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I. Executive Summary 1

II. Responses to Questions

A. Responses to Questions Concerning Prices 4

1. How can we at the state level reassure ourselves and

our constituents that the extraordinary prices we are

experiencing today are free of such manipulation?

2. How can we reassure ourselves and our constituents 5

that the indexes driving the extremely high retail rates

are free of such manipulation, and in fact represent

robust, realistic market prices?

3. How much gas is actually being bought and sold at the 7

reported prices?

4. Who establishes the prices? 8

5. What are the mechanics of price disclosure and 8 discovery?

6. How robust are the indices and other price reporting 9

mechanisms?

B. Responses to Questions Concerning Market Concentration

1. What is the extent of vertical integration in the producing 11

and processing functions?

2. What is the extent of vertical integration among producers, 11

processors, and pipelines?

3. What are the relationships between marketers and brokers, 11

on the one hand, and owners of the physical elements of

the gas system (production, processing, transmission)?

4. What is the relationship between marketers and brokers 11

and financing entities such as investment banks?

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5. How concentrated are each of the markets for physical 16

production and delivery services?

6. How concentrated are each of the markets for financing, 16

Marketing, and trading natural gas for delivery and use

in California?

C. Responses to Questions about the Identity of Market

Participants

1. Who are the producers in the producing basins that serve 23

California?

2. Who are the royalty owners in the producing basins that 25

service California?

3. Who performs the gas gathering and processing functions 26

in each of the producing basins?

4. Who are the pipelines that transport gas out of the producing 28

basins to California? To other parts of America?

5. Who are the California wholesale buyers of gas transported 30

by pipeline?

6. Who are the California retail buyers of gas transported by 31

pipeline (noncore utility customers)?

7. Who are the gas marketers and brokers? 33

8. How are the physical elements of gas infrastructure 35

(production, processing, transmission) financed?

9. Who are the financing entities? 35

Appendices

I. Background Information on the Structures and Functioning of the Natural Gas Production and Delivery Systems that Serve California and the U.S.

II. Natural Gas Producers and Production

III. Market Concentration Tables - Profiles of Companies Involved in California Natural Gas Market