Sempra Energy Trading, the wholesale energy marketing unit ofSempra Energy, announced a two-year electric and gas managementagreement with the city of Burbank, CA, last week. The agreementmarks a continuation of the type of success that helped turnSempra’s unregulated operations from unprofitable in 1998 to veryprofitable in 1999.

Under the terms of the deal, Sempra will identify ways thatBurbank’s Public Service Department (PSD) can save money for its55,000 residential and commercial customers over the next twoyears. The company will review the city’s energy portfolio of powersupply facilities, gas assets and energy contracts, and developsolutions to manage existing and underutilized energy assets moreeffectively. Sempra will have control over electric and gaspurchases under the contract.

“Sempra Energy Trading’s depth of asset and risk managementexperience will enable the city and our residential and commercialcustomers to reap the rewards of new energy marketplaceefficiencies,” said Fred Fletcher, assistant general manager forthe city of Burbank. “It is our goal to benefit from the changesbrought by deregulation in the California energy market. In SempraEnergy Trading, we found a partner that was willing to take anon-traditional approach to the market and utilize our assets tothe fullest advantage.”

Fletcher put a large annual price tag on the deal with SempraTrading, noting that his minimum expectations are that the work ofSempra will bring at least a net revenue increase to the city of $1million annually. Under the contract, Sempra gets to keep 10% ofthe first added $500,000 and 20% of the next $500,000, Fletchersaid. “I expect the changes in electric power marketing to continueover then next 10 years,” he added. “And Sempra can help us withthose changes by keeping up with what’s going on at the(California) ISO and PX and other markets. That is a job that wouldoverwhelm us.”

Fletcher noted that Sempra was selected through a competitivebidding process managed by an advisory group established by thecity 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 tore-bid for more outside help.

Other prominent Sempra Energy Trading customers include the Cityof Colton, CA, California’s Department of General Services andConnecticut 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, alongwith strong performances from Sempra Energy International, were twoof the main reasons why the parent company’s non-utility operationsposted a net income of $15 million, compared to a net loss of $34million in 1998.

“We’ve successfully delivered on our primary performanceobjectives since Sempra Energy’s creation 18 months ago,” saidStephen L. Baum, COO Sempra Energy, when Sempra reported itsearnings last month. “We exceeded our earnings goal in 1999 andachieved profitability in our unregulated businesses one year aheadof target. We’re on track to meet our objective to generateone-third of our earnings from these units by the end of 2003.We’re particularly pleased with the progress of our energy tradingand our international businesses.” John Norris;

Richard Nemec, Los Angeles

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.