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To: kattracks
I am curious on what basis FERC is ordering the "renegotiation" of the gas pipeline allocation contracts. Because California "needs" it?
5 posted on 05/31/2002 2:51:30 AM PDT by snopercod
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To: snopercod
I am curious on what basis FERC is ordering the "renegotiation" of the gas pipeline allocation contracts. Because California "needs" it?

Basically, yes.

Long ago, El Paso entered into contracts with customers outside of California to deliver as much as gas they ever needed on the pipeline, and whatever was left over was available for California. That wasn't a problem, because California wasn't using that much.

Now, California demand has soared and it was getting disproportionately hurt. Because FERC retains regulatory authority over these interstate pipelines, it found that this was "unjust and unreasonable", which is the finding necessary to order changes.

El Paso doesn't care. It probably welcomes the chance to renegotiate contracts in a tight market. If anything, they'll make more profit. It's California's neighbors who are getting screwed, but that's what happens when we give the government the power to interfere with the market.

In a free market, of course, market forces would have already reacted to build a new pipeline into California to serve demand, but regulatory roadblocks have slowed that. El Paso still would like to build more capacity, and will if the politicians and bureaucrats get out of the way.

6 posted on 05/31/2002 5:47:00 AM PDT by Dog Gone
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