A small group of producers and marketers yesterday said they”fully support[ed]” the complaint in which California regulatorsaccused El Paso Natural Gas and its marketing affiliate El PasoMerchant Energy Co. of anti-competitive practices and affiliateabuse in connection with the $38.5 million contract arrangementbetween the two.

In contrast, Pacific Gas and Electric (PG&E) indicated it’sstill undecided on the more serious allegations raised byCalifornia regulators with respect to El Paso Merchant’stransaction for 1.22 Bcf/d of firm transportation to California onEl Paso, but it advocated regulators’ positions on recall rightsand discovery.

Given it’s been a “brief time” since the California PublicUtilities Commission (CPUC) filed its complaint, PG&E hasn’tbeen able to “formulate a definitive position on all the issuesraised, such as the…..allegation that El Paso and its marketing[affiliate is] engaging in an anti-competitive ‘hoarding’ ofcapacity in an effort to drive up the price of gas” at theCalifornia border, the utility said in comments filed at FERC[RP00-241].

But Burlington Resources Oil & Gas, Amoco Production Co. andAmoco Energy Trading Corp., which comprised the Indicated Shippergroup, weren’t hesitant about making the leap. “As the CPUC pointsout, the only reason El Paso Merchant would have for purchasing allof the available firm capacity to California is to exercise marketpower by hoarding it, artificially driving up prices for gasdeliveries to California,” it told FERC.

PG&E, however, did back the CPUC’s request to remove thecontract transaction’s restrictions on the recall rights to BlockII firm capacity for northern California shippers. Both PG&Eand the CPUC agree that El Paso Merchant’s contract transactionwith El Paso diminishes the “high-priority access” rights ofshippers to Block II capacity to serve northern California, whichPG&E argues were assured under the famed 1996 El Pasosettlement in exchange for its payment of $58.4 million. The BlockII capacity – which is central to El Paso Merchant’s contract deal- consists of 614 MMcf/d of firm transportation from the San JuanBasin to the PG&E-Topock delivery point.

The northern California utility said it also supported theCPUC’s bid for a “reasonable opportunity for discovery” of thefacts surrounding the 15-month contract arrangement, which entailsthree separate agreements between the pipeline and its marketingaffiliate.

In the Section 5 complaint filed earlier this month, the CPUCchallenged the “justness and reasonableness and anti-competitiveeffects” of the contract transaction that was unveiled in February,saying the state’s gas and electric consumers will be forced to payan additional $100 million at least as a result of the allegedanti-competitive practices of El Paso and its marketing affiliate.It urged FERC to rescind the El Paso contracts.

Aside from what the CPUC sought in its complaint, PG&E askedthe Commission to consider two additional requests. First, it urgedFERC to make the El Paso agreements subject to Section 4 of theNatural Gas Act (NGA). This would “appropriately place ” on El Pasothe burden of proving its affiliate contracts are “just andreasonable,” and it would give FERC the opportunity to suspend theeffectiveness of the agreements for up to five months “whileparties…..engage in discovery and flesh out the facts,” PG&Esaid.

El Paso was exempted from the filing because its contracts withEl Paso Merchant “conformed” to the type of agreement allowedunder the pipeline’s tariff. But PG&E questioned whether theexemption should have been permitted given that the contracts were”with an affiliate, at a substantial discount [and] forapproximately one-third of the pipeline’s total capacity.”

Secondly, PG&E said El Paso should be required to explainwhy its contracts with El Paso Merchant don’t trigger theCommission’s affiliate rule, which requires a pipeline to offer tosimilarly-situated, non-affiliated shippers the same discountthat’s been offered to an affiliated shipper. “In this instance, itwould appear that any shipper holding firm transportation rights tothe California border would be ‘similarly situated’ to the [El Pasoaffiliate], other than those with short-term contracts such as30-day contracts,” PG&E noted.

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