El Paso seeks negotiated settlement in California pipeline case

After the chief administrative law judge in the case urged the parties to negotiate, El Paso Corp. said it would make an effort to settle litigation pending at the Federal Energy Regulatory Commission alleging affiliate abuse in California.

El Paso asked FERC officials to appoint a settlement judge in the hope of avoiding a lengthy court fight. California regulators filed a complaint last year claiming El Paso Natural Gas Co., an interstate pipeline serving California, and El Paso’s marketing and trading arm, El Paso Merchant Energy Co., drove up natural gas prices by engaging in improper conduct between the two subsidiaries. The state has argued consumers are entitled to refunds as a result of the alleged price manipulation.

El Paso asked to go to the bargaining table, but the company held firm to its position that neither El Paso Merchant or El Paso Natural Gas exercised market power in California or artificially raised natural gas prices or engaged in affiliate abuse.

However, El Paso said it took seriously the “strong” admonition of chief Administrative Law Judge Curtis Wagner Aug. 30 to settle the case. The ongoing litigation is a continuing “drain of resources” on the companies, El Paso said. The two parties have been in litigation for some time and are equally “resolute” in their positions, it said.

“A settlement judge might bring a new perspective and a dose of reality to the parties as settlement talks proceed,” El Paso said. An initial decision in the case is due from Wagner on or before Oct. 9. Each party has threatened to appeal a nonfavorable decision to the federal courts.

Because further litigation would mean the case would not be resolved for “a very long time,” Wagner urged the parties to negotiate a settlement. However, Wagner said Friday he did not have the “authority” to act on El Paso’s request to extend the Oct. 9 deadline. He also gave all parties until noon Tuesday to reply to his latest orders on the case.

Wagner will proceed with his deliberations at the same time settlement discussions are under way, if indeed, negotiations do take place. Once a decision is reached the full commission will decide on the penalties, if any, for El Paso, a FERC spokeswoman said.

She said options include disallowing El Paso’s access to market based rates, or possibly ordering refunds. The California Public Utilities Commission has until Tuesday to decide whether to participate in settlement talks. The PUC did not return phone calls.

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