El Paso Capacity Split
Affiliates of El Paso Energy, Enron, Duke Energy and Pacific Gas & Electric appear to have picked up the largest shares of the 1.2 Bcf/d of available space on El Paso Natural Gas lines to Southern California points in the latest capacity auction. 
The assignments posted on the El Paso EBB from 30 companies mostly run for five or six years from the June 1, 2001 start date, with a few extending even longer. An El Paso spokesperson would not confirm the posted bids represented the final allocation, but industry sources said they did not expect the current holder of the 1.2 Bcf/d of capacity, El Paso Merchant Energy, whose contract runs out May 31, to exercise its right of first refusal. El Paso spokespersons have been promising an announcement for two days. 
It appears the winning bidders were taking no chances in going for the long term, since El Paso had said its economic evaluation of the bids would include returns up to five years. Rates paid were not disclosed, but sources were assuming, given current demand for capacity, they were at or near the maximum. The bids posted totaled 1,243,072 MMBtu/d and the leaders were (all volumes in MMBtu/d): El Paso Merchant Energy with 276,932, Enron Energy Services 254,056, Duke Energy affiliates 211,697, PG&E affiliates 151,300, Texaco Natural Gas 58,407, and Dynegy affiliates 56,418. 
For El Paso Merchant Energy, Enron, Duke and PG&E, the bulk of their capacity is for deliveries to PG&E at Topock. Other prospective capacity holders include MGI Supply Ltd., CEG Energy Options, Sempra Energy affiliates, Occidental Energy, Merrill Lynch Capital, Coral Energy, Mexicana del Cobre, AEP Energy Services, Allegheny Energy Supply, Williams Energy, Sacramento Municipal Utility District, Burlington Resources, Paramount Petroleum, California Steel Industries, and others. 
Coming in the wake of the capacity squeeze going into California over the last year, the latest allocation was a far cry from the two previous auctions for about a third of El Paso's capacity relinquished by Pacific Gas & Electric in December 1997. Dynegy (then NGC) paid $70 million for the space for 1998 and 1999. The payment included about a 12-cent/Dth reservation charge, plus about 1.6-cent usage charge (see Daily GPI, Jan. 7, 1998 <d980107c.htm>). After that a contract with Enron for the space fell through and El Paso Merchant Energy picked up the capacity in January 2000 for 15 months for $38.5 million (see Daily GPI, Feb. 17, 2000 <d20000217e.html>). 
Management of the space has been under attack by California regulators and shippers since the first contract was awarded to NGC. El Paso and high-flying California border prices currently are among the targets of several investigations on-going in California and Washington. The company recently issued a press release labeling as "demonstrably untrue" allegations that capacity was manipulated to increase prices (see Daily GPI, Feb. 26 <d20010226g.html>).