The energy business has another about-face on its hands.

Williams

(WMB) - Get Report

confessed Monday to reaping profits during the California power crisis through transactions it had previously denied.¿

Tulsa-based Williams said Monday that it purchased price-capped electricity in California and sold it outside the state at higher prices during a power crisis in the Western U.S. two years ago. Williams had denied engaging in such transactions as recently as two weeks ago. In its comments Monday, the company said the sales came at prices below the price caps.

"Williams' regular business practice is to seek the highest priceavailable in the market," the company said in a Monday filing to the FederalEnergy Regulatory Commission. "However, Williams as a practice made no salesoutside of California above the price cap."

The comments come just a week after the company, which had long indicated it wanted to focus its resources increasingly on the lucrative but risky power-trading business, sharply reduced the amount of capital it would commit to power trading.

Aquila

(ILA)

followed suit Monday, slashing its earnings forecasts and saying trading would account for almost none of its coming-year profits.

FERC on the Lurk

Williams reversed its stand on the California electric trades Monday, when it was forced to provide detailed trading information to the

Federal Energy Regulatory Commission

. FERC had threatened to yank the rate-setting authority of Williams and three other energy traders if they failed to fully cooperate with the agency's investigation into possible abuses in the Western power market.

Williams has begun each of the last three weeks with revelations regarding a once-soaring energy trading operation that it now plans to dramatically reduce. The company's stock, which closed Monday after a 20-cent gain at $7.55, is near decadelong lows as investors fret about the viability of the energy trading industry as a whole.¿

Williams has been among the hardest hit companies in the sector. Even so, the company has remained optimistic and continues to roundly deny it engaged in any improper trading practices. Even after reversing field Monday on the questionable power trades, Williams seemed to indicate that it had done nothing wrong.

"Consistent with the company's trading practices," Williams said in a statement, "the price for that exported power was at or below temporary price caps that were in effect at the time."

Construction Paper

Williams promised to make public Monday's full FERC filing as soon as FERC confirms that it's been received. In the meantime, Williams said it is working constructively with the regulatory body.

"We will continue to cooperate fully with government regulators who are investigating the California energy crisis with the hope of bringing this matter to a prompt conclusion," said Williams Chief Executive Steve Malcolm.

Regulatory probes and revelations that many energy companies made trades solely to boost their numbers have chased investors out of the once-hot sector. Williams and its rivals now face the prospect of possible debt downgrades, which could provoke further investor flight and make it more difficult for these companies to bolster their balance sheets.