El Paso Sets Record Straight on Price Manipulation Charges
Allegations that large capacity-holders on El Paso Natural Gas
have deliberately withheld pipeline capacity from the market to
drive up gas prices in California, and that the pipeline was
involved in a "conspiracy" in 1996 to block new interstate pipe
capacity from entering the state are unfounded, said a company
"We would like to take this opportunity to clarify the record,"
said spokeswoman Norma Dunn in a prepared statement late Friday.
These accusations "overlook critical facts and are demonstrably
"It is not possible for any holder of capacity on the El Paso
Natural Gas pipeline to cause a significant increase in California
gas prices by refusing to use that capacity," she said. Dunn
specifically noted that all of the capacity held by affiliate El
Paso Merchant Energy, the largest capacity-holder on the pipeline,
has been used or made available for use by others to serve
California and other western markets.
As for allegations of a conspiracy in 1996, she said, "the facts
show that all new pipelines considered during the 1990s were either
built or were not viable projects because they lacked sufficient
customer support to justify their construction." Dunn cited
Tenneco's failed Altamont project as an example of the latter.
In 1996, she noted the excess pipeline capacity into California
ranged up to 2 Bcf/d. It "was misplaced reliance on the continuing
availability of such excess capacity that prompted the California
Public Utilities Commission to encourage PG&E, SoCal Edison and
SoCal Gas, beginning in 1996 and continuing into 1998, to
relinquish over 1.5 Bcf Bcf/d of firm transportation capacity on
the El Paso Natural Gas pipelines."
As recently as last year, Dunn said there were periods when
significant quantities of unused capacity were available on El
Paso, but shippers failed to take advantage of this. "If California
had taken advantage of the opportunity in 2000 to store the same
volumes of natural gas that had been stored in 1999, 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 avoid," she noted.
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