El Paso Energy yesterday issued a “public and unequivocaldenial” of the claims that it conspired with Southern CaliforniaGas and San Diego Gas and Electric over a four-year period to driveup the price of gas and power in California. The claims were madeMonday in two class action lawsuits filed in California SuperiorCourt.

“We deplore this attempt by plaintiffs’ attorneys to advancetheir cause by taking advantage of the media focus on California’sunfortunate circumstances,” El Paso Spokeswoman Norma F. Dunn said.”As virtually all knowledgeable parties have publicly recognized,the present energy shortages result from the concurrence of avariety of circumstances, including unusually warm summer weatherfollowed by high winter demand, low gas storage levels, poorhydro-electric power conditions, maintenance downtime ofsignificant generating facilities, price caps that discouragedpower movement from out-of-state into California, etc.”

One class action suit was filed by a Los Angeles law firm onbehalf of 1,600 of SoCalGas’ largest industrial gas customers. Theother was filed on behalf of 100,000 residential and small businesselectricity consumers, alleging the same conspiracy has “endangeredthe state’s electricity system and threatened its economy.”

The suits allege restraint of trade and unfaircompetition/business practices. They maintain that the threecompanies agreed to “refrain from competition, not to challenge oneanother’s mergers, and to exchange reciprocal benefits designed toeliminate competition.” Both suits cite an alleged Sept. 25, 1996meeting among “top executives” of the three companies held inPhoenix, during which a conspiracy plan was hatched to “dominatethe unregulated aspects of the natural gas and electricitymarkets.” At the time, the gas suit contends, the representativesof the three companies agreed “not to compete against each other inthe Southern California and Baja California (Mexico) natural gasdelivery markets.”

A simple review of the facts shows the inaccuracy of many of theallegations, Dunn said. “Neither El Paso Energy Corp. nor any ofits affiliates have been or are now engaged in any illegalactivities, alone or in combination with any other parties, toincrease energy prices or create energy shortages in California.”

In a Dec. 13 letter to FERC, El Paso CEO William A. Wise notedthat prior to the recent price increases El Paso Merchant Energylimited its opportunity to profit from such increases by putting inplace financial hedges designed to protect against falling prices.Dunn said these hedges belie the assertion that El Paso hadanticipated the recent increase in natural gas prices, much lessbeen involved in causing it. “Similarly, the lawsuits’ claims of aconspiracy overlook, misrepresent, and misinterpret evidence andevents that contradict the contrived conspiracy theory and renderit totally unbelievable,” she said.

“As to the charge that Merchant Energy withheld its capacity todrive up California gas prices, commencing before the recent priceincreases and throughout this period, virtually all of thatcapacity that has been physically available has been utilized tomove gas to California,” she said. “The capacity of California’sown in-state facilities to receive gas is not physically sufficientto accept much more gas than has been shipped.”

Dunn said El Paso intends to respond to the California lawsuitsin court, refuting with independent evidence all claims that itplayed any illegal role in California’s current crisis.

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