El Paso Open Season Was 'Rigged,' CPUC Says
Armed with a "smoking gun" discovered in just-released data, the
California Public Utilities Commission (CPUC) has launched a fresh
offensive against El Paso Natural Gas' 1.22 Bcf/d transportation
contract arrangement with affiliate El Paso Merchant Energy.
Based on information uncovered in an internal El Paso Merchant
e-mail, the CPUC now contends that the open season last February
for one third of El Paso's firm transportation capacity was
"rigged" to show preference to El Paso Merchant.
The e-mail revealed that during the open season El Paso Merchant
had "secretly negotiated" a two cents/MMBtu transportation discount
rate on Mojave Pipeline, another El Paso affiliate, for service
from Topock to Southern California Gas at Wheeler Ridge for
quantities above 100,000 MMBtu/d effective March 1, 2000, the CPUC
told FERC. The interruptible discount would last the entire 15
months of the new contracts offered in El Paso Natural Gas' open
season, state regulators said, adding that Mojave had withheld
announcing the discount until Feb. 18 --- after El Paso's open
season had ended.
The discounted capacity on Mojave was critical, given that FERC
previously had ruled that half of the 1.22 Bcf/d El Paso capacity
(Block II capacity) could not directly access the SoCal-Topock
delivery point. As a way around this restriction, bidders in the El
Paso open season knew they could use El Paso capacity to access
Mojave Pipeline at Topock, and then have their gas shipped to SoCal
at Wheeler Ridge, the CPUC said. But what the non-affiliated
bidders didn't know was that Mojave had negotiated a discount with
El Paso Merchant, the commission noted. These bidders were
operating under the assumption that the IT rate on Mojave still was
four cents/MMBtu, which it had been for the previous 18 months, and
has "factored that limitation" into their bids, it said.
The information about the discount was disclosed in a Feb. 9
e-mail written by El Paso Merchant Vice President Robin Cox, which
acknowledged that "Mojave is willing to offer" a two cent/MMBtu
discount rate for volumes above 100,000 MMBtu/d. "I will not
officially request this discount until next Wednesday assuming we
win the capacity," the executive wrote. "After it is posted, it
will be [available] to everyone."
This e-mail makes "clear that El Paso Merchant received
preferential treatment from El Paso/Mojave and had unfair
advantages over all other bidders during the open season" in
violation of Sections 4 and 5 of the Natural Gas Act, the CPUC
charged in its motion for summary disposition [RP00-241]. It urged
FERC to "fulfill its duty and abrogate" the El Paso-El Paso
Merchant contract arrangement. The deadline for El Paso to respond
to CPUC's motion was last week, but it asked FERC for an extension
until Sept. 29.
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