Sempra Energy and its California utility subsidiaries, Southern California Gas and San Diego Gas & Electric, agreed to settle with 12 plaintiffs in the "Continental Forge" class action lawsuit over the weekend. Terms of the deal were not disclosed. However, the multibillion dollar case involving allegations of natural gas price manipulation continues in California Superior Court in San Diego County. Jury selection started last week.
The case hinges on a meeting in the fall of 1996 in a Phoenix hotel room attended by Sempra representatives and officials from pipeline company El Paso Natural Gas Co. Plantiffs, who include industrial customer Continental Forge, the County of Los Angeles and multiple other cities and large gas consumers, alleged that the utilities and El Paso conspired at that meeting to withhold pipeline capacity, prevent new gas supply from entering the state and reap the benefits of higher prices.
This alleged conspiracy -- which occurred prior to the opening of a restructured electricity market -- was to allow the players to dominate unregulated wholesale markets for both gas and electricity. It allegedly resulted in a record spike in wholesale natural gas prices at the Arizona border in the fourth quarter of 2000, according to the plaintiffs' charges.
Sempra's attorneys argued that a combination of fundamental forces in the wholesale electricity market, including a drought in the Pacific Northwest and shortage of generating capacity throughout the West, led to the price spikes, rather than any conspiracy.
"Our companies are pleased to have reached a mutually agreeable settlement for a fraction of these particular plaintiffs' claims," said Javade Chaudhri, executive vice president and general counsel of Sempra. "These individual plaintiffs were part of the consolidated case, but not part of the initial class of Ventura County natural gas customers and Southern California Edison customers currently being heard in San Diego Superior Court.
"The allegations involved in this case are simply false and, as part of this agreement, Sempra Energy and our affiliate companies expressly deny any wrongdoing."
The Continental Forge class action trial began Oct. 24, and is expected to continue for three to five months.
In addition to the County of Los Angeles, the plaintiffs included in the settlement are the City of Burbank, City of Culver City, City of Glendale, City of Upland, City of Vernon, County of San Bernardino, Edgington Oil, Imperial Irrigation District, World Oil Corporation, Demenno-Kerdoon and Lunday-Thaggard Co.
Among the remaining plaintiffs are Compton-based Continental Forge Co., which makes precision aluminum parts, the City of Los Angeles and the City of Long Beach.
Under California law, the nearly $8 billion in damages alleged by the plaintiffs would triple to about $23 billion if Sempra loses.
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