A FERC judge on Tuesday will hear arguments on whether to toss out an agency subpoena that orders El Paso Corp. to furnish documents on its deceptive price reporting activities to California parties to support their claim for refunds.

The Houston-based energy company filed a motion last Tuesday to crush the subpoena and all other efforts to conduct discovery of its natural gas trading records, and to make a “special appearance” before the Commission judge to argue its case.

Administrative Law Judge (ALJ) H. Peter Young, who issued the subpoena on Jan. 17, granted El Paso’s request to make a “special appearance” for the “limited purpose” of challenging the subpoena at a hearing set for Jan. 28. In the meantime, he ordered California regulators, state Attorney General Bill Lockyer and other parties, which requested the subpoena, to make a “good faith best effort to resolve or limit the issues” that will be addressed in the oral arguments. Young said the California parties must make a “threshold demonstration of compliance with this directive” prior to the hearing.

The California parties are seeking information about El Paso’s gas trades as part of an ongoing Commission proceeding in which they 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].

They view information about El Paso’s reporting of false prices for 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, to be used in calculating its index price for gas (see NGI, Jan. 20). 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.”

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 NGI, Dec. 9, 2002). He pleaded not guilty, and is awaiting trial.

El Paso said it is fighting the subpoena because the information being sought by California parties does 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 NGI, Jan. 20).

“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.'”

©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.