El Paso Sets Record Straight on Price Manipulation Charges

Allegations that large capacity-holders on El Paso Natural Gas have deliberately withheld pipeline capacity from the market to drive up gas prices in California, and that the pipeline was involved in a "conspiracy" in 1996 to block new interstate pipe capacity from entering the state are unfounded, said a company spokeswoman.

"We would like to take this opportunity to clarify the record," said spokeswoman Norma Dunn in a prepared statement late Friday. These accusations "overlook critical facts and are demonstrably untrue."

"It is not possible for any holder of capacity on the El Paso Natural Gas pipeline to cause a significant increase in California gas prices by refusing to use that capacity," she said. Dunn specifically noted that all of the capacity held by affiliate El Paso Merchant Energy, the largest capacity-holder on the pipeline, has been used or made available for use by others to serve California and other western markets.

As for allegations of a conspiracy in 1996, she said, "the facts show that all new pipelines considered during the 1990s were either built or were not viable projects because they lacked sufficient customer support to justify their construction." Dunn cited Tenneco's failed Altamont project as an example of the latter.

In 1996, she noted the excess pipeline capacity into California ranged up to 2 Bcf/d. It "was misplaced reliance on the continuing availability of such excess capacity that prompted the California Public Utilities Commission to encourage PG&E, SoCal Edison and SoCal Gas, beginning in 1996 and continuing into 1998, to relinquish over 1.5 Bcf Bcf/d of firm transportation capacity on the El Paso Natural Gas pipelines."

As recently as last year, Dunn said there were periods when significant quantities of unused capacity were available on El Paso, but shippers failed to take advantage of this. "If California had taken advantage of the opportunity in 2000 to store the same volumes of natural gas that had been stored in 1999, reliance on the spot market would have been reduced and the steep rise in prices at the California border could have been substantially mitigated or avoid," she noted.

Susan Parker

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