FERC orders El Paso market power case reopened

The Federal Energy Regulatory Commission Wednesday reopened an investigation into whether a unit of El Paso Corp. manipulated the natural gas market in California last year. A FERC law judge had concluded El Paso didn't drive up prices by withholding capacity. FERC ordered the rehearing after additional evidence came to light.

By the OGJ Online Staff

HOUSTON, Dec. 19 -- The Federal Energy Regulatory Commission Wednesday reopened an investigation into whether a unit of El Paso Corp. manipulated the natural gas market in California last year.

FERC Chief Administrative Law Judge Curtis Wagner Oct. 9 ruled El Paso didn't drive up natural gas prices by withholding capacity on its pipeline into California, but he determined company affiliates engaged in "blatant collusion" in sharing shipping information.

The state of California and utilities Pacific Gas & Electric Co., San Francisco, and Edison International, Rosemead, accused El Paso of driving up gas prices in the state last winter. They claim inflated prices cost Californians an extra $3.7 billion for gas. Houston's El Paso has said it did nothing wrong.

The commission said the new hearing will address El Paso's available capacity, capacity postings, and shippers making nominations. FERC ordered the rehearing after additional evidence came to light in late October.

FERC said, "The question of whether El Paso Pipeline made all of its capacity available at its California delivery points is a uniquely important issue that requires further development because gas spot prices during this period were elevated to the $20-$30/MMbtu level, with price spikes as high as $60/MMbtu."

The commission said it was in the public interest to reexamine the issue in order to protect California customers. FERC ordered the law judge to hold a prehearing conference within 20 days and promised El Paso will be given "ample opportunity" to present its case.

El Paso said it is "confident" Wagner will reconfirm his conclusion that El Paso Natural Gas fully complied with FERC's regulations by making its capacity available.

"Given the high level of publicity that this case has engendered, it is not surprising that FERC seeks to ensure that every question raised has been answered," said Peggy Heeg, El Paso general counsel.

In his October decision, Wagner concluded that no action on the part of El Paso Natural Gas or El Paso Merchant Energy caused high natural gas prices in California during 2000 and 2001.

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