FERC last Wednesday upheld its November 2003 order approving with one change a $1.7 billion settlement of California’s allegations that an El Paso Corp. pipeline drove up natural gas prices in the state by withholding capacity during the state’s energy crisis, and that it gave preferential treatment to its energy merchant affiliate during bidding on transportation capacity.

“It’s officially ready to go to court if somebody wanted to take it [there]. We denied rehearing, so we’re done. It was a full, clean denial,” Chairman Pat Wood said during a press briefing following last Wednesday’s regular Commission meeting. The agency’s order on rehearing was not publicly available last week.

Noting that the case has dogged him since he joined the Federal Energy Regulatory Commission in mid-2001, Wood was obviously relieved to see it leave the agency [RP00-241].

The settlement, which was filed by El Paso and California parties in June 2003 at FERC, resolved charges in a high-profile complaint case brought by the California Public Utilities Commission (CPUC) in 2000, accusing El Paso Natural Gas of withholding its capacity to inflate prices for gas delivered to the California border in 2000 and 2001.

Parties to the settlement included private class-action litigants in California, former state Gov. Gray Davis and the lieutenant governor, the attorneys general of California, Oregon, Washington and Nevada, the CPUC, the California Electricity Oversight Board, Pacific Gas and Electric and Southern California Edison.

In the original November 2003 order and apparently on rehearing Wednesday, FERC rejected as unduly discriminatory a proposal for dual primary firm delivery points and directed the settlement parties to revise that part of the agreement. The settlement had granted certain customers, holding 600 MMcf/d of El Paso’s capacity, the ability to designate two primary delivery points on the El Paso pipeline. But the Commission held that all El Paso shippers should have single primary delivery point rights.

The settlement, which also was subject to state court approval, called for El Paso Cop. and its subsidiaries to pay approximately $1.7 billion to California. In exchange, El Paso and subsidiaries would be released from all claims of misconduct in the California energy markets during 2000-2001.

The bulk of the benefits were to be disbursed to a court-approved settlement class, comprised mostly of residents and businesses who paid a gas or electricity bill to a California utility between Sept. 1, 1996 and March 20, 2003.

©Copyright 2004 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.