http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/15/nation
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Judge says natural gas document suggests market manipulation
SUZANNE GAMBOA, Associated Press Writer Tuesday, May 15, 2001
(05-15) 14:57 PDT WASHINGTON (AP) -- A federal regulatory judge said Tuesday
that a memo in a natural gas supply case implies the market was abused to
drive up California energy costs last year.
The memo "certainly has statements in it that could lead one to believe there
was an abuse" of the gas market, Curtis Wagner, the Federal Energy Regulatory
Commission's chief administrative law judge, said in a hearing.
California regulators have pointed to the memo to accuse Houston-based El
Paso Corp. of using its market power to inflate the price of natural gas sold
in California last year by as much as $3.7 billion.
El Paso Corp. owns a gas marketing company, El Paso Merchant, and one of the
largest pipelines connecting Southwest gas fields to California. The company
has denied the allegations.
Wagner wouldn't release the memo, dated Feb. 14, 2000, and attorneys wouldn't
discuss the contents.
The New York Times has reported that El Paso Merchant said in a Feb. 14,
2000, memo that it would have "more control" of gas markets because of a deal
it made with El Paso Natural Gas that gave it the right to ship 1.2 billion
cubic feet of gas a day on El Paso's pipeline.
The deal accounted for about 30 percent of the pipeline's capacity and about
one-sixth of California's daily demand.
El Paso Merchant attorney Bill Scherman dismissed the significance of the
memo during a hearing break.
"When those documents are revealed, we believe it will show those documents
are consistent with the position we've taken in this case, that we did not
exercise market power," Scherman said.
The regulators have alleged that the El Paso Corp. subsidiary kept other
natural gas suppliers from using its pipeline by offering use of unused
pipeline capacity at unreasonable prices and terms.
Natural gas prices have soared in the California market and remain
substantially higher than prices in other parts of the country. While
wholesale gas has been selling in the range of $5 per thousand cubic feet at
most trading points, it has been as much as $14 at the California border.
Wagner's ruling is expected in June. The full Federal Energy Regulatory
Commission can accept or reject his ruling.
The hearing began Monday and should continue through next week.
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