Transwestern Hearing

Hey, time to join the fun at FERC!!!

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 07/26/2001 09:42 AM -----

=09Rebecca W Cantrell/ENRON@enronXgate
=0907/26/2001 08:08 AM
=09=09=20
=09=09 To: Susan J Mara/NA/Enron@ENRON, Ray Alvarez/NA/Enron@ENRON
=09=09 cc:=20
=09=09 Subject: Transwestern Hearing

Here=01,s a little more detail on the issues that FERC wants to explore wit=
h=20
regard to the Transwestern negotiated deals:

NGI's Daily Gas Price Index=20
published : July 26, 2001
FERC Targets Transwestern for Market-Power Hearing=20
FERC called for a hearing to determine whether Transwestern Pipeline=20
exercised market power when it awarded negotiated-rate contracts that led t=
o=20
shippers being charged up to $27/MMBtu last February, when the firm=20
transportation rate to the California border was only 38 cents/MMBtu.=20
That was "70 times the recourse rate," said Commissioner Linda Breathitt, w=
ho=20
called the matter up for discussion at the Commission's regular meeting.=20
"Thirty-eight cents versus $27, that's a big difference in prices and we=20
ought to be looking at that," responded Commissioner William Massey.=20
"...[W]e believe closer scrutiny of transactions that provide the opportuni=
ty=20
to impose rates many multiples in excess of maximum approved tariff rates i=
s=20
necessary, especially in light of our serious concern regarding the high=20
prices for natural gas in California relative to prices in the rest of the=
=20
country and their consequential effect on wholesale electricity prices in=
=20
California," the order noted [RP97-288-009].=20
FERC's action was in response to a show cause order it issued in March,=20
directing Transwestern to explain how it had firm capacity available on its=
=20
pipeline to move gas under the negotiated-rate transactions, and why its=20
actions in entering into the negotiated-rate agreements didn't violate=20
Commission regulations and policy regarding firm transportation service and=
=20
negotiated-rate agreements.=20
FERC's order requires Transwestern to make certain changes to the posting o=
f=20
daily capacity. "I'm satisfied that this should take care of the issue=20
prospectively," Breathitt said. But with respect to the negotiated=20
agreements, "our order today establishes a hearing of limited scope on a=20
fast-track basis to determine whether Transwestern exercised market power i=
n=20
awarding these...contracts."=20
It directs an administrative law judge to convene a pre-hearing conference=
=20
within 10 days, and issue an initial decision on the matter within 60 days.=
=20
The hearing will focus on three issues: 1) whether Transwestern capacity wa=
s=20
advertised and awarded in a fair manner; 2) whether the rates negotiated we=
re=20
the result of the exercise of market power; and 3) why the capacity awarded=
=20
was available without interruption while recourse service was not available=
.=20
"In addition, I have a question [as to] why shippers agreed to such rates=
=20
when much lower recourse rates should have been available under our=20
negotiated rate program," Breathitt said.=20
The shippers that entered into the negotiated-rate transactions with=20
Transwestern include Richardson Products Co., Sempra Energy Trading Corp., =
BP=20
Energy Co., Astra Power LLC and Reliant Energy Services.=20