FERC Chief Administrative Law Judge Curtis L. Wagner stunned his courtroom yesterday when he abruptly adjourned the affiliate-abuse phase of the hearing exploring charges against El Paso Natural Gas and affiliate El Paso Merchant Energy after the company refused to put El Paso Corp. Chairman William Wise and other top corporate executives on the stand to respond to questions from Wagner.

El Paso’s attorney argued that it wasn’t necessary for Wise and the others to testify because the California Public Utilities Commission (CPUC), which initiated the case against El Paso pipeline and its merchant power affiliates, had not made its case against the companies. “Oh, yes they have,” Wagner said, adding that if the companies’ behavior didn’t constitute affiliate abuse, “then I don’t know what does.” The judge once again cited a Feb. 14 memo, which remains confidential, as supporting the charges that the pipeline and its merchant energy affiliates conspired to rig the bidding so that the affiliates won a 15-month contract for 1.2 Bcf/d of capacity on El Paso pipeline.

“The judge told them [El Paso] that you’re losing on the affiliate-abuse part of the case, and you need to call witnesses,” said CPUC attorney Harvey Morris. But Wise, and other top El Paso executives — John Somerhalder and Ralph Eads — refused to be questioned by Wagner and the CPUC. This left Wagner with no other option than to end the hearing after only three days. “If they didn’t produce their witnesses, and we [the CPUC] had already met our burden of proof, there was nothing to continue with,” Morris told NGI.

The Federal Energy Regulatory Commission initially had dismissed the bid-rigging charges, but had ordered a hearing into related charges that El Paso’s merchant power affiliates — El Paso Merchant Energy Gas L.P. and El Paso Merchant Energy Co. — had market power and used it to manipulate gas prices in Southern California since June 2000 (RP00-241). That phase of the hearing (which lasted more than five weeks) ended in June. Critics claim the affiliates had the ability to manipulate prices in southern California, and took advantage of it, based on the sizable amount of capacity that they held on El Paso pipeline.

In the midst of the market-power hearings, Wagner suddenly asked the commissioners for “guidance” as to whether he should re-open the affiliate-abuse issues, suggesting that evidence had emerged during the market power hearing that warranted further review of the charges. In those hearings, Wagner referred to a document — filed by the CPUC and remaining under protective seal, available only to parties in the case — saying it “certainly has statements in it that could lead one to believe there was an abuse” of market power. The New York Times reported that in a Feb.14, 2000 internal memo it had obtained, El Paso Merchant said that its contracted capacity on El Paso pipeline would give it more control of the market (see Daily GPI, May 17). Responding the judge’s request, the Commission ordered the affiliate abuse portion of the case re-opened for an evidentiary hearing (see Daily GPI, June 12).

Wagner has said he plans to issue an initial decision addressing both the affiliate-abuse and market-power issues by late September.

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