FERC ALJ Admits 'Sensitive' Memo into El Paso Case

FERC Chief Administrative Law Judge Curtis Wagner has ordered El Paso Merchant Energy Co. (EPME) to produce a copy of a highly sensitive internal memorandum, which allegedly reveals the intimate working relationship between parent El Paso Corp. and affiliates El Paso Natural Gas and EPME, into the record of a high-profile case exploring charges of affiliate and market-power abuse.

"Because of the fact that EPME is now apparently, after the conclusion of the hearing, contesting the Chief Judge's summation of the document, it now becomes necessary for the document to be available for the Commission's review of the Chief Judge's decision and findings. Accordingly, EPME is hereby ordered to file with the Chief Judge, under seal, a full and complete copy of the April 14, 2000 memorandum on or before Aug. 23," said Wagner in an order issued Tuesday.

This latest move by Wagner will help to "insulate his finding from any potential reversal down the road" by FERC and the courts, said an attorney close to the case. The memo, he believes, directly supports the charges that El Paso pipeline favored its affiliate EPME over non-affiliate shippers when awarding capacity on its pipeline system, and indirectly relates to the allegations that EPME had market power, and exercised it, to drive up delivered natural gas prices to the southern California border beginning in mid-2000.

During the hearing into the charges, which ended earlier this month, Wagner said the 18-page memo from Greg Jenkins of EPME to El Paso Corp. Chairman William Wise revealed "the extent to which Wise and others in the corporation, including officials of the pipeline affiliate, were kept advised of even minute details concerning the operation of EPME, including plans to purchase, plans to bid, what's being negotiated, the results of negotiations, what's expected, what it would like to do, and even the hiring and firing of employees, the company's MBA program, the summer hire program, contracts and proposed contracts, etc. etc."

A copy of the memo was sent to John W. Somerhalder II (president of the El Paso Pipeline Group), and included information relating to EPME's acquisition of 1.22 Bcf/d of capacity on affiliate El Paso pipeline. How EPME came to win a 15-month contract for the 1.22 Bcf/d of capacity on El Paso pipeline is at the center of the case. The memo specifically addresses the "circumstances that must exist [for EPME] to make the contract involved herein successful," Wagner said.

The judge at the time, however, refused to admit the entire memo into the record because of the "highly sensitive business material" it contained, but he did offer a summary of it during the hearing. Undaunted, the California Public Utilities Commission (CPUC), Pacific Gas & Electric (PG&E), and Southern California Edison again urged Wagner after the hearing was concluded to include the full document in the record (See NGI, Aug. 20). EPME quickly responded in opposition, and added that it also disagreed with the "characterization of and assumptions about the document made on the record by the Chief Judge" in his summary of it.

Because EPME took issue with Wagner's "summation" of the memo, the judge said he was being forced to admit the document into the record.

Citing the sensitive commercial nature of the memo, Wagner said only "one outside counsel for each party and a representative for the CPUC and a representative of the FERC trial staff can view the document in the Chief Judge's office." He noted that an "un-redacted copy" of the memo will be certified to the Commission under seal.

Wagner is expected to issue an initial decision on both the affiliate-abuse and market-power allegations in this high-profile case in early October.

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