PG&E Says Cut ROFR from El Paso Contracts

PG&E National Energy Group has called on FERC to rid El Paso Merchant Energy's contract arrangement with affiliate El Paso Natural Gas of its right-of-first-refusal (ROFR) provision, which it says will give the unregulated marketing affiliate "first call" over non-affiliates in bidding for the 1.2 Bcf/d of firm capacity when its contracts expire in May.

"Elimination of El Paso Merchant's ROFR is necessary to protect the public interest. Once this unfair advantage is eliminated, new shippers may compete fairly for capacity with El Paso Merchant and not be forced to obtain transportation service or bundled services from the unregulated marketing affiliate," said PG&E National Energy and affiliated companies.

"This solution also will allow other [competing] bidders to obtain at least a pro rata share of any matched bids and will allow El Paso Merchant to obtain capacity as well," they told the Commission.

"With the ability to exercise its ROFRs and control 1.2 Bcf of El Paso capacity, El Paso Merchant is effectively a surrogate for the El Paso pipeline," charged PG&E National Energy and related companies.

If the Commission should deny California regulators' pending request to abrogate the contracts between El Paso and its affiliate, Southern California Gas also asked FERC to purge the ROFR provision so that non-affiliate bidders could at least have a shot at blocs of the 1.2 Bcf/d capacity when it comes up for sale. If neither actions are possible, SoCal asked the Commission to clarify that the contracts between El Paso and its marketing affiliate cannot provide for a delivery point at SoCal-Topock.

Assuming FERC decides to remove the ROFR provision, SoCal and PG&E National Energy requested that a new open season be held for the 1.2 Bcf/d of capacity that becomes available on June 1, 2001. El Paso Merchant's capacity contracts expire May 31.

PG&E National Energy and SoCal submitted their comments as part of a complaint proceeding in which the California Public Utilities Commission is seeking to dissolve the contract arrangement between El Paso Merchant and the El Paso pipeline [RP00-241]. The state regulators claim that El Paso Merchant was shown preference over non-affiliate bidders during the open season for the capacity.

Susan Parker

©Copyright 2001 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.