Narrative:

On radar vector on IFR training flight from ryy to mac, assigned altitude 5000 ft. Student had been as much as 150 ft low, but no more. ATC advised that it 'is imperative that you maintain assigned altitude' and stated that altitude had ranged from 4600-4800 ft in the last few mins. At the time our altimeter was reading 5000 ft as assigned. We confirmed altimeter setting was 29.93. I advised ATC of same and also advised we must be experiencing a mode C readout problem. Subsequent check revealed mode C continued to read 200 ft low. We continued IFR to destination but returned to ryy VFR in order to avoid further problems with ATC due to mode C error.

Google
 

Original NASA ASRS Text

Title: ALT EXCURSION IN CLASS B AIRSPACE DUE TO FAULTY MODE C XPONDER INDICATION TO ATC BY AN SMA SEL TRAINING ACFT.

Narrative: ON RADAR VECTOR ON IFR TRAINING FLT FROM RYY TO MAC, ASSIGNED ALT 5000 FT. STUDENT HAD BEEN AS MUCH AS 150 FT LOW, BUT NO MORE. ATC ADVISED THAT IT 'IS IMPERATIVE THAT YOU MAINTAIN ASSIGNED ALT' AND STATED THAT ALT HAD RANGED FROM 4600-4800 FT IN THE LAST FEW MINS. AT THE TIME OUR ALTIMETER WAS READING 5000 FT AS ASSIGNED. WE CONFIRMED ALTIMETER SETTING WAS 29.93. I ADVISED ATC OF SAME AND ALSO ADVISED WE MUST BE EXPERIENCING A MODE C READOUT PROB. SUBSEQUENT CHK REVEALED MODE C CONTINUED TO READ 200 FT LOW. WE CONTINUED IFR TO DEST BUT RETURNED TO RYY VFR IN ORDER TO AVOID FURTHER PROBS WITH ATC DUE TO MODE C ERROR.

Data retrieved from NASA's ASRS site as of July 2007 and automatically converted to unabbreviated mixed upper/lowercase text. This report is for informational purposes with no guarantee of accuracy. See NASA's ASRS site for official report.