Court Challenges to Major El Paso Contracts Dismissed
A federal appeals court in Washington D.C. has dismissed
challenges by California regulators and other petitioners to FERC's
approval of the the controversial contract arrangement that awarded
Dynegy Marketing and Trade more than 1 Bcf of turned-back capacity
on El Paso Natural Gas.
"Because the contracts expired in December 1999, we hold that
the issues underlying the petitions are moot, and accordingly, we
dismiss the petitions," the U.S. Court of Appeals for the D.C.
Circuit told the California Public Utilities Commission (CPUC) and
other petitioners, which included producers, marketers and major
utilities serving the California gas market.
The CPUC and petitioners claimed FERC "abused its discretion and
acted arbitrarily" because it failed to give weight to the
allegedly anticompetitive nature of the El Paso-Dynegy contracts,
and allowed parties to violate the terms of a 1996 agreement
between the pipeline and its customers with respect to Block II
Moreover, the court said it was "unpersuaded" by arguments that
El Paso's post-Dynegy capacity contracts - first with Enron North
American Corp. and now with affiliate El Paso Merchant - were
subjecting California market participants to the "same
anticompetitive harm," as well as the "same flawed legal analysis"
by FERC. Enron North was awarded the El Paso capacity that held by
Dynegy last January, but withdrew from its agreement. El Paso
Merchant then quickly stepped in to pick up the firm capacity.
The CPUC and petitioners "fail to show the necessary parallels
between these new contracts and the contracts upheld in the El
Paso-Dynegy order," the court said. "The Dynegy contracts are
materially different from the subsequent contracts entered into by
For one, the Enron North contract "did not contain the RRM
[revenue reduction mechanism], which was the key element that
petitioners claimed made the El Paso-Dynegy transaction
impermissibly anticompetitive," it noted. As for the contract deal
with El Paso Merchant, the court said that was a "standard
contract" under El Paso's tariff, and thus didn't require FERC
"Were FERC to examine this contract, however, the relationship
between El Paso and El Paso Merchant would trigger different
concerns than a transaction between unrelated parties," the court
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