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Judge Dismisses Texas Gas Claim

A large Texas energy company did not illegally drive up the price of natural gas in California...

A large Texas energy company did not illegally drive up the price of natural gas in California, a federal regulatory judge ruled Tuesday.

However, El Paso Corp. of Houston, through two subsidiaries, violated federal rules governing the award of natural gas contracts, said Curtis L. Wagner, the Federal Energy Regulatory Commission's chief administrative law judge.

The California Public Utilities Commission and two investor-owned utilities claimed El Paso created an artificial shortage of natural gas, sending prices to unprecedented levels last year and early this year. The commission, Southern California Edison and Pacific Gas and Electric said El Paso's actions added $3.7 billion to gas prices.

But Wagner found the high prices were due to high demand and an actual shortage of gas.

The parties had sought at least $200 million from El Paso. Wagner's ruling, which FERC commissioners can accept or reject, did not address that issue. It's possible a separate hearing on damages could be held.

Harvey Morris, a lawyer for the utilities commission, said state regulators are disappointed Wagner did not see a connection between the fall of Southern California gas prices in May and the end of El Paso's contract to ship gas there.

"We thought the record was clear that there was an abuse of the standards and the exercise of market power," he said.

El Paso denied doing anything wrong, and attributed the price rise to severe weather and a shortage of gas storage facilities.

"We know we have a very good record. So much of this is politics," said Norma Dunn, El Paso's vice president for communications.