State and CPUC Sue Sempra over Gas Supplies

The California attorney general followed through on his pre-Thanksgiving threat: filing a second suit against Sempra Energy and its utilities. The second lawsuit against Sempra alleges deceitful natural gas curtailments to large business customers during the 2000-01 state energy crisis. In the November 21 San Diego Superior Court motion, the state, along with the California Public Utilities Commission, asserts that Sempra constrained supplies for 17 days while diverting gas to a power plant in Mexico. This diversion was said to jack up prices and increase air pollution because of fuel switching at affected electricity-generating facilities. The state and the commission seek a minimum $1 million in penalties, a court-ordered divestiture of assets, and $2,500 in damages for each claimed violation of California?s public utilities and unfair competition laws. In a statement, Sempra vice-president W. Davis Smith refuted the AG's claims of fraudulent gas reductions. He stated that fuel use in San Diego Gas & Electric territory during the crisis was "uncharacteristically high" because of unprecedented demand from power plants in the region. He added that the company's legal staff had not had the opportunity to fully analyze the complaint because of its redacted paragraphs and exhibits. The action was filed under seal, hiding several sections of the brief because of a confidentiality agreement the state signed with Sempra when initiating its investigation. AG spokesperson Tom Dresslar claimed, "If Sempra wants to waive the agreement, we'll gladly provide the full version." According to the state's suit, Sempra misled the commission into believing it had enough capacity on its gas pipeline to serve its ratepayers and supply a power plant across the border owned by the Mexican Comisi?n Federal de Electricidad. The gas at issue was supplied by unregulated affiliate Sempra Energy International via a utility pipeline. At the border, however, the gas was shipped to the Rosarito generating facility plant by Gasproducto Rosarito, another Sempra subsidiary, the attorney general asserts. The CPUC approved the diversion in September 1999 on grounds that the proposal would benefit ratepayers because the fixed costs associated with the gas transportation rates would be spread among more customers. However, resulting gas curtailments because of capacity limits on the pipeline "forced the generators to substitute oil for natural gas, causing greater air pollution and costs to consumers," according to the AG-CPUC suit. In related news, the class-action antitrust trial for Sempra's alleged price-fixing conspiracy action, Continental Forge v. Sempra, continues into its sixth week (Circuit, Nov. 18, 2005). On November 21, Sempra's outside counsel threatened to request a mistrial on this class-action suit because of the adverse publicity generated by the state's two recent complaints, according to a company statement. Attorney general spokesperson Dresslar responded that the AG discussed the issue with the judge handling the Continental Forge class-action suit in San Diego. The jury would be admonished about the publicity and the trial was expected to proceed, he added. The November 21 suit is docket #GIC857224.

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State and CPUC Sue Sempra over Gas Supplies

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