By the OGJ Online Staff
HOUSTON, Feb. 26�El Paso Corp. Monday renewed its denials of charges natural gas prices were deliberately manipulated by withholding capacity on the El Paso natural gas pipeline.
Lawsuits filed Dec. 18 in California Superior Court in Los Angeles allege units of Sempra Energy and El Paso illegally conspired not to compete against each other in the southern California gas market. El Paso owns one of the largest interstate gas pipelines which transports gas from the producing basins to the California border. Its affiliate El Paso Merchant Energy was awarded the right to a majority of that pipeline�s capacity in a bidding process early in the spring.
El Paso said capacity held by El Paso Merchant Energy, a unit of El Paso Corp., has been used or made available for use by others to serve California and other Western markets. The Houston energy firm said it isn't possible for any holder of capacity on the El Paso pipeline to cause a significant increase in California gas prices by refusing to use that capacity.
The pipeline is required by law to post availability of any unused capacity on its public bulletin board and is obligated to sell that capacity for no more than the published tariff rate found to be just and reasonable by the Federal Energy Regulatory Commission (FERC), the company said in a statement.
El Paso said there was no "conspiracy'' in 1996 to limit new interstate pipeline capacity into California. It says all new pipelines considered during the 1990s were either built or were not viable because they lacked sufficient customer support to justify construction.
For example, despite years of marketing efforts by Tenneco Inc., which sold its interstate system to El Paso, not a single potential customer made the binding commitment required for the proposed Altamont project to proceed, El Paso said. For that reason alone, the company said, the project was dropped.
In 1996, according to estimates, there was 1-2 bcf/day of excess gas transportation capacity on existing interstate pipelines serving California. El Paso said misplaced reliance on the continuing availability of excess capacity prompted the California Public Utilities Commission to encourage Pacific Gas & Electric Co, Southern California Edison Co. and Southern California Gas, beginning in 1996 and continuing into 1998, to relinquish over 1.5 bcf/day of firm transportation capacity on the El Paso pipeline.
The lawsuits allege El Paso Merchant has withheld some of that capacity from the market driving up prices. El Paso reiterated its contention that as recently as last year, there were periods when significant quantities of unused capacity were available on the pipeline. Notwithstanding its availability, the company said, this capacity was not used by shippers to California to fill in-state natural gas storage facilities for future use.
If California had stored in 2000 the same volumes of natural gas stored in 1999, El Paso said, "reliance on the spot market would have been reduced and the steep rise in prices at the California border could have been substantially mitigated or avoided."