Concern over lack of regulation in the over-the-counter energy markets was fuelled on Monday as a powerful US gas industry group added its voice to calls for tighter oversight of such markets.

The move came as the Commodity Futures Trading Commission (CFTC) settled with a former American Electric Power energy trader in a case alleging falsely reporting natural gas trades and attempting to manipulate natural gas prices.

It was the second such case settled in less than a week.

Calls for the US congress to address lack of oversight in the OTC energy markets have been mounting since a report issued in June by the Permanent Sub-committee on Investigations claimed that speculation in OTC markets was contributing to record high energy prices.

OTC markets are markets where trading is done between two parties on the phone, or on specialised electronic platforms such as the Intercontinental Exchange, or ICE.

The report’s authors, senators Norm Coleman and Carl Levin, called for the CFTC to extend a system of reporting trades in exchange-traded energy markets to OTC markets.

In a letter sent on Monday to Saxby Chambliss, chairman of the senate’s agriculture committee, the American Public Gas Association (APGA) said Congress “must give the CFTC authority to collect information concerning all positions held by the largest traders in the natural gas derivatives market”.

“It is important that the government be able to monitor large positions to detect or prevent any squeezes or manipulations,” APGA president Bert Kalisch said.

He said that the recent meltdown of hedge fund Amaranth and earlier MotherRock hedge fund failure “highlight the need for regulators to understand and have access to more data to monitor the natural gas market”.

The letter was sent to the agriculture committee because it is responsible for overseeing the CFTC.

The CFTC has the authority to pursue alleged manipulation in the OTC markets through its congressionally-mandated enforcement powers. But it does not regulate OTC markets, limiting such oversight to exchange-traded energy markets.

The CFTC on Monday settled a civil case against Joseph P. Foley, a former desk head at American Electric Power (AEP), that he directed employees to falsely report natural gas trades and attempt to manipulate natural gas prices.

The agency charged that, from at least November 2000 through September 2002, AEP traders repeatedly reported false natural gas trading information, including price and volume information, to firms that compile natural gas price indexes such as Platts, a division of the McGraw-Hill Companies.

The complaint alleged that Foley knowingly directed the delivery of false information to price index compilers in an attempt to skew those indexes for his financial benefit.

Mr Foley agreed to pay $350,000 as part of the settlement.

Gregory Mocek, CFTC director of enforcement, said: “Today’s settlement further demonstrates that false reporting to energy index providers will be discovered, and the culprits will be punished.”

The case was the second since the CFTC last week entered in to a $4.25m settlement involving false reporting of natural gas prices with Dominion Resources, a large US energy group based in Virginia.

It was also the second this year involving AEP. The company and its subsidiary AEP Energy Services in January paid $30m to settle false reporting and attempted manipulation charges with the CFTC.

Evidence in support of the Permanent Subcommittee on Investigations’ allegations about lack of OTC oversight came last month with the release of a report claiming that this summer’s jump in energy prices could not solely be attributed to economic fundamentals such as fuel storage levels, demand and supply.

The report, funded by the National Legal and Policy Center, a non-profit group was produced by Sonecon, a consultancy.

One of its authors, former Clinton era undersecretary of commerce Robert Schapiro, said: “We’ve had millions of people paying natural gas prices that are not justified by the economics that are almost certainly the result of some broad scale manipulation of those markets. It begins with the fact that significant parts of the market aren’t subject to oversight,” he said, referring to the OTC markets.

Senator Dianne Feinstein, a California Democrat, has tabled a bipartisan bill that would require traders on ICE, Houston Street and other OTC trading platforms to keep records and report large positions carried by their market participants in energy commodities for five years or longer.