Federal probe widens into prices of natural gas

The Associated Press
Tuesday June 12, 2001

The Federal Energy Regulatory Commission ordered an expanded inquiry Monday into whether El Paso Corp. drove up the price of natural gas destined for California last year by improperly favoring gas marketing companies it owns in bidding for transportation capacity on one of its pipelines. 

The commission reversed its ruling of March 28 in which it said El Paso Corp. did nothing wrong in the way it awarded contracts for capacity, or the right to ship gas on its large pipeline connecting gas fields in the Southwest to California. 

El Paso’s control of the pipeline is the subject of hearings now in their fifth week before an administrative law judge at the energy commission. 

Acting on an appeal of their decision by California regulators and on a request for guidance from the judge, Curtis L. Wagner Jr., the five commissioners said they now believe the relationship between the El Paso units raises “factual issues that are best resolved in an evidentiary hearing.” 

California regulators allege that El Paso used its control of the pipeline to inflate the price of gas by as much as $3.7 billion. 

El Paso Corp., based in Houston, has denied that it overcharged customers or manipulated the markets.  

It has attributed the high cost of gas to supply and demand and to constraints in California’s distribution system. 

“The bottom line is the evidence the FERC looked at when they made their initial decision...is still the same,” said Norma F. Dunn, El Paso’s senior vice president for communications. “We remain very confident.” 

In its action Monday, the commission rejected El Paso’s request to dismiss the entire case. 

The hearings have gone on longer than expected. Wagner’s initial ruling had been due in late June, then early September.  

The commission gave him 10 days to produce a new timetable. The commission will be able to either accept or reject Wagner’s ruling. 

Commissioner Pat Wood III, one of President Bush’s two recent appointees to the commission, issued a concurring opinion in which he noted that California regulators originally filed their complaint 14 months ago.  

“In the framework of active energy markets, it is critical that the commission act expeditiously on complaints,” he said. 


On the Net: 

FERC: http://www.ferc.gov