In the ongoing revelations of the energy debacle that brought us the City Council approval of MEC, El Paso pipeline had their day in front of the Federal Energy Regulatory Committee top brass yesterday. FERC forced public revelations of some internal documents. See article

One document was a presentation given at an El Paso risk management committee meeting in February 2000. According to the document, El Paso executives discussed ways to boost profits by "idling large blocks of transport," meaning taking some of its natural gas pipeline capacity off-line.

The February 2000 document said, under a heading titled "strategic advantages," that El Paso had the "ability to influence the physical market to the benefit of any financial hedge/position."In a separate memo sent to Wise in April 2000 by Greg Jenkins, then president of El Paso Merchant, Jenkins noted that the company could profit by either increasing its capacity or widening the "basis spread," or the difference between prices at the California border and producing fields to the east.The note also talked about moving supplies to other "east of the border markets" such as Mexico and Arizona and away from California, potentially shortening supplies.

Apparently El Paso has a regulated pipeline side and a merchant side which are not allowed to talk to each other. Well a FERC judge earlier ruled that El Paso withheld capacity and this is how they respond on their web site.

The Initial Decision's finding that EPNG withheld 696 million cubic feet per day (MMcf/d) of capacity from California between November 1, 2000 and March 31, 2001 simply ignores the evidence. It fails to take into account that EPNG capacity was reduced by the DOT's Corrective Action Order (approximately 270 MMcf/d), maintenance undertaken on the system (approximately 95 MMcf/d), growth in the east of California market (300 MMcf/d, of which approximately 220 MMcf/d reduced the volume of natural gas that could be delivered to California), and capacity that simply was not used by shippers (approximately 110 MMcf/d). These factors fully account for the 696 MMcf/d of capacity that EPNG allegedly withheld.
(my emphasis added)

Seems like their proposed strategy turned out to be a prediction.
They also state that the DOT flow reduction is still in effect. One thing that changed in June 2001 is that a six month contract between El Paso and its Merchant arm came to an end according to an LA Times article, as did rolling blackouts. Look at the graph of gas spot market prices in this DMA report from CAISO page 14, for the six months up to June 2001. What a coincidence!

LA Times.9/24/02: When the contract expired May 31, 2001, the price markup between production fields in Texas and the California border was $6.32 per million British thermal units, according to trade publication Natural Gas Week. A week later, after about 30 competitors had divided up the pipeline capacity, the markup had plunged to less than 25 cents.