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Lawsuit Against Sempra Energy Heading to Trial; Last Appeal Rejected

Lawsuit Against Sempra Energy Heading to Trial; Last Appeal Rejected

Just before year-end, a California state appeals court denied Sempra Energy's latest pleading, sending a $24 billion anti-trust class action lawsuit to trial in 2005, the plaintiffs' attorneys in the case announced Dec. 27. The plaintiffs anticipate a trial date will be scheduled to begin this summer regarding their charges of "cartel-like behavior" and collusion in the wholesale natural gas markets.

In its latest legal maneuver, Sempra was denied a writ of mandate on the case by the California Court of Appeal, Fourth Appellate District. Last October, Sempra filed an emergency appeal in response to a state Superior Court judge in San Diego County denying the company's motion for a summary judgment in the case, which is a civil action that seeks treble damages totaling the estimated multi-billion-dollar total (see NGI, Oct. 25, 2004).

Plaintiffs including state and local governments, as well as a large industrial customer, Continental Forge Co., allege Sempra and its two utilities engaged in conspiracy and market manipulation that resulted in California's 2000-2001 energy crisis. The plaintiffs base their case on an alleged clandestine meeting in 1996 between the Sempra utilities, Southern California Gas Co. and San Diego Gas and Electric Co., and their largest interstate natural gas pipeline supplier, El Paso Natural Gas Co., resulting in anti-competitive activity in violation of state business practice laws.

In a prepared statement, Sempra said it "looked forward to demonstrating in court that plaintiffs' claims are completely without merit and directly contradicted by their own evidence -- and that the plaintiffs' damage claims are based on unrealistic assumptions and grossly inflated." The San Diego-based utility holding company said it is more difficult getting the procedural writ of mandate than it had been obtaining a summary judgment, and that in being denied by the courts in both instances there was no finding on the merits of the charges.

Calling the lawsuit "irresponsible," Sempra predicted if the case ever goes to trial, the company "fully expects" to win. In its prepared statement, the company cited the action last month by the California Public Utilities Commission concluding that a two-year investigation of SoCalGas's role in the wholesale natural gas market during the state energy crisis exonerated the utility, and noting that the utility had, in fact, "played an important role in reducing energy costs for its customers during the 2000-2001 energy crisis" (see, NGI, Dec. 17, 2004).

The plaintiffs, including Continental Forge, the state of California, the city and county of Los Angeles, San Bernardino County and a half-dozen other Southern California cities, along with other companies and individuals, allege that in a September 1996 meeting in Phoenix, AZ, the Sempra utilities and El Paso companies agreed not to compete. They allege the companies agreed to cooperate in the wholesale natural gas business at the California-Arizona border resulting in "an artificially constrained supply" of gas that drove up wholesale prices and caused inflated retail utility gas and electricity prices.

Sempra said that it still believes the original trial judge in San Diego erred in not granting the company's request for a summary judgment.

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