Without conceding any wrongdoing on its part, El Paso Electric Co. (EPE) has agreed to pay $14 million as part of a settlement with FERC trial staff that resolves issues arising from the agency’s investigation into the company and Enron Corp. [EL02-113-000]. The settlement was disclosed by the staff in written testimony filed Thursday.

EPE said it has settled all issues resulting from the four-month investigation, which reviewed the alleged trading irregularities of EPE and two subsidiaries of Enron in the California electricity market. However, the settlement did not resolve issues between the company and other parties in the case, including California governmental agencies and other market participants. EPE said prehearing proceedings will continue for all parties.

Under the terms of the negotiated settlement, EPE has agreed to refund $14 million of revenues it earned on wholesale power transactions. In addition, EPE also been stripped of its license to sell electricity at market-based rates for the next two years, until Dec. 31, 2004. As part of the agreement, EPE did not admit to violating any statute or FERC rule when carrying out its wholesale trading activities.

As part of Commission’s ongoing review of alleged manipulation in the short-term electric and natural gas markets, FERC launched formal investigations in August into the potentially illegal actions of three Enron Corp. affiliates — Portland General Electric, Enron Power Marketing and Enron Capital and Trade Resources Corp. — and EPE, Avista Corp. and affiliate Avista Energy during the western energy crisis (see Daily GPI, Aug. 14).

EPE said its settlement was not binding on any party other than itself and the trial staff. If FERC chooses not to approve the settlement, neither EPE nor the FERC trial staff will be bound by its terms.

“We are pleased today to announce this settlement with the FERC’s Trial Staff,” said EPE’s CEO Gary R. Hedrick. “We realize that there are still many hurdles ahead to resolve this proceeding before the FERC, but this is a significant step in that direction, and we are eager to present it to the administrative law judge and the FERC commissioners for their consideration.”

EPE noted that its sales of wholesale electricity delivered to the California Independent System Operator (CAISO) accounted for less than 0.3% of the total energy delivered through the California Independent System Operator during 2000 and 2001.

EPE said it will hold a conference call Friday at 3 p.m. EST to discuss the FERC settlement. The dial-in number is (888) 769-8523 with a passcode of ‘2002’. The conference call will be webcast live on EPE’s website (www.epelectric.com ).

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