PG&E National Energy Group has called on FERC to rid El PasoMerchant Energy’s contract arrangement with affiliate El PasoNatural Gas of its right-of-first-refusal (ROFR) provision, whichit says will give the unregulated marketing affiliate “first call”over non-affiliates in bidding for the 1.2 Bcf/d of firm capacitywhen its contracts expire in May.

“Elimination of El Paso Merchant’s ROFR is necessary to protectthe public interest. Once this unfair advantage is eliminated, newshippers may compete fairly for capacity with El Paso Merchant andnot be forced to obtain transportation service or bundled servicesfrom the unregulated marketing affiliate,” said PG&E NationalEnergy and affiliated companies.

“This solution also will allow other [competing] bidders toobtain at least a pro rata share of any matched bids and will allowEl Paso Merchant to obtain capacity as well,” they told theCommission.

“With the ability to exercise its ROFRs and control 1.2 Bcf ofEl Paso capacity, El Paso Merchant is effectively a surrogate forthe El Paso pipeline,” charged PG&E National Energy and relatedcompanies.

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

Assuming FERC decides to remove the ROFR provision, SoCal andPG&E National Energy requested that a new open season be heldfor 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 aspart of a complaint proceeding in which the California PublicUtilities Commission is seeking to dissolve the contractarrangement between El Paso Merchant and the El Paso pipeline[RP00-241]. The state regulators claim that El Paso Merchant wasshown preference over non-affiliate bidders during the open seasonfor the capacity.

Susan Parker

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