More than 1 Bcf/d of additional transportation capacity on El Paso Natural Gas was available to serve the gas-starved California market last year, but it went unused, claimed a witness for Southern California Edison during a FERC hearing yesterday exploring price-manipulation charges against the pipeline and its merchant power affiliates.

SoCal Edison, California regulators and other critics contend that El Paso pipeline intentionally kept a portion of the capacity off the market for much of 2000 to drive up natural gas prices in California.

Some of the unused capacity can be explained away by the increased gas usage of the El Paso pipeline’s east-of-California (EOC) customers, the rupture on the pipeline’s South Mainline last August in New Mexico, and the capacity lost to maintenance downtimes, conceded Paul R. Carpenter, an economist with The Brattle Group. But that still leaves a “significant” amount of capacity that was inexplicably unavailable in 2000, he said.

After adjusting for the EOC, rupture and maintenance factors, he estimated that prior to the August rupture about 500 MMcf/d of capacity on El Paso was unavailable to the market for “unexplained” reasons. Post-rupture, that figure dropped to about 300-400 MMcf/d, Carpenter said. “While each of these [factors] appears to have had some effect” in reducing the amount of available capacity on El Paso’s system, Carpenter noted the numbers “don’t add up.”

Kevin Lipson, Washington, D.C., attorney for SoCal Edison, put Carpenter on the stand to refute the earlier testimony of John Somerhalder, president of the El Paso Pipeline Group, who had said that El Paso was unable to meet its capacity obligations to supply California’s expanding gas appetite.

“The notion that there was insufficient capacity to meet their obligations in California was not something that we would even consider. It was not on our radar screen,” countered Carpenter.

The FERC hearing into whether El Paso and its affiliates, El Paso Merchant Energy Gas L.P. and El Paso Merchant Energy Co., engaged in illegal practices to drive up California gas prices has now entered its fifth week, and is expected to wrap up next week.

The second phase of the trial-type hearing is expected to get underway shortly afterwards. It will examine allegations that El Paso rigged its bidding process for a large block of capacity by showing preference to its affiliates over non-affiliate bidders. The El Paso Merchant Energy companies were awarded 1.22 Bcf/d of firm capacity in early 2000, making them the biggest shippers on the El Paso pipeline. The affiliates’ contracts for the capacity expired in late May.

Chief Administrative Law Judge Curtis Wagner Jr. said earlier this week he intends to call nine executives of parent El Paso Corp., El Paso pipeline and El Paso Merchant Energy to testify during the second phase, including El Paso Corp. Chairman William Wise. Wagner indicated that he hopes to issue an initial decision in the case sometime in September.

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