Top FERC officials will meet in a closed-door session today todiscuss the results of its investigation into whether Kinder MorganInterstate Gas Transmission has properly implemented theCommission-ordered operational restructuring in compliance with themarketing-affiliate standards of Order 497.

A FERC source indicated the unprecedented number of high-levelCommission officials that are due to gather at the session, 32 inall, suggests that possibly broader issues may be addressed by theparties as well.

Both the Commission and Kinder Morgan representatives weretight-lipped about what exactly will transpire today. “Discussionsare likely to involve disclosure of investigative records compiledfor law enforcement purposes,” which if publicly revealed at thistime “would interfere with enforcement proceedings,” said DouglasW. Smith, FERC’s general counsel, in a statement certifying themeeting as “closed to public observation.”

Discussions “are also likely to specifically concern theCommission’s participation in a civil action or…..the initiationof a particular case” arising from a 1996 proceeding in which FERCordered KN Interstate Gas Transmission (KNI) – now Kinder MorganInterstate – to restructure its operations upon learning thatemployees worked interchangeably for the pipeline and its marketingaffiliates in violation of Order 497.

“We’re not going to talk about it until after the meeting’sover,” said Kinder Morgan spokesman Larry Pierce. “We’ll probablyhave a statement then.”

FERC officials attending the session will include Chairman JamesJ. Hoecker and Commissioners William L. Massey, Linda Breathitt andCurt Hebert Jr., their staffs, and representatives from practicallyevery office in the Commission. The session will take placeimmediately following the regular FERC meeting today.

In a December 1996 order, FERC found that KNI had violatedseveral of the standards of conduct in Order 497, including: 1)routinely “cycling” employees between pipelines and marketingaffiliates; 2) disclosing to marketing affiliates information onnon-affiliated shippers; and 3) failing to share information thatit provided to its marketing affiliates with other shippers on itssystem [MG96-13]. At the time, the Commission directed KNI toquickly cease the violations and comply with the marketingaffiliate rule’s conduct standards.

A year later, FERC accepted KNI’s revised standards of conductas “acceptable,” pending an audit by its Office of the ChiefAccountant (OCA) to determine whether the procedures were beingproperly implemented by the pipeline. The audit — the results ofwhich haven’t been publicly disclosed — was conducted during thefirst quarter of 1998.

The OCA was instructed by the Commission to determine, amongother things, whether there was any “legitimate need” for cyclingpipeline and marketing employees at KNI. The pipeline had told FERCit prohibited transferring an employee multiple times in the”absence of a legitimate need for such transfers.”

The Commission also directed the OCA to focus on the “proceduresand criteria” used by KNI to determine when transportationinformation has lost its commercial value. KNI had assured FERCthat pipeline employees transferred to marketing affiliates wouldno longer work on the transportation accounts of customerspreviously handled at KNI “at least until the information obtainedwhile working at KNI has lost its commercial value.”

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