Hi James,
Breaking news El Paso Corp. Treasurer commits suicide. Stock down 20%. Company said to be in disarray, financial restatements coming.
During the California Energy Crisis, natural gas prices hit $50/mcf at the California-Arizona border due to manipulation by El Paso Gas. Here's a "better late than never" effort by regulators to prevent El Paso and others.
June 3: Decision To Reallocate Capacity On El Paso’s Pipeline Expected To Create Controversy
riskcenter.com
June 3: Decision To Reallocate Capacity On El Paso’s Pipeline Expected To Create Controversy
Location: Los Angeles
Author: Singh Balwinder, RiskCenter Correspondent
Date: Monday, June 3, 2002
In a decision expected to provoke protests from congressional lawmakers, federal energy regulators have ordered negotiations to reallocate capacity on El Paso Corp's pipeline system that delivers natural gas into California.
The Federal Energy Regulatory Commission found "unjust and unreasonable" 10- year old capacity-allocation contracts that allow customers east of California a right to obtain ever-increasing supplies of gas from El Paso 's system.
The so-called full-requirements contracts deprive California customers the opportunity to obtain their full allotment of firm natural-gas capacity under contracts with El Paso. The decade-old system for allocating capacity on El Paso's system proved unworkable over time as rapid population growth in Arizona, New Mexico and other desert southwest states resulted in so much capacity being allocated under the full requirement contracts that El Paso was failing to meet its contractual arrangement with its California customers.
FERC's order calls for replacing the full requirements' contracts with so- called contract-demand agreements. The order directs negotiations to set the terms of the new contract demands-allocation amounts. El Paso was directed to report back by Aug. 1 whether or not the negotiations produced any agreements. If there is no agreement on the new capacity allocations, FERC will determine the appropriate contract demand levels.
FERC's order calls for the contract-demand pacts to take effect Nov. 1. El Paso 's El Paso Natural Gas Co. unit expressed support for FERC's decision, saying it worked with its customers to resolve the issue and offered to increase the capacity on its pipeline system.
"We hope this will be a final chapter in a decades-old dispute among the El Paso Natural Gas Co. customers." the firm added. Separately, FERC largely rejected a complaint filed by California Attorney General Bill Lockyer alleging that California power sellers were failing to meet their power sales reporting obligations under the Federal Power Act.
The commission, however, directed any power sellers in California that failed to provide transaction specific information in FERC-mandated quarterly transaction reports to make new filings.
Lockyer filed the complaint in March, calling for up to $2.8 billion in power sales refunds in addition to the $8.9 billion California is demanding from power sellers. FERC called Lockyer's complaint "an impermissible collateral attack" on the system of market-based rates for wholesale power it put in place over the past decade. The commission viewed his filing as an effort to roll back FERC's market-based rates and replace them with cost-based rates, the traditional monopoly-regulation approach largely displaced by competitive power markets the commission fostered in a series of rulings in the 1990s.
Court rulings have upheld FERC's system of market-based rates as supported by the Federal Power Act, noted the commission. But even if there wasn't a body of legal precedent supporting market-based rates, FERC said Lockyer's arguments "lack merit." |
