FERC Chief Accountant John Delaware told El Paso Natural Gas and Gulf South Pipeline in letters this week that the companies should have written agreements with their parent companies, El Paso Corp. and Entergy-Koch LP, respectively, regarding the use of corporate money pools. However, Delaware said Commission audits found no instances of noncompliance with FERC regulations.

FERC sent similar letters last week to two Enron subsidiaries and a Williams pipeline (see Daily GPI, Sept. 10). On June 25, FERC issued an interim rule requiring U.S. energy firms to document their cash pools, which allow a parent company to borrow money from an affiliate at preferred rates. It also said the agreements should be filed with the Commission, and that regulated companies must notify FERC within 20 days when their minimum propriety capital balance drops to below 30% of total capital (see Daily GPI, June 26).

The industry’s credit crunch and a downturn in marketing and trading prompted some financially weak firms to turn to regulated affiliates for cash. Enron, for example, borrowed about $1 billion from affiliates Transwestern and Northern Natural Gas Co. before the parent company filed for bankruptcy in December 2001.

El Paso Natural Gas, which serves primarily California and the Southwest, had a balance of $92.7 million in its cash pool in 2001, according to the FERC audit. Gulf South had a balance of $52.6 million in its 2001 cash pool. Gulf South serves the Gulf Coast region.

Delaware said that although both companies were in compliance with existing FERC regulations, they still should have specific cash management agreements, designating the responsibilities of the parties, the interest rate and rate adjustments, when interest should be paid and any restrictions on borrowing from the pool.

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