A Victoria, TX-based energy company is seeking refunds of at least $5.9 million from Energy Transfer Partners LP (ETP) for allegedly manipulating the price of natural gas at the Houston Ship Channel (HSC).

In a complaint filed at FERC Wednesday, O’Connor & Hewitt Ltd. said it sold its gas to ETP affiliate Houston Pipeline Co. between 2003 and 2006 based on the HSC index that was published by Inside FERC’s Gas Market Report because it believed it was a “true reflection” of market price. But “it turns out…that the HSC [Inside FERC] index was not a true reflection of market price in 2003, 2004, 2005 and early 2006 because ‘ETP [allegedly] manipulated wholesale natural gas prices at HSC by suppressing them to benefit ETP’s financial positions and other physical positions,'” the company noted.

In addition to Dallas-based ETP and Houston Pipeline, other companies named in the complaint are Energy Transfer Co., ETC Marketing and Energy Transfer Equity LP.

O’Connor & Hewitt claims that ETP violated the Natural Gas Act (NGA) by failing to make its sales for resale at the HSC at “negotiated rates;” intentionally engaged in market manipulation in violation of FERC’s market behavior rules; knowingly submitted misleading trade data to Platts, publisher of Inside FERC, to include in the calculation of its HSC index; and caused the company to suffer “quantifiable economic losses.”

The company called on the Federal Energy Regulatory Commission to order ETP to disgorge all profits stemming from its alleged violations of the NGA; refund the amount of money necessary to return O’Connor & Hewitt to the status quo; and revoke ETP’s blanket market certificate or, alternatively, appoint an independent monitor to supervise ETP’s future resale trades at the HSC and ETP’s reporting of trade data to the Inside FERC newsletter [RP08-30].

FERC already is seeking more than $167 million in total penalties and disgorgement of unjust profits from the Texas-based owner of intrastate/interstate pipeline assets and a natural gas trading affiliate.

The company said it suspected ETP of price manipulation even before FERC filed its show-case order in July, which accused ETP of manipulating wholesale natural gas markets at the HSC and Waha, TX, trading hubs (see Daily GPI, July 27). O’Connor & Hewitt filed a lawsuit against ETP in state court in Victoria County, TX, in March 2007, seeking pre-arbitration discovery and a temporary injunction enjoining ETP from initiating arbitration in any other court or from destroying documents.

ETP refused to turn over documents and later challenged the lower court’s ruling in the 13th Court of Appeals in Corpus Christi, TX, where the case currently is pending. “O’Connor is currently awaiting the court’s decision. However, it is clear that the case is headed to the Texas Supreme Court and delay regardless of how the 13th Court of Appeals rules,” O’Connor & Hewitt said.

The company said it believes that ETP’s alleged manipulation at the HSC was more pervasive than what was outlined in FERC’s show-cause order. “In order for the complete picture of ETP’s manipulation to be painted, discovery is needed from ETP and from Platts detailing [Inside FERC’s] calculation of the HSC index ” for the years 2002 through 2006, it said.

FERC, in its show-cause order, charged ETP with engaging in manipulation of wholesale natural gas markets at the HSC and Waha trading hubs on various dates between December 2003 and 2005.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.