PLT OF A BEECH BE76 DUCHESS SHOWED ON ATC RADAR AS 300 FT LOW DUE TO A FAULTY XPONDER MODE C (PRESSURE ALT RPTING) ERROR.

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THE OCCURRENCE OCCURRED ON OCT/XA/99. THE PROB CONCERNED THE XPONDER'S MODE C CAPABILITY IN THAT THE XPONDER WAS GIVING ERRONEOUS REPLIES TO ATC'S RADAR INTERROGATIONS. THE ACFT WAS ON AUTOPLT LEVEL AT 6000 FT. THE ALTIMETER WAS SET TO 29.92; THE LCL SETTING GIVEN BY ATC. THE PROB WAS BROUGHT TO THE PLT'S ATTN WHEN ATC QUERIED WHAT THE ALTIMETER WAS SET TO. IT WAS SET CORRECTLY AND INDICATING PERFECTLY LEVEL AT 6000 FT MSL. ATC STATED THAT THEIR READOUT WAS 5700 FT MSL; 300 FT LOWER THAN INDICATED ON OUR CORRECTLY SET ALTIMETER. WE ACKNOWLEDGED THE DISCREPANCY AND ATC TOLD US TO GET THE EQUIP FIXED. WE TRIED TO DETERMINE IF IT WAS OUR EQUIP OR ATC'S. AFTER BEING HANDED OFF TO COLUMBUS APCH; WE QUERIED WHAT OUR ALT READOUT WAS -- IT WAS 5800 FT. WE THEN DETERMINED THAT OUR XPONDER WAS AT FAULT GIVING INDICATIONS 200-300 FT LOWER THAN INDICATED ON THE ALTIMETER. CONTRIBUTING FACTORS IN THIS ALT DISCREPANCY WERE THE XPONDER'S FAULTY MODE C REPLY. IN THE PLT'S OPINION; IT IS HARD TO DETERMINE HOW ACCURATE A XPONDER IS BEFORE DEPARTING. THE PROB CAN BE SOLVED BY REQUIRING DIGITAL READOUTS ON ALL XPONDER'S PANELS. THEREFORE; ALL INACCURACIES CAN BE ADDRESSED WITHOUT HAVING AN OCCURRENCE LIKE THIS. THE OCCURRENCE WAS TO NO FAULT OF THE PLT OR THE ATC AGENCY. IT WAS THE EQUIP WHICH FAILED; GIVING THE FALSE READINGS. IN THE FUTURE; THE FAA SHOULD REQUIRE DIGITAL READOUTS THAT LET THE PLT KNOW WHAT HIS/HER XPONDER IS RPTING; ALLOWING THE PLT TO TAKE THE PROPER CONSIDERATIONS REGARDING THE FLT.