In an emergency motion filed at FERC this week, El Paso Corp. is seeking to quash a subpoena issued by an agency judge that requires it to turn over documentary evidence related to its self-avowed practice of submitting false prices for natural gas trades to an energy publication.
Last Friday, Administrative Law Judge (ALJ) H. Peter Young issued the subpoena in response to a request by California regulators, state Attorney General Bill Lockyer and others for information about the gas trades as part of an ongoing Commission proceeding in which California parties are trying to prove that the state’s wholesale power market was manipulated in 2000 and 2001, and that billions of dollars in refunds are owed to electric customers there [EL00-95-069].
The California parties view information on gas trades as critical to their effort to win refunds for electricity customers, given that much of the electricity in the state is produced from natural gas. High gas prices, whether due to manipulation or competitive factors, lead to increases in electricity prices.
Specifically, the subpoena seeks documents that El Paso furnished earlier this month to the U.S. Attorney’s Office in Houston, which detailed more incidents in which its employees gave deceptive information on gas trades to the energy trade publication, Platts’ Inside FERC (see Daily GPI, Jan. 14). It also requires the Houston-based energy company to turn over CD recordings of “140 phone calls among El Paso employees in which plans to provide false data to trade publications are discussed, and a conversation in which [former El Paso Corp. trader] Todd Geiger allegedly defends certain non-existent trades to an Inside FERC editor [occurred].”
In early December, Geiger was arrested and charged with one count of wire fraud and one count of knowingly submitting false information on gas trades to Inside FERC (see Daily GPI, Dec. 5). He pleaded not guilty, and is awaiting trial.
In addition to crushing the subpoena and efforts to conduct discovery, El Paso — which is not a party to the refund proceeding — has asked Young to allow it to make a “special appearance” before the parties in the case for the purpose of “protecting its rights.” Other ALJs “have recognized the propriety of allowing a non-party to make a special appearance for purposes of objecting to discovery” of “confidential and commercially sensitive date,” while not becoming a “full-fledged party” to the case.
El Paso said it objected to the subpoena because the information being sought by California parties did not involve gas trades in California. The parties “jump immediately to presume” that El Paso’s latest disclosure to federal prosecutors in Houston are “relevant because: ‘Inside FERC was one of the trade publications upon which the Commission based the calculation of the [Mitigated Market Clearing Price, and] manipulation of data reported to this trade publication almost certainly impacted the MMCP.'”
The Commission established the MMCP formula for computing market power prices in connection with the California refund cases. The formula includes a gas price component that was tied to the gas price indices of energy publications, which FERC staff criticized as being “unverifiable.”
El Paso’s recent disclosure to the U.S. Attorney’s Office “concerns information about monthly [gas] contracts transacted at delivery points in other parts of the country,” the company said. It conceded that some data on monthly gas contracts transacted in the West were included as well, but El Paso noted the information could be obtained directly from affiliate El Paso Merchant Energy Co., which is a party to the refund proceeding.
In addition to seeking irrelevant data, El Paso contends that the subpoena conflicts with the Commission’s Jan. 10 order, which barred access by California parties to any information that could jeopardize FERC’s ongoing investigation into supplier activities in the West, as well as to information obtained jointly by FERC, the Commodity Futures Trading Commission and/or the Department of Justice (see Daily GPI, Jan. 15).
“Here, where the discovery will interfere with ongoing investigations by the Commission and other federal agencies, as well as subject a non-party to undue burden, good cause exists to quash the California parties’ subpoena to El Paso and/or deny the discovery sought,” the company noted. Moreover, “in clear disregard for the Commission’s ruling, the California parties’ subpoena expressly calls for documents and data ‘provided to prosecutors, investigators at the Federal Energy Regulatory Commission, and investigators at the Commodity Futures Trading Commission.'”
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