El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
El Paso Corporation Responds to ALJ Proposed Decision
HOUSTON, TEXAS, October 9, 2001
El Paso Corporation (NYSE:EPG) today responded to a proposed decision issued by Federal Energy Regulatory Commission (FERC) Chief Administrative Law Judge Curtis L. Wagner, Jr. The proposed decision recommends dismissal of the California Public Utilities Commission's complaint alleging that El Paso exercised market power in the California gas markets.
"We are gratified that Judge Wagner concluded that no action on the part of El Paso caused high natural gas prices in California during 2000 and 2001," said William A. Wise, president, chairman, and chief executive officer of El Paso Corporation. "We have maintained from day one that the law and facts are on our side and that El Paso did not exercise market power. The Judge agreed. He found no evidence that pipeline capacity was withheld and that 'El Paso Pipeline did in fact comply' with the Commission's regulations that prevent the exercise of market power. This ruling squarely addresses and refutes the claims we have seen in litigation related to El Paso's alleged role in causing increased California gas prices. Hopefully the proposed decision will shift the focus from accusations to resolving the fundamental infrastructure problems that have plagued California's gas markets."
At the same time, the proposed findings that there were violations of FERC's affiliate regulations fail to address controlling precedent and appear inconsistent with the FERC's ruling in March 2001. In that decision, FERC analyzed the identical evidence (including transcripts of telephone conversations) presented at trial regarding El Paso Natural Gas' February 2000 capacity auction and a discount on an affiliated pipeline. The order issued by FERC concluded that El Paso's actions were in compliance with all applicable rules. No new evidence was presented at the hearing to justify Judge Wagner's recommended reversal of FERC's previous decision. Accordingly, we believe it would constitute legal error for the Commission to adopt Judge Wagner's views on this issue.
El Paso recognizes the importance of compliance with the FERC's marketing affiliate regulations and has at all times structured and conducted its business in compliance with those rules. The regulations explicitly recognize and permit interstate pipelines and marketing companies to be part of the same corporate family and to share a common corporate parent. The FERC acknowledges that there is a balance between independence and the obligations to shareholders imposed by a wide array of laws and regulations. Indeed, Judge Wagner in his proposed decision recognized that "the officers of parent companies would be derelict in their duties if they did not exercise some degree of supervision and approval over important decisions." No evidence was presented at the hearing to support a finding that the employees of El Paso Natural Gas and El Paso Merchant Energy did not operate with the requisite degree of independence.
We are heartened that Judge Wagner recognized that the marketing affiliate regulations "were promulgated many years ago and the gas industry has undergone tremendous changes." Indeed, the newly constituted FERC has recently instituted a proceeding to update the marketing affiliate regulations, and El Paso will support and participate in this process to clarify the regulations.
Wise stressed that El Paso would continue to devote its efforts to its ongoing business, even as the case proceeds through the review process. "While our legal team focuses on the issues in this proceeding, our management will be focused on growing our earnings and shareholder value."
In a statement issued last week, El Paso announced that it expects to meet or exceed the First Call consensus earnings estimate of $0.74 per share for the third quarter 2001. All of the company's business segments are performing well despite a downturn in the U.S. economy and the recent drop in natural gas and oil prices. The company expects continued robust earnings growth in 2002 based on its fundamentally strong businesses in natural gas, power, and petroleum as well as its disciplined risk management strategies.
El Paso Corporation is committed to meeting energy needs throughout the United States and the world, with operations that span the energy value chain from wellhead to electron. El Paso Corporation is involved in every segment of the natural gas industry, including production, gathering and processing, and transmission. The company also provides merchant energy services, international project development, energy financing, power generation, and telecommunications services. El Paso is focused on speeding the development of new energy sources to address critical energy shortages across the globe. For more information, please visit www.elpaso.com.