Federal regulators investigating manipulation of the nation's power markets announced yesterday that Dynegy Inc. in Houston will pay a $5 million fine to settle charges that it reported false natural gas prices to the industry to inflate profits from its trades.

The case, in which Dynegy neither admitted nor denied the charges, is part of an expanding federal probe into allegations that rigged power prices were a major cause of the energy crisis in California and the Pacific Northwest two years ago.

Earlier this month, a former El Paso Corp. vice president pleaded not guilty to federal fraud charges that he fabricated 48 natural-gas trades and reported the bogus data to an industry publication whose price index is used in valuating energy deals across the country. And a federal grand jury in San Francisco is investigating charges that Enron Corp. rigged power prices in California.

The Commodity Futures Trading Commission, which monitors trading and announced the Dynegy fine, and the Federal Energy Regulatory Commission, which regulates power prices, have coordinated ongoing investigations into allegations of price manipulation.

Though still largely unproven, these allegations have had a dramatic impact on the energy industry, experts said. The three largest power traders in 2000 -- Enron, Dynegy and Williams Cos. -- have abandoned the business. Other companies, such as Reliant Energy, no longer report prices on their energy deals.

The result, experts say, is that reliable information about gas and power prices has eroded, threatening to undermine investments in energy projects. "Unless you have a believable set of prices, you can't really make any rational decisions on investments," said energy consultant Philip K. Verleger. "No banker will lend unless there is a reliable index of the cost of the raw material -- natural gas -- and the value of the output -- electricity."

The issue has not hit hard yet, because electricity supplies are still in surplus in most of the country. But unless confidence in power price reports is restored, construction of future power projects will be affected, industry officials warn.

Dynegy had fired seven traders and disciplined seven others earlier for similar offenses. Investigations of individual wrongdoing continue, CFTC officials said.