Sempra Signs Burbank City to Management Deal
Sempra Energy Trading, the wholesale energy marketing unit of
Sempra Energy, announced a two-year electric and gas management
agreement with the city of Burbank, CA, last week. The agreement
marks a continuation of the type of success that helped turn
Sempra's unregulated operations from unprofitable in 1998 to very
profitable in 1999.
Under the terms of the deal, Sempra will identify ways that
Burbank's Public Service Department (PSD) can save money for its
55,000 residential and commercial customers over the next two
years. The company will review the city's energy portfolio of power
supply facilities, gas assets and energy contracts, and develop
solutions to manage existing and underutilized energy assets more
effectively. Sempra will have control over electric and gas
purchases under the contract.
"Sempra Energy Trading's depth of asset and risk management
experience will enable the city and our residential and commercial
customers to reap the rewards of new energy marketplace
efficiencies," said Fred Fletcher, assistant general manager for
the city of Burbank. "It is our goal to benefit from the changes
brought by deregulation in the California energy market. In Sempra
Energy Trading, we found a partner that was willing to take a
non-traditional approach to the market and utilize our assets to
the fullest advantage."
Fletcher put a large annual price tag on the deal with Sempra
Trading, noting that his minimum expectations are that the work of
Sempra will bring at least a net revenue increase to the city of $1
million annually. Under the contract, Sempra gets to keep 10% of
the first added $500,000 and 20% of the next $500,000, Fletcher
said. "I expect the changes in electric power marketing to continue
over then next 10 years," he added. "And Sempra can help us with
those changes by keeping up with what's going on at the
(California) ISO and PX and other markets. That is a job that would
Fletcher noted that Sempra was selected through a competitive
bidding process managed by an advisory group established by the
city government. Other bidders included Southern California Edison,
Los Angeles Department of Water and Power and Williams Energy.
After the two-year Sempra deal, he said the city could decide to
re-bid for more outside help.
Other prominent Sempra Energy Trading customers include the City
of Colton, CA, California's Department of General Services and
Connecticut Gas Co.
For 1999, Sempra Energy Trading had a net income of $32 million,
which is a 37% rise from the previous year's results. This, along
with strong performances from Sempra Energy International, were two
of the main reasons why the parent company's non-utility operations
posted a net income of $15 million, compared to a net loss of $34
million in 1998.
"We've successfully delivered on our primary performance
objectives since Sempra Energy's creation 18 months ago," said
Stephen L. Baum, COO Sempra Energy, when Sempra reported its
earnings last month. "We exceeded our earnings goal in 1999 and
achieved profitability in our unregulated businesses one year ahead
of target. We're on track to meet our objective to generate
one-third of our earnings from these units by the end of 2003.
We're particularly pleased with the progress of our energy trading
and our international businesses." John Norris;
Richard Nemec, Los Angeles