In a simmering legal dispute over one of its largest long-term power supply contracts, California’s wholesale electricity-buying agency, the Department of Water Resources (DWR), Tuesday filed a counter lawsuit in a San Diego state Superior Court against Sempra Energy and replied to an earlier lawsuit by the company.

DWR contends its contracts with Sempra, the parent of San Diego Gas and Electric and Southern California Gas, were for new power supply sources as well as specific supplies; Sempra argues that its contract is just to provide megawatts.

Sempra called DWR’s actions “political shenanigans” that imperil the development of “critically needed new energy-generating” capacity, the 500 MW Elk Hills Power Project, for which there is a $6.6 billion long-term power supply contract with DWR.

At the heart of the controversy is a 10-year deal under which Sempra was to provide 4,000 MW to DWR from the newly built power plants, including Elk Hills. Sempra expressed confidence that its contract is clear, and the company is “living up” to its end of the agreement, calling the state’s latest court action “outrageous” and “a feeble attempt” to tip any renegotiations of the company’s contract in the state’s favor.

“Regrettably, California officials are playing a game of ‘Russian roulette’ with the state’s energy future in hopes of scoring political points as elections approach,” said Michael R. Niggli, president of Sempra Energy Resources, the power-generation unit of Sempra Energy. “Their reckless political shenanigans are undermining the very contracts that serve as the foundation for getting new power plants built — plants that they acknowledge are necessary to serve California’s current and future energy needs.”

The dispute centers on whether Sempra is obligated to provide power from certain new sources, or whether it is just obligated to provide set amounts of power, regardless of its sources, which is the stance the energy company is taking. A DWR spokesperson indicated that it feels Sempra is acting like it has no obligation to build new power plants, and now plans only to deliver 30% to 50% of the 4,000 MW it agreed to sell.

A spokesperson for Sempra said the energy company’s affiliate is building 2,100 MW of new power plant capacity at the present time, all of it geared for DWR’s contract.

There are now three different court actions involving DWR, Sempra and Sempra’s partner in building the Elk Hills plant, Los Angeles-based Occidental Petroleum. In addition, the disputed power supply contract is one of the California deals on which the Federal Energy Regulatory Commission is trying to stimulate renegotiations. DWR’s spokesperson said, however, the latest lawsuit is not a “negotiating ploy.”

“Sempra made commitments they knew they couldn’t keep,” DWR’s spokesperson Oscar Hidalgo said. “They are under litigation with Occidental over the sale of that power to the state that essentially Sempra had no right to offer. They didn’t exclusively own the right to it, so they are not injecting any new supply, nor are we optimistic they are going to inject any new supply, because they have said publicly they are under no obligation to build anything.”

DWR’s legal filing on July 2 seeks to void the 10-year supply contract with Sempra Energy Resources. The legal deadline was July 3 for DWR answering an earlier Sempra court filing seeking a ruling that upholds the contract.

“We have a solid, legally binding contract, under which we are meeting all of our obligations,” Niggli said. “Over the life of our contract, we will be supplying up to 1,900 MW of reasonably priced electricity to power homes and businesses throughout the state. Even though our contract permits us to fulfill our energy-supply obligations from a mix of sources — including our own plants or market purchases — we are investing more than $1 billion to develop in excess of 2,100 MW of new power generation in the West. These clean, efficient new power plants are to begin operations next year, right on schedule.”

Both sides used extraordinarily strong language for a legal dispute. DWR noted that Occidental three months ago sued Sempra, claiming that although the San Diego firm had the lead in marketing the Elk Hill plant’s output, it has attempted to push out Oxy with an under-valued buyout. Sempra called the DWR charges “scurrilous and completely without merit, insulting everyone who is working to help California out of its energy crisis.”

Sempra filed its lawsuit against DWR in the San Diego state court, seeking an order to force the state’s power buyer to accept and pay for delivery of its power, and to declare that the company is honoring its contract. DWR refused and filed its reply Tuesday, along with the counter-suit.

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