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First Round of Bidding On El Paso Flops

First Round of Bidding On El Paso Flops

El Paso Natural Gas last week said it awarded only a small fraction of the 1.35 BBtu/d of soon-to-be available firm capacity on its system to one shipper --- Williams Energy Marketing and Trading --- following its recent open season. "There were no big winners," noted El Paso President Richard Baish. The pipeline rejected the majority of shipper bids because they failed to meet the "minimum revenue threshold" requirements for the capacity.

As a result, El Paso has initiated a second open season through Oct. 13th for the remaining available 1,254,089 MMBtu/d of Blocks I, II and III firm capacity for delivery to California. And as an added bonus, none of the available capacity --- including the large amount (1.2 BBtu/d) that's committed to Dynegy until the end of the year --- will be subject to right-of-first refusal in the second round. Bidders can bid for all of the capacity in a total package or for part of the capacity.

During the first round, "that right-of-first-refusal I expect probably discouraged some potential bidders because they knew that Dynegy could come back in, and by matching their bid, could take the capacity away from them," Baish said. But the ROFR won't be a threat in the second open season, he noted.

If there had been valid bids in the first round, then Dynegy would have had the right to match those, but since there were none "there was nothing for Dynegy to match," one source said. Dynegy now "is welcome to bid like everybody else, but they do not have any priority to come back in at a later date and match bids and take capacity away from someone else."

"People were very cautious in their bidding in the first round, and I think they now have a better sense of where those [minimum revenue] thresholds will be. As a consequence, I expect we'll have a lot more interest" in the second round, Baish noted. There have been "a couple of bids to date," but it couldn't be learned if Dynegy was one of them.

In the first open season, Williams Energy was the only shipper whose bid met the minimum revenue threshold, meaning that it would generate enough revenue annually to either meet or exceed an "undisclosed" threshold. Williams bid 21.5 cents/MMBtu cents at 95% load factor for 101,585 MMBtu/d of Block II firm capacity, with primary delivery point rights to PG&E Topock, Southern California Gas Topock and Mojave Topock. The capacity currently is held by Burlington Resources until the end of the year.

El Paso Natural Gas said it plans to award the capacity that has been posted in the second open season by Oct. 18th, finalize the contracts between Oct. 19-22, with the capacity becoming available on Jan. 1, 2000.

Susan Parker

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