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FERC Orders Enron Pipeline to Pay Refunds in California
Houston Chronicle | Reuters News Service 7/17/2002

WASHINGTON - U.S. energy regulators said today that a natural gas pipeline owned by bankrupt Enron Corp overcharged firms shipping gas to California during the state's power crisis and must pay refunds.

The Federal Energy Regulatory Commission said Enron's Transwestern Pipeline charged unjust rates to San Diego-based Sempra Energy Richardson Products Co. and other companies for natural gas shipments that were primarily used to fuel California's electricity generating plants.

California officials had accused the shipping firms of being willing to pay the higher transportation rates so they could then charge higher energy prices in the state.

FERC, in its order posted on its Web site, did not specify the total amount of refunds or name all the companies that are due money, saying only that Transwestern must make the payments within 30 days.

Other companies believed to have paid higher shipping rates were Astra Power and units of Reliant Energy and BP.

"I'm disappointed in the behavior here, very much so," said FERC Chairman Pat Wood. "I'm disappointed in the violations of the tariffs by this (Transwestern) pipeline." The FERC action overturned an October ruling by an agency administrative law judge, who found no evidence of wrongdoing.

The refund order comes at a time when FERC is separately investigating Enron's trading unit and dozens of other natural gas and electricity traders to determine if any tried to inflate prices during California's power crisis that began in late 2000 and ended in mid-2001.

A ten-fold jump in wholesale electricity prices caused a series of blackouts and the bankruptcy of California's largest utility, Pacific Gas & Electric, owned by PG&E Corp. Agency commissioners scolded Transwestern for charging almost 100 times its regulated transportation tariff of 38 cents per roughly 1,000 cubic feet of natural gas during the winter of 2000-01.

For example, Transwestern charged Sempra $231,817 and Richardson Products $143,283 for gas shipments on Feb. 14, 2001. Under its tariff, Transwestern should have charged slightly less than $3,800 for each contract per day, FERC said.

"We conclude that Transwestern failed to comply with the tariff posting requirements. Transwestern therefore must return those profits ... plus interest to all of the firm transmission shippers on its system at the time," a FERC order said.

FERC also restricted Transwestern's ability to negotiate rate agreements with shippers for one year.

The Transwestern Pipeline stretches a total of 2,700 miles from southern California to markets in the Midwest and Northeast.

Transwestern is still operating despite the collapse of Enron and recently completed a $72 million pipeline project in Arizona.

In a related matter, FERC asked for public comment on whether it should change the agency's policies on allowing natural gas pipeline owners to negotiate rates with shipping customers.

Specifically, FERC is reviewing if regulated rates that have specified maximum prices are a viable alternative and safeguard against market manipulation of interstate gas pipelines.

The agency will take comments from energy companies, pipelines and consumer groups until mid-August.


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