Foiled in its bid to sell 1.25 Bcf/d of capacity to Enron NorthAmerica, El Paso Natural Gas announced late yesterday the capacityhad been won in a rebid by affiliate, El Paso Merchant Energy-GasL.P. for $38.5 million.

The contract is for a 15-month term from March 1, 2000 to May31, 2001. El Paso Merchant Energy includes the company’s marketingarm and its merchant power plants. El Paso Natural opened thelatest bidding for one week, starting Feb. 7, with a posting on itselectronic bulletin board. The company said 25 bids were submittedfor part or all of the available capacity. After evaluating thebids under the prescribed methodology El Paso Merchant was declaredthe winner.

El Paso Natural had announced just four days before the new openseason that it had reached a mutual agreement with Enron to nullifythe contracts signed by the two last December. (See Daily GPI, Feb. 4) Enron had agreed to pay $38million for the same three blocks of capacity for 12 months but laterdeclared it wanted to drop one segment — Block II capacity, abouthalf the total volume — after the Federal Energy RegulatoryCommission restricted delivery. The Commission had ruled Block IIcapacity had to go to the receipt point Pacific Gas &Electric-Topock, AZ, rather than the favored Southern CaliforniaGas-Topock.

El Paso Natural subsequently announced the two companies hadagreed to drop the entire package. El Paso had previously marketedthe capacity to Dynegy for two years. Other shippers and theCalifronia Public Utilities Commission (CPUC) all along haveprotested the marketing of such a large block of capacity to oneparty.

“This is pretty shocking,” said Harvey Morris, principalattorney for the CPUC, when apprised of the latest deal. “Thisraises all kinds of red flags. I never believed El Paso was capableof this. It removes any hope that interruptible transportation willbe discounted since that would undermine its own marketingaffiliate. We were glad when El Paso and Enron agreed to drop theirnon-competitive deal. We hoped this would be picked up by manydifferent marketers.”

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