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Frequently Asked Questions

What is the Lawsuit About?
Certain plaintiffs allege that El Paso gave its unregulated merchant energy subsidiary a secret discount enabling it to become the sole successful bidder for 1.2 billion cubic feet of capacity on El Paso's pipeline to California from March 2000 through May 2001, and that El Paso and its subsidiary worked together to create artificial shortages and artificially high natural gas prices during this time period. This lawsuit also alleges that El Paso manipulated natural gas price indices by engaging in "wash trades" and by giving false information to the trade press. Other plaintiffs allege that in 1996, El Paso conspired with Southern California Gas Co. and San Diego Gas & Electric (the "Sempra Defendants") to eliminate competing pipeline projects under development which would have increased supplies of natural gas to Southern California and reduced or averted natural gas shortages and high natural gas and electricity prices experienced in 2000 and 2001. El Paso and the Sempra Defendants deny these allegations.

Who is Covered by the Settlement?
The settlement class includes all individuals and businesses in California who purchased natural gas and/or electricity for their own use and not for resale or generation of electricity at any time from September 1996 through March 20, 2003. If you or your business paid a gas or electric bill to a California utility (a "ratepayer"), were a "non-core" gas customer of a California gas utility (generally large industrial users), or a "direct access" electricity customer of a California utility during this time period, you and/or your business are members of the settlement class. For more information, including a detailed Notice of Proposed Class Action Settlement, visit www.elpasosettlement.com or call 1-877-205-2720.

What Are the Terms of the Settlement?
In exchange for the release of all claims arising out of alleged misconduct relating to the California energy crisis, El Paso will provide total consideration to the class of approximately $1.4 billion, as follows:

  • Up-front cash payments totaling approximately $256 million.
  • Proceeds of the sale of 26,371,308 shares of El Paso Corporation common stock, having a market value of approximately $207 million as of July 24, 2003.
  • $125 million in price reductions on power contracts with the California Department of Water Resources through 2005, the cost of which would otherwise be passed on to class members.
  • Approximately $798 million, paid in equal semi-annual installments over 20 years, accelerated to 15 years if El Paso obtains an investment-grade rating for 6 months, secured by oil and gas properties and subject to a prepayment option by El Paso at a discount rate of either 7.48% or 7.86%.
  • Extensive structural relief designed to help prevent a recurrence of natural gas supply shortages and high prices in California.
  • Cooperation with plaintiffs in ongoing litigation against other defendants.
  • Costs of class notice and settlement administration.

The benefits of the settlement will be passed through to California gas and electricity ratepayers and direct access electricity customers in the form of rate reductions, credits, and/or rebates, subject to the approval of the California Public Utilities Commission (CPUC). If the settlement is approved, "non-core" gas customers will be invited to submit claims for their share of the settlement, based on a formula. The several groups of class members will share the benefits of the settlement in approximately the following percentages: electricity ratepayers and direct access electricity customers - 73%; natural gas ratepayers - 12%; non-core gas customers - 15%. As nearly all natural gas users are also electricity users, they will also benefit from electricity rate reductions, and vice-versa. PG&E reserves the right to contend before the CPUC that because it was unable to recover the full cost of its electricity purchases while a rate freeze was in effect, it is entitled to certain amounts otherwise allocated to electricity ratepayers in its service territory. The settlement is also subject to FERC approval and entry of a stipulated judgment incorporating the structural relief.

What Are My Rights?
. If you wish to remain in the settlement class, you need not take any action at this time. However, you will be bound by the rulings of the Court if the settlement is approved. This will include a release of your claims against El Paso. The settlement will not release class members' claims against the Sempra Defendants or other firms who are defendants in related litigation arising out of California's energy crisis.

  • If you do not wish to participate in the settlement or be bound by the Settlement terms, you must exclude yourself in writing postmarked no later than October 14, 2003, as outlined in the Exclusion Procedures page.
  • A hearing will be held by the Court on November 20, 2003 to determine whether the proposed settlement should be approved and to consider the application of the eleven law firms representing the class for attorneys' fees and costs not to exceed $60 million.

If you wish to object to the settlement, you must remain a class member. You and/or your counsel may appear in opposition to the settlement following procedures outlined in the Notice of Proposed Class Action Settlement.