The Federal Energy Regulatory Commission released three “protected” El Paso Corp. document exhibits Monday as part of the agency’s day-long oral arguments in the market-manipulation complaint case that has pitted California against the Houston-based energy giant.

At the request of California regulators and other state representatives, the Commission voted unanimously to make the internal El Paso documents public, with Commissioner William Massey saying he wanted to avoid the “perception that there’s anything that any of us have to hide about the record” in the high-profile complaint case, which has been the subject of intense media coverage. Commissioner Nora Brownell agreed that an “open and complete” record was in “everyone’s best interest.”

El Paso attorneys objected to the release of the “confidential, sensitive business information,” and asked FERC to weigh the potential for competitive harm to the energy corporation.

In one document, which was presented to El Paso’s risk management committee in February 2000, company executives talked about whether there was “sufficient financial liquidity” to “justify idling large blocks of transport.” They also discussed the role of storage to “help manipulate physical spreads, adding to overall transport/storage cost,” and addressed the risk involved “if marketing takes over transport.”

An April 2000 memo to El Paso Chairman William Wise, focusing on the company’s pipeline capacity, said the company could “make money two ways” — increase the load factor on its pipes and/or “widen the basis spread” between the California border and the producing basins that it serves. The memo, which was written by Greg Jenkins of El Paso Energy Merchant Co., also talked about the El Paso pipeline’s ability to move gas to “East of the Border” markets, such as Arizona and New Mexico, rather than California, as well as its strategies in Mexico and Texas.

In another document, identified as “Strategic Advantages,” El Paso discussed its “ability to influence the physical market to the benefit of any financial hedge position,” and its “control of [the] total physical market” at key points along its system (San Juan Basin, Permian Basin and Waha, for example).

All three document exhibits contain “very important and probative evidence regarding El Paso Corp.’s intent on entering into the [contract] arrangements that are at issue in this case,” said Frank R. Lindh, counsel for Pacific Gas and Electric Co., who was part of the tag team that argued on behalf of California. They also show the activities of affiliates El Paso Natural Gas and El Paso Merchant Energy were known and endorsed by officials at the highest levels of the company, California representatives claimed.

The oral arguments were the final step before the complaint case goes to the full Commission for deliberations. A FERC judge in September ruled that the El Paso pipeline withheld substantial amounts of capacity to ratchet up California natural gas prices, and that both the pipeline and El Paso Merchant violated the agency’s affiliate standards. FERC now has the option to accept or reject the judge’s decision in full or part. It has indicated that a decision, probably the most important one FERC has ever made, will likely be issued in early 2003.

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