In what was a major blow for El Paso Corp. last week, the Federal Energy Regulatory Commission granted the request of the Office of General Counsel’s Market Oversight and Enforcement Section (MOE) for an inquiry into whether El Paso Natural Gas withheld transportation capacity from customers last winter in an attempt to drive up prices for natural gas delivered to the Southern California border.

In a brief five-page order, the Commission remanded the long-standing complaint case against El Paso and its merchant energy affiliates to Chief ALJ Curtis Wagner Jr. to conduct a “supplemental” hearing into the “limited” issue of whether the pipeline denied interruptible transportation service to customers from November 2000 through March 2001.

“The question of whether El Paso pipeline made all of its capacity available at its California delivery points is a uniquely important issue that requires further development because gas spot prices during this period were elevated to the $20 to $30/MMBtu level, with price spikes as high as $60/MMBtu,” the FERC order said (RP00-241).

In October, Judge Wagner issued an initial decision that found El Paso pipeline had engaged in “blatant collusion” by maneuvering the bidding process for a large block of transportation capacity on its system to favor affiliate El Paso Merchant Energy Co., but it vindicated El Paso Merchant of allegations that it illegally exercised market power to push up prices for gas delivered to Southern California beginning in mid-2000 (See NGI, Oct. 15).

Last Wednesday, FERC directed Wagner to re-open the record in the proceeding to explore essentially the same market-power abuse charge, but this time El Paso pipeline (rather than El Paso Merchant) is the alleged offender, and the time period is different — November-to-March 2001.

The El Paso companies argued that MOE’s request was an attempt to retry the case, and amounted to an “abuse of process,” and would be detrimental to their rights. However, FERC rejected their arguments, noting that “contrary to the allegations of El Paso pipeline and El Paso Merchant, this remand does not abridge their due process rights.”

The El Paso companies further claimed that the issue — withholding of transportation capacity last winter — already was addressed by Wagner during hearings last summer, but the Commission begged to differ. “The existing record in this proceeding does not provide an adequate basis for resolution of this issue,” the order noted.

Despite FERC’s action, parent El Paso Corp. said it expects to prevail in the end. “Given the high level of publicity that this case has engendered, it is not surprising that FERC seeks to ensure that every question raised has been answered,” said Peggy Heeg, general counsel of El Paso Corp. “The sole issue to be examined in this limited hearing is whether El Paso Natural Gas pipeline company fully complied with the regulations to make all of its capacity available for interruptible service during the winter of 2000-2001. We are confident that Chief Judge Wagner will reconfirm his conclusion that El Paso Natural Gas fully complied with FERC’s regulations by making its capacity available.”

Within 20 days of the new order, Wagner must convene a pre-hearing conference to establish dates for a hearing. FERC directed Wagner to issue a supplemental decision “as soon as practicable” addressing the limited issue.

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