- The Washington Times - Tuesday, September 24, 2002

ASSOCIATED PRESS
A Texas energy company tightened California natural-gas supplies during the state's energy crisis, contributing to a rise in power prices, a federal regulatory judge ruled yesterday.
El Paso Corp., through its El Paso Natural Gas pipeline subsidiary, held back at least 10 percent of the capacity on its pipeline delivering gas from its Southwest gas fields to California from November 2000 to March 2001, said Judge Curtis L. Wagner, the Federal Energy Regulatory Commission's chief administrative law judge.
That was a period of high demand and large price increases for natural gas.
El Paso "withheld extremely large amounts of capacity that it could have flowed to its California delivery points," Judge Wagner said.
He recommended that FERC which must sign off on the ruling impose penalties on El Paso for its actions.
Shares of El Paso plunged 36 percent on the news.
California regulators said El Paso used its dominance of the Southern California market to inflate the price of gas sold there by $3.7 billion. Southern California Edison, a large investor-owned utility, said high natural-gas prices added $1 billion to the cost of energy produced at its gas-fired power plants.
California wants FERC to order El Paso to refund at least $200 million, roughly equivalent to El Paso's profits from the transactions.
El Paso said it will ask FERC to reject Judge Wagner's decision.
"The evidence in this case demonstrates that, at all times, El Paso Natural Gas operated its system to maximize the amount of capacity available to California," the company said in a statement. It has said that higher prices resulted from high demand and a shortage of natural gas.
El Paso stock fell $4.16, to close at $7.51 on the New York Stock Exchange.
The ruling in the 2-year-old complaint against El Paso is the latest finding that energy companies attempted to manipulate power supplies and prices in California. Many California power plants use natural gas, and gas prices during the winter of 2000-01 were on average three times higher in California than elsewhere in the United States.


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