?Largest Settlement in California History? Approved

In what the judge called ?the largest antitrust class-action settlement in California history,? the last major obstacle to El Paso?s $1.5 billion settlement for alleged gas price manipulation was put to rest. ?It involves 13 million Californians, 3,000 industrial core users of natural gas,? noted San Diego Superior Court judge Richard Haden in his December 5 decision. The settlement has passed the Federal Energy Regulatory Commission, the California Public Utilities Commission, and superior court and now heads to federal court. Attorneys are assured that the last milestone will not become a problem, as parties have stipulated to the outcome prior to the proceeding. The superior court deal, however, could be appealed. El Paso has set an investors? conference for early December 15 to discuss its future. Mel Scott, El Paso spokesperson, would say only that the latest court decision ?pleased? the company but that because it is still in litigation, he couldn?t elaborate. ?What the federal court is going to do is approve the structural elements? in the settlement, Tom Dresslar, California attorney general spokesperson, explained. ?It?s not as sexy as the money but it makes sure we are not again victimized by the natural gas market.? Among the infrastructure changes El Paso agreed to is that the company will make available more than 3,000 MMcfd of firm capacity at the border for five years with dual primary delivery points. After litigation expenses, Californians will see an up-front payment of about $480 million, semiannual payments of $800 million, and a $125 million reduction in price for Department of Water Resources contracts. The states of Nevada, Oregon, and Washington would get lesser amounts of the settlement. The San Diego case was based on two allegations, referred to as the Southern and Northern California theories. The latter alleges a ?rigged auction? between El Paso Pipeline Co. and El Paso Merchant Energy, according to Barry Himmelstein of Lieff Cabraser. Plaintiffs maintain that the pipeline company reserved 1.2 bcf/day for its merchant affiliate, forcing firm capacity holders to buy energy on the spot market. The seller on the spot market was the very same El Paso Merchant. The court said that Merchant allegedly received $184 million in profits. Under the Southern California theory, plaintiffs alleged that in a secret meeting in the Sky Harbor Airport Motel near Phoenix, Arizona, El Paso?s and Sempra?s upper management schemed to prevent construction or expansion of competitive pipelines, restricting the availability of capacity on the El Paso pipeline. The lack of competition, termed a ?conspiracy? in court briefs, is blamed for ?extreme? gas prices during the energy crisis. The Sempra part of the case is set for trial next September in San Diego.

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?Largest Settlement in California History? Approved

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