El Paso Protests Re-Opening Bid-Rigging Charge

El Paso Natural Gas and affiliate El Paso Merchant Energy are challenging FERC's decision last month to re-open an investigation into allegations that the bidding for transportation capacity on the pipeline's system was skewed to favor its merchant power generation affiliates.

FERC's June 11 ruling "represents a complete absence of the reasoned decision-making [that] the courts require as underpinning final Commission action," El Paso Merchant argued in seeking rehearing [RP00-241-005]. In the June order, the Federal Energy Regulatory Commission unexpectedly had reversed an earlier decision in which it cleared El Paso pipeline of the charges without holding a fact-finding hearing. The FERC's earlier decision said the pipeline had not violated the standards of conduct barring interstate pipelines from showing preference to their affiliates when awarding capacity (see NGI, June 18).

FERC issued the reversal while a hearing was under way at the agency into related charges, specifically whether El Paso's merchant power affiliates -- El Paso Merchant Energy Gas L.P. and El Paso Merchant Energy Co. -- have market power and used it to manipulate gas prices in Southern California since June 2000 [RP00-241]. Critics claim that 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 --- 1.22 Bcf/d. The affiliates' contracts expired in late May. The market-power hearings currently are in recess, and will start again in August at which time both the market-power and bid-rigging charges will be aired.

"Absolutely no new evidence arose during the six-week market power hearings before the Chief Judge [Curtis L. Wagner] to suggest any need to re-open" FERC's original order clearing El Paso of favoring its affiliates when awarding capacity, El Paso Merchant said. "In fact, the Chief Judge's report [to FERC] did not identify any such new evidence, and the June 11 order did not identify any such new evidence, either," it noted. The Commission, in the June order, "simply seems to have changed its mind for some unexplained reason."

El Paso pipeline echoed many of the same arguments in its rehearing request, saying that FERC "offered no explanation or new facts for why it reached that conclusion, nor did it identify the factors that led it to reverse course" in the June ruling. This "is a clear example of an 'intolerably mute' agency decision."

FERC reversed its March 28 ruling after Wagner had sought guidance from the Commission as to whether he should re-open the affiliate-abuse issues as part of the ongoing agency hearing exploring allegations that the merchant affiliates manipulated gas prices at the California border. The strongly worded "request" for guidance from the judge pointed out FERC's decision on the affiliate-abuse violations "was based solely on the paper record before the Commission at that point in time." Wagner appeared to suggest that additional evidence had emerged at the trial to warrant a possible review of the charges (see Daily GPI, June 8). The Commission's reversal also was in response to the requests for rehearing of the order by the California Public Utilities Commission, Pacific Gas and Electric and Southern California Edison.

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