El Paso Natural Gas is trying to head off an attempt by Chief Administrative Law Judge Curtis L. Wagner Jr. to expand the scope of a four-week-old FERC hearing — which has been limited to market-power issues so far — to include the previously-litigated allegations that the pipeline rigged bidding for transportation capacity on its system to favor its merchant-power affiliates.

The Commission cleared the El Paso pipeline subsidiary in late March of the charges that it violated the standards of conduct that prohibit interstate gas pipelines from showing preference to their affiliates when awarding capacity (see Daily GPI, March 29). But Wagner has asked FERC for guidance on whether he should “compile a more complete record on that question and make findings as to whether such a violation, if it existed, contributed to the alleged exercise of market power by El Paso Natural Gas” and its two affiliates — El Paso Merchant Energy Gas L.P. and El Paso Merchant Energy Co.

FERC’s decision on the affiliate-abuse violations “was based solely on the paper record before the Commission at that point in time,” said Wagner, who seemed to suggest that additional evidence has emerged at the trial to warrant a possible review of the charges [RP00-241].

The March 28 order, apart from ruling on the affiliate-abuse issue, directed Wagner to hold a hearing into the single, unresolved issue of market power — do El Paso’s merchant power affiliates have market power and did they use it to drive up natural gas prices at the California border in 2000. FERC was unable to decide the market-power issue at the time, having found the “current record incomplete.”

On Tuesday, El Paso Natural Gas asked FERC to instruct Wagner to keep the hearing focused on just the market-power issues. “No probative evidence has emerged at the hearing that is inconsistent with the facts the Commission had before it at the time it made its ruling on the affiliate issues,” the pipeline said. Further, it noted these issues can be raised during rehearing of the March order.

The pipeline specifically singled out the recent hearing testimony of El Paso Corp. CEO William Wise, saying it revealed nothing new. Rather, it “merely [confirmed] what was obvious from the protected materials that were reviewed by the Commission” in reaching its decision on alleged affiliate-abuse violations. Wise testified that El Paso Merchant informed him of its decision to bid on El Paso pipeline capacity prior to submitting the bid, and that he had given his “implicit, if not explicit, approval” to the company’s decision.

“Oral testimony confirming what was evident from the paper record reviewed by the Commission does not constitute ‘new’ evidence, nor does it justify the re-opening of the record on the affiliates issues,” El Paso Natural Gas said. “Even if one could argue that the oral testimony put a new ‘slant’ on the affiliate issues that was not available to the Commission when it made its decision, there is still absolutely no indication that any violation of any of the [pipeline-affiliate] Standards of Conduct has occurred. Nothing in the Standards precludes a business unit of a corporation from informing the head of the corporation of its business plan.” But assuming there were a prohibition on this type of communications, the El Paso pipeline noted that it wasn’t party to the communications so there was no breach of the affiliate rules on its part.

Lastly, the interstate gas pipeline contends that an eleventh-hour decision by the Commission to re-examine the affiliate-abuse charges would deny it of its due-process rights, which require accused parties to be given “sufficient notice” of the charges against them.

In his latest report to the Commission on the progress of the hearing, Wagner acknowledged that “this case has proven to be much more complex than anyone imagined” previously. “To date, there have been 17 days of hearing [19 days now], with a record that contains more than three linear feet of exhibits and over 2,700 pages of cross-examination. In addition to this record, there will be at least six rebuttal witnesses [this week], with the hearing expected to continue throughout [this] week” and possibly into next week. He asked the Commission to extend the deadline for issuing an initial decision in the case. FERC complied, extending it to Sept. 4.

While “there is no question additional time must be allowed in order to conclude the hearing and to ensure due process for all parties, [I believe] that because of the importance of this case, the concern over the higher prices in California than in any other part of the country, and the national interest the case is receiving, it must be moved along as rapidly as possible,” Wagner told FERC. He noted he would make “every effort” to issue an initial decision by around Aug. 24.

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