Sempra Seeks FERC Order on Antitrust Case

A decision is expected any day in Sempra Energy's latest attempt to involve federal regulators in sorting out the financial impact of California's energy crisis—and perhaps staving off a legal battle that could cost the company up to $21 billion. Pending before the Federal Energy Regulatory Commission is the San Diego-based utility holding company's unprecedented request for a declaratory order. Sempra requested the commission to determine whether a five-year-old antitrust case could invade FERC's exclusive jurisdiction to control natural gas and wholesale electric rates. Asking for a ruling by August 1, Sempra points out that the California class-action lawsuit is scheduled to go to trial on September 2. The state lawsuit that Sempra seeks to block consolidates lawsuits filed in September 2000 alleging a conspiracy to constrain natural gas pipeline capacity to California. The cases were moved to federal court on grounds that the antitrust claims were preempted by federal law. On October 25, 2001, the federal court remanded the cases to California state court, finding that they did not "challenge conduct within FERC's exclusive domain." Sempra's request claims that the antitrust case is based on "patently wrong characterizations" of a September 1996 meeting between officials of El Paso Corporation and the two companies that later merged to form Sempra—Southern California Gas and San Diego Gas & Electric. In an ordinary motel near the Sky Harbor Airport in Phoenix, Arizona, El Paso and Sempra management—supposedly including the then-president and chief executive officer of SoCal Gas—allegedly schemed to prevent construction or expansion of competitive pipelines, restricting the availability of capacity on the El Paso pipeline. The lack of competition, termed a "conspiracy" in court briefs, is blamed for "extreme" gas prices during the energy crisis. Since then, Sempra has litigated the issues raised in its petition "at several junctures" in California courts. Asking FERC to dismiss Sempra's request, the defendants state, "Each time, the issues have been fully briefed and argued and, each time, Sempra has lost. There is no reason that Sempra should be permitted to relitigate these very same issues" before FERC. Along the way, the company's original codefendant, El Paso, settled for $1.7 billion—a path that Sempra rejected. At this time, some of the plaintiffs' allegations are also pending before the California Public Utilities Commission, state regulators pointed out in the pending case. The CPUC filing protested Sempra's petition as a threat to California regulation because of the company's "misstatements and omissions." Even if FERC issues the requested order, however, the ruling's impact on the California court case is far from certain, according to Stanford Washington Research Group analyst Christine Tezak. She pointed out that there is no legal reason for state court judges to honor a FERC ruling in this case but noted that a FERC declaratory order could be helpful to Sempra as the case continues. Tezak described the case pending in San Diego Superior Court as "a difficult set of circumstances for any company to navigate. The legal questions being tested are relatively novel and specific to the market dysfunction that took place during the California power crisis."

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Sempra Seeks FERC Order on Antitrust Case

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