FERC to Hear Case Against El Paso

A fight between California and El Paso Corp. goes before the Federal Energy Regulatory Commission today in a closely watched case to determine whether the nation’s largest pipeline company deliberately withheld natural gas during the state’s energy crisis.

California says its utilities were overcharged by as much as $3.3 billion for natural gas to fuel their plants because El Paso improperly capped its pipeline shipments at 79% of capacity from November 2000 to March 2001.

A FERC administrative law judge ruled in September that Houston-based El Paso wrongly withheld natural gas when California was reeling from blackouts, soaring prices and a major utility’s bankruptcy filing.

During today’s three-hour session, the company and California will make their arguments directly to the agency’s three commissioners. The commission is expected to issue a decision early next year.

Under FERC rules, the commissioners can accept, reject or modify the administrative judge’s initial ruling. El Paso contends that it limited shipments to ensure the pipeline operated safely and that the FERC judge wrongly micro-managed company decisions.

The preliminary ruling against El Paso in September prompted investors to dump shares, wiping out about $4 billion in market value and triggering downgrades of its debt.

El Paso’s shares dropped last week after Moody’s Investors Service slashed the company’s credit rating to “junk” status.

On Friday, shares closed at $8.52, down 3 cents, on the New York Stock Exchange.