A unit of Dallas-based TXU Corp. manipulated the state's wholesale power market two years ago, causing at least $70 million in higher electricity prices during the summer of 2005, an independent investigation said Monday.

The report, commissioned last year by the state Public Utility Commission, said that TXU's wholesale arm made a profit of about $19.6 million through its anti-competitive behavior.

Overall, the investigation said TXU's actions caused wholesale prices statewide to rise an average of 15.5 percent during the summer of 2005.

The final cost to consumers could have been substantially higher, the report said.

"TXU's behavior constitutes market power abuse," Brian Lloyd, commission special projects manager, wrote in a memo about the 37-page report.

The report could lead to fines of up to $25,000 per day per violation. According to the report, TXU was the critical power provider in the state during 657 price spikes between June 1 and Sept. 30, 2005.

The report comes as many legislators are questioning whether TXU has too much market power in Texas, where it is the largest utility. The Dallas-based company has 2 million retail customers (mostly in North Texas), owns 19 power plants and sells electricity statewide through its wholesale arm.

It also comes as more questions are emerging about a proposed $32 billion buyout of TXU by private equity firms.

On Friday, U.S. Rep. Joe Barton, R-Ennis, raised a long list of concerns in a letter to the utility commission. Barton said he wanted assurances that the deal would be good for consumers as well as investors and that the buyout firms are not pursuing the deal for short-term gain.

TXU rejected the allegations in the report.

"We have thoroughly reviewed our conduct during the referenced time period and believe it is consistent with the commission's rule and policies," spokeswoman Lisa Singleton said. "We are eager and open to discussing this matter further with commission staff."

The commission had said earlier that there were signs that an unnamed utility company had withheld power during peak usage hours in the summer of 2005 to tighten supply and therefore boost what it could charge on the wholesale market.

In September, Potomac Economics Ltd., the firm hired as the independent monitor, began its investigation, reviewing wholesale activities of TXU during the summer of 2005.

Repeatedly during that time, TXU offered power to the statewide grid during peak usage hours at prices that were far higher than its cost to generate the power, the report said. Because of its size, TXU was a pivotal provider almost 85 percent of the time, meaning the state couldn't meet its power demands without TXU's supply and enabled TXU to call the shots on price.

The next step in the market power case is a filing of a notice of violation by the commission's executive director. TXU can respond through an agency hearing or settlement hearing.

"I'm personally outraged that TXU would intentionally manipulate prices in the wholesale market to create higher profits," state Sen. Troy Fraser, R-Horseshoe Bay, said during a Monday news conference. "Consumers deserve to be treated fairly."

Last month, a team of private equity firms led by Kohlberg Kravis Roberts & Co. and Fort Worth-based Texas Pacific Group offered to purchase TXU for about $32 billion, plus assuming $13 billion in debt.

Since then, the firms have made a series of concessions to win state leaders' support, including offering a 10 percent discount on electricity bills and canceling plans for eight of 11 coal-fired plants, which had strong opposition from environmental groups and many Texas cities.

However, Fraser and other key lawmakers are pushing legislation, which could hit the Senate floor this week, to curtail TXU's market power and give the commission authority to approve or kill the TXU deal.

The new report "underscores the need for legislation we have under review," said Rep. Phil King, R-Weatherford, and author of TXU-related legislation in the House.

Barton outlined numerous concerns in his letter about the consumer impact of the buyout and whether the deal will get a full review in Texas, which has an independent statewide power grid that isn't under federal authority.

Among his concerns: how the buyers would deliver on a promised 10 percent rate cut for most customers while they are paying a premium price for TXU shares and how the proposed cancellation of the eight coal plants would affect the state's future power supply.

Barton, the ranking member of the House Energy and Commerce Committee, raised the possibility of putting Texas' power grid under federal regulation "in order that this transaction receive the scrutiny it deserves."