Price-Fixing Case Against Sempra Begins

By Published On: October 28, 2005

Opening statements began October 25 in San Diego in the $23 billion class-action antitrust lawsuit against Sempra Energy and its subsidiaries San Diego Gas & Electric and SoCal Gas. The companies stand accused of collusion and price fixing. “Eleven executives teamed up to pull off what we believe you will conclude was the perfect scam?well, the near-perfect scam,” plaintiffs’ attorney Tom Girardi said Wednesday during opening statements. The suit was filed by numerous Southern California energy customers, including Continental Forge, a Compton-based aluminum manufacturer, the city and county of Los Angeles, the county of San Bernardino, and the Imperial Irrigation District. They allege that an artificial reduction in natural gas production contributed to soaring prices in 2000-01. The plaintiffs’ case revolves around a September 1996 meeting at a Phoenix hotel at which executives from SoCal Gas, SDG&E, and Texas-based El Paso Natural Gas, a subsidiary of El Paso Corp., allegedly conspired to take advantage of the unregulated aspects of the natural gas and electricity markets. According to the plaintiffs’ allegations, the three competitors decided to cooperate in the delivery of natural gas, agreeing that SoCal Gas would stop trying to compete with El Paso to build a Baja California pipeline and that El Paso would reciprocate by not pursuing a proposal to compete in SoCal Gas territory. Sempra contends that there was a mixture of factors that contributed to the leap in gas prices during the fall of 2000, including extreme weather and fluctuations in nuclear and hydroelectric power exports in the state. Outside the courtroom, SDG&E spokesperson Stephanie Donovan unequivocally denied the allegations. “You’ll find that the plaintiffs are going to try to do a little bit of revisionist history,” she said. “There were a lot of causes of the energy crisis that all of us lived through.” Sempra said there was no incentive to push up natural gas prices because pipeline earnings were heavily regulated. Executives who attended the September 1996 meeting said in sworn depositions that no conspiracy existed. Despite the firm denials of any wrongdoing, however, El Paso agreed to a $1.6 billion settlement in the case in 2003. During opening statements, plaintiffs’ attorney Pierce O’Donnell said that the 1996 hotel meeting was “the death of competition and the birth of collusion in Southern California energy markets.” He said the plaintiffs “went into this room fighting each other but they came out a team. And who were they playing against? We will prove they were playing against everyday consumers. The people that bought energy in this state, including my clients.” SDG&E’s Donovan responded, “We have 11 people who participated in that meeting in Phoenix, some representatives from SDG&E, Southern California Gas, and also El Paso, and every single one of those people who were there?none of them will, in their testimony, corroborate any of the fantasies that the plaintiffs’ attorneys have come up with.” Under state antitrust law, the $8 billion in damages being sued for would triple to about $23 billion if Sempra loses the case. The trial is expected to last anywhere from three to six months.

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