did a small number of transactions that might appear to be "round trip" trades but were actually used to hedge natural gas prices, said it was cooperating with both agencies. 

The exact implications of the subpoenas are unclear, but Paul Fremont, an analyst at Jefferies & Co., said, "If you look at some of the competitor organizations which have come under a high level of scrutiny by the government, they have announced they're basically getting out of the business." 

"What investors are grappling with right now is, should we be concerned about the immediate findings of the government and whatever fine or penalty they choose to impose and will this put pressure on Duke to exit this business?" 

Already, Aquila Inc. and El Paso Corp. have said they will limit their exposure to the trading business and Dynegy Inc. has decided to suspend trading in its online system. 

It's also unclear how much does Duke's trading operation contribute to the company's overall business because those numbers aren't broken out, Fremont said. 

"I think the problem is that everyone's guessing," he said. "The absence of disclosure is hurting the company." 

However, Greg Phelps, who manages five funds within John Hancock's Patriot Group, believes that Duke's "incredible amount of credibility and veracity" will vindicate it when the government inquiries are completed. 

He noted too that Duke -- which does not have as much debts as some of its competitors -- still deserves its high investment-grade credit ratings, even though many of its rivals have seen their ratings slashed to "junk" or close to it. 

Duke is rated "A plus" by Standard & Poor's and "A1" by Moody's Investors Service. 

Cheryl Richer, director at Standard & Poor's, added that Duke is also different from its cash-starved competitors because the majority of its revenues come from its stable regulated utility and gas transmission businesses. 

"There are certainly negative things, like falling energy prices and the loss of investor confidence, going on and we are going to have to monitor them and they certainly could at some point have an effect on Duke," she said. 

"But it's not as if energy trading were their sole activity." 

The energy trading sector was roiled by the bankruptcy of Enron Corp. last December, which brought to light many trading activities like round-trip trades, which artificially pumped up volumes and revenues.