El Paso Energy Responds to Lawsuits

HOUSTON, TEXAS, December 21, 2000

El Paso Energy Corporation (NYSE:EPG), through its spokesperson, Norma F. Dunn, today issued the following statement regarding two lawsuits that were filed on December 18 in California alleging a conspiracy between certain El Paso affiliates and certain California utilities: "It is our usual policy to refrain from commenting on pending litigation; however, in light of the attempts made by plaintiffs’ attorneys to garner wide-spread publicity for these lawsuits, we feel it is necessary to issue a public and unequivocal denial of their claims. Neither El Paso Energy Corporation nor any of its affiliates have been or are now engaged in any illegal activities, alone or in combination with any other parties, to increase energy prices or create energy shortages in California. Claims that El Paso has caused or contributed to the present energy crisis in California are false, and the recently filed lawsuits have no factual or legal basis. A simple review of publicly available information reveals the inaccuracy of many of the allegations."

The facts described in the letter dated December 13, 2000, from El Paso Energy president and chief executive officer William A. Wise to the Federal Energy Regulatory Commission illustrate that El Paso Energy has not engaged in conduct that is alleged to have contributed to the recent sharp increase in California natural gas prices. The letter, available at www.epenergy.com/press/linked/ceolettertoferc.pdf, explains that, commencing well before the recent upswing in natural gas prices, El Paso had limited its opportunity to profit from such increases by putting in place financial hedges designed to protect against falling prices. Dunn emphasized that this hedging belies the assertion that El Paso had anticipated the recent increase in natural gas prices, much less been involved in causing it. "Similarly, the lawsuits’ claims of a conspiracy overlook, misrepresent, and misinterpret evidence and events that contradict the contrived conspiracy theory and render it totally unbelievable," she said.

As to the charge that Merchant Energy withheld its capacity to drive up California gas prices, commencing before the recent price increases and throughout this period, virtually all of that capacity that has been physically available has been utilized to move gas to California, Dunn added. "The capacity of California’s own in-state facilities to receive gas is not physically sufficient to accept much more gas than has been shipped."

In his December 13 letter, Wise expressed El Paso’s commitment to help alleviate California’s current energy crisis and identified specific steps that El Paso is willing to take toward that end. The letter also pointed out that when the shortages first became apparent, El Paso demonstrated its desire to be part of the solution, not the problem, by voluntarily operating its only gas-fired merchant electric generating plant on an uneconomic basis at times to help meet the demand for power.

"We deplore this attempt by plaintiffs’ attorneys to advance their cause by taking advantage of the media focus on California’s unfortunate circumstances," Dunn stated. "As virtually all knowledgeable parties have publicly recognized, the present energy shortages result from the concurrence of a variety of circumstances, including unusually warm summer weather followed by high winter demand, low gas storage levels, poor hydro-electric power conditions, maintenance downtime of significant generating facilities, price caps that discouraged power movement from out-of-state into California, etc." She concluded by saying that El Paso intends to respond to the California lawsuits in court, refuting with independent evidence all claims that it played any illegal role in California’s current crisis, and that El Paso expects to prevail in that litigation.

With over $21 billion in assets, El Paso Energy Corporation is one of the largest integrated natural gas-to-power companies in the world. El Paso Energy not only owns North America’s largest natural gas pipeline system, but also has growing operations in merchant energy services, power generation, international project development, gas gathering and processing, and gas and oil production. On May 5, the stockholders of both El Paso Energy and The Coastal Corporation overwhelmingly voted in favor of merging the two organizations. The merger is expected to close in the fourth quarter of this year, concurrent with the completion of regulatory reviews. Visit El Paso Energy’s web site at www.epenergy.com.

El Paso Addresses the California Energy Situation

HOUSTON, TEXAS, February 26, 2001

El Paso Corporation (NYSE:EPG) reaffirmed today its continuing commitment to work with all parties involved to help improve California’s energy situation. "We are surprised to see continuing misinformation in the media concerning El Paso’s involvement in California," said Norma Dunn, senior vice president of Corporate Communications and External Affairs at El Paso Corporation. "We would like to take this opportunity to clarify the record."

The significant increase in electricity demand at a time when available power supplies are short has caused a sharp climb in the price of power, which has in turn increased the price of natural gas used to generate electricity. High natural gas prices are, therefore, an effect rather than a cause of the power shortage.

Allegations that natural gas prices were deliberately manipulated by withholding capacity on the El Paso Natural Gas pipeline overlook critical facts and are demonstrably untrue. It is not possible for any holder of capacity on the El Paso Natural Gas pipeline to cause a significant increase in California gas prices by refusing to use that capacity. The El Paso Natural Gas pipeline is required by law to post the availability of any unused capacity on its public bulletin board and is obligated to sell that capacity for no more than the published tariff rate found to be just and reasonable by the Federal Energy Regulatory Commission. All capacity held by El Paso Merchant Energy on the El Paso Natural Gas Pipeline has been used or made available for use by others to serve California and other Western markets.

Allegations that there was a "conspiracy" in 1996 to limit new interstate pipeline capacity into California are absolutely refuted by facts that no one can challenge. The facts show that all new pipelines considered during the 1990s were either built or were not viable projects because they lacked sufficient customer support to justify their construction. For example, despite years of marketing efforts by Tenneco, not a single potential customer could be induced to make the sort of binding commitment required for the proposed Altamont project to proceed. For that reason alone, it was ultimately dropped. In 1996, according to estimates, there were between one and two billion cubic feet per day (Bcf/d) of excess natural gas transportation capacity on existing interstate pipelines serving California. Indeed, it was misplaced reliance on the continuing availability of such excess capacity that prompted the California Public Utilities Commission to encourage PG&E, SoCal Edison, and SoCal Gas, beginning in 1996 and continuing into 1998, to relinquish over 1.5 Bcf/d of firm transportation capacity on the El Paso Natural Gas pipeline. Processes are now under way to assess present demand and support for new interstate pipeline capacity into California, and El Paso intends to do its part to help satisfy whatever needs may be established today.

As recently as last year, there were periods when significant quantities of unused capacity were available on the El Paso Natural Gas pipeline that were not necessary to meet demands at that time. Notwithstanding its availability, this capacity was not used by shippers to California to fill in-state natural gas storage facilities for future use. If California had taken advantage of the opportunity in 2000 to store the same volumes of natural gas that had been stored in 1999, reliance on the spot market would have been reduced and the steep rise in prices at the California border could have been substantially mitigated or avoided.

It is now widely recognized that the California "energy crisis" was caused by the inability of the supply of power available in California to keep pace with the state’s economy and increased demand. A combination of factors caused a sharp increase in power prices. First, the construction of new power plants in California is a slow, difficult, and heavily regulated process. As a result, the growing demand has far outstripped in-state generating capabilities. Second, unfavorable precipitation and increased out-of-state demand caused some of the hydroelectric power normally relied on by California to become unavailable. Third, increased demand for power in the western United States drove up prices that California had to pay to out-of-state generators. Fourth, state policies deregulated wholesale power prices but capped the rates paid by consumers, leaving demand unrestrained and preventing utilities from recovering their costs. Fifth, because rate caps prevented utilities from passing increased costs to consumers, the utilities’ creditworthiness was impaired, causing supplemental power needed during peak periods to become more difficult and expensive to purchase. Sixth, the early and greater-than-normal use of peaking units "plants that are designed to only operate under peak demand conditions"necessitated unscheduled maintenance, rendering them unavailable at critical times. Seventh, during the final months of 2000, some power plants were forced to shut down because increased usage exhausted their air emissions credits. Eighth, a warm summer followed by an early onset of cold weather further drove up demand for power. Finally, the increased power costs in California could have been substantially mitigated through long-term power contracts and less reliance on the volatile short-term power market.

"California is currently in a difficult position, but now has the opportunity to refine its regulatory model and craft a long-term energy policy," said Dunn. "El Paso has been one of the largest suppliers of energy to California for more than 50 years, and we are actively participating with all parties in California to be a part of a long-term, stable solution to California’s energy needs."

El Paso Corporation, the largest and most broadly based natural gas company in the world, spans the energy value chain from wellhead to electron. With an enterprise value in excess of $50 billion, El Paso is a leader in every phase of the natural gas industry. The company owns and operates a significant portion of the North American natural gas delivery grid, operates the fastest growing, most sophisticated energy merchant group, and is the nation’s third largest natural gas producer. El Paso, a leader in risk management techniques, is focused on maximizing shareholder value, transforming existing markets, and speeding the development of new markets. Visit El Paso at www.epenergy.com.


[The following company statement applies to both releases, above]

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release. While the company makes these statements and projections in good faith, neither the company nor its management can guarantee that the anticipated future results will be achieved. Reference should be made to the company’s (and its affiliates’) Securities and Exchange Commission filings for additional important factors that may affect actual results.