Affiliates of El Paso Energy, Enron, Duke Energy and Pacific Gas& Electric appear to have picked up the largest shares of the1.2 Bcf/d of available space on El Paso Natural Gas lines toSouthern California points in the latest capacity auction.

The assignments posted on the El Paso EBB from 30 companiesmostly run for five or six years from the June 1, 2001 start date,with a few extending even longer. An El Paso spokesperson would notconfirm the posted bids represented the final allocation, butindustry sources said they did not expect the current holder of the1.2 Bcf/d of capacity, El Paso Merchant Energy, whose contract runsout May 31, to exercise its right of first refusal. El Pasospokespersons have been promising an announcement for two days.

It appears the winning bidders were taking no chances in goingfor the long term, since El Paso had said its economic evaluationof the bids would include returns up to five years. Rates paid werenot disclosed, but sources were assuming, given current demand forcapacity, they were at or near the maximum. The bids posted totaled1,243,072 MMBtu/d and the leaders were (all volumes in MMBtu/d): ElPaso Merchant Energy with 276,932, Enron Energy Services 254,056,Duke Energy affiliates 211,697, PG&E affiliates 151,300, TexacoNatural Gas 58,407, and Dynegy affiliates 56,418.

For El Paso Merchant Energy, Enron, Duke and PG&E, the bulkof their capacity is for deliveries to PG&E at Topock. Otherprospective capacity holders include MGI Supply Ltd., CEG EnergyOptions, Sempra Energy affiliates, Occidental Energy, Merrill LynchCapital, Coral Energy, Mexicana del Cobre, AEP Energy Services,Allegheny Energy Supply, Williams Energy, Sacramento MunicipalUtility District, Burlington Resources, Paramount Petroleum,California Steel Industries, and others.

Coming in the wake of the capacity squeeze going into Californiaover the last year, the latest allocation was a far cry from the twoprevious auctions for about a third of El Paso’s capacity relinquishedby Pacific Gas & Electric in December 1997. Dynegy (then NGC) paid$70 million for the space for 1998 and 1999. The payment includedabout a 12-cent/Dth reservation charge, plus about 1.6-cent usagecharge (see Daily GPI, Jan. 7, 1998).After that a contract with Enron for the space fell through and ElPaso Merchant Energy picked up the capacity in January 2000 for 15months for $38.5 million (see Daily GPI, Feb. 17, 2000).

Management of the space has been under attack by Californiaregulators and shippers since the first contract was awarded toNGC. El Paso and high-flying California border prices currently areamong the targets of several investigations on-going in Californiaand Washington. The company recently issued a press releaselabeling as “demonstrably untrue” allegations that capacity wasmanipulated to increase prices (see Daily GPI, Feb. 26).

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