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El Paso Cleared


El Paso Corp., parent company of The Coastal Corp, did not illegally drive up the price of natural gas in California during the height of the state's energy crisis last year, a federal regulatory judge ruled.

However, El Paso, through two subsidiaries, violated federal rules governing the award of natural gas contracts, said Curtis L. Wagner, the Federal Energy Regulatory Commission's chief administrative law judge.

The California Public Utilities Commission and two investor-owned utilities claimed El Paso created an artificial shortage of natural gas, sending prices to unprecedented levels last year and early this year. The commission, Southern California Edison and Pacific Gas and Electric said El Paso's actions added $3.7 billion to gas prices, which also benefited other sellers of natural gas. But Wagner found the high prices were due to high demand and an actual shortage of gas.

The cost and availability of natural gas was a key component in the state's power crisis because gas fuels most power plants. The state sought at least $200 million from El Paso, a minimal estimate of the company's profits from the contract, said Harvey Morris, a lawyer with the California commission. Wagner's ruling, which FERC commissioners can accept or reject, did not address that issue. It's possible a separate hearing on damages could be held.

Morris said state regulators are disappointed Wagner did not see a connection between the fall of Southern California gas prices in May and the end of El Paso's contract to ship gas there. California and Southern California Edison will challenge Wagner's ruling, their lawyers said. El Paso denied doing anything wrong, and attributed the price rise to severe weather and a shortage of gas storage facilities.

"We're gratified by the judge's finding that El Paso was not the cause of high gas prices in California," said Norma Dunn, El Paso's vice president for communications. "That's been our position from Day 1."

She denied that El Paso violated FERC's rules for natural gas contracts and said the company would challenge those aspects of Wagner's ruling.
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