TO: Editors, News Directors

DATE: April 16, 2002

FOR: Immediate Release

Chairman Mundell Testifies in DC to Protect Arizona Ratepayers

PHOENIX - Staff members at the Federal Energy Regulatory Commission (FERC) recommended a change in the way interstate gas transmission capacity is allocated. The change could radically affect the quantity and availability of bulk natural gas for the state of Arizona. Governor Jane Dee Hull and Corporation Commissioners Jim Irvin and Mark Spitzer asked Chairman Bill Mundell to represent the state at the FERC today.

"To ensure that Arizona consumers are properly shielded from the devastating effects of this policy change, I testified in front of FERC, met privately with FERC Chairman Pat Wood and met with our congressional delegation," Chairman Bill Mundell explained. "When my colleagues and I reviewed the FERC staff report, we wanted to make known our fierce opposition to this plan."

In reaction to the numerous issues that arose during California's energy supply crunch, California authorities sought FERC's intervention to change the way gas pipeline capacity is allocated to Arizona. Arizona currently has what are called "full requirements contracts" meaning that bulk gas users (and resellers of bulk natural gas such as Southwest Gas) have access to as much natural gas as is necessary to serve their consumers. If FERC adopts the recommendations of its staff, such contracts would be compromised and Arizona natural gas users would face a firm cap on the amount of natural gas they can receive.

"What makes this matter so troubling is that the FERC staff is recommending that the new capacity allocation be based on a fixed date - in December 2001," Mundell explains. "This would be disastrous for a variety of reasons, as I explained in my testimony today."

Arizona reaches its natural gas peak in the summer, primarily because of the increased need for electricity to cool our homes and businesses. Many Arizona power plants are powered by natural gas, including the new plants under construction.

Mundell emphasized four key points in his remarks on the FERC staff proposal. They are:

• The plan fails to recognize the public safety and health issues facing Arizona.

• The plan fails to recognize extraordinary growth in both population and energy use.

• The plan ignores the captive nature of the Arizona market because most of Arizona is served by a single gas supplier, El Paso.

• The plan sets the level lower than what Arizona needs to meet our summer and winter peaks.

Mundell characterized his meetings in Washington, DC as productive and said he believes that FERC now has a better understanding of the policy implications for Arizona if the staff recommendation is adopted. "The Commission will be monitoring the progress of this case and stands ready to defend against any attempts to deprive Arizona of the gas it needs."

"The proposal by FERC staff accords all of the benefits to California while we Arizonans get stuck with all the negatives. My colleagues and I will pull out all the stops to prevent this from happening on our watch," Mundell added emphatically.

The full text of Chairman Mundell's remarks are attached.

FERC's website is www.ferc.gov.