Power Engineering - Phase One initial decision issued in FERC products pipeline case

HOUSTON, June 27, 2003 -- Kinder Morgan Energy Partners, L.P. announced that a non-binding, phase one initial decision was issued by the Administrative Law Judge (ALJ) hearing the Federal Energy Regulatory Commission (FERC) case on the rates charged by SFPP, L.P. on the interstate portion of its pipelines.

SFPP owns and operates most of KMP's west coast refined petroleum products pipelines. The Energy Policy Act of 1992 "grandfathered" most of SFPP's interstate rates, deeming them lawful. Certain shippers have challenged SFPP's interstate rates, arguing that those rates should no longer be "grandfathered."

In his phase one initial decision, the ALJ recommends that the FERC "ungrandfather" SFPP's interstate rates. If these rates are "ungrandfathered," they could be lowered prospectively and complaining shippers could be entitled to reparations for prior periods. The ALJ has indicated that a phase two initial decision will address prospective rates and whether reparations are necessary.

Initial decisions have no force or effect and must be reviewed by the Commission. The Commission is not obliged to follow any of the ALJ's findings and can accept or reject this initial decision in whole or in part. Resolution of this matter by the Commission is not expected before late 2004.

KMP Chairman and CEO Rich Kinder said, "We believe the ALJ's recommendation, if adopted, would represent a major shift in public policy governing U.S. petroleum pipelines and would eviscerate the intent of Congress when it mandated 'grandfathered' rates in the Energy Policy Act of 1992. We look forward to presenting our case to the Commission."

The ALJ's initial decision does not change KMP's previously disclosed estimate of what the complainants seek. Were the complainants to receive all of the prospective rate reductions and reparations they are seeking, KMP still expects the ongoing, annual effect on KMP's cash available for distributions to unit holders to be less than $0.15 per unit per year following implementation of a final Commission decision on both phases of the case. In addition, KMP expects no effect on its current distribution of $2.56 per unit annually, or its planned increase to $2.72 per unit annually beginning with the fourth quarter of 2003.

Kinder Morgan Energy Partners, L.P. is the largest publicly traded pipeline limited partnership in the U.S. in terms of market capitalization and the largest independent refined petroleum products pipeline system in the U.S. in terms of volumes delivered. KMP owns or operates more than 25,000 miles of pipelines and approximately 80 terminals. Its pipelines transport more than two million barrels per day of gasoline and other petroleum products and up to 7.8 billion cubic feet per day of natural gas.

Its terminals handle over 60 million tons of coal and other dry-bulk materials annually and have a liquids storage capacity of approximately 55 million barrels for petroleum products and chemicals. KMP is also the leading provider of CO2 for enhanced oil recovery projects in the U.S.

The general partner of KMP is owned by Kinder Morgan, Inc. (NYSE: KMI - News), one of the largest energy transportation and storage companies in America. Combined, the two companies have an enterprise value of approximately $20 billion.

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