More than $500 million is at stake in a growing dispute between Sempra Energy’s San Diego Gas and Electric Co. utility and various political, regulatory and consumer leaders, resurfacing recently with the release of sworn testimony by an SDG&E executive.

The center of the dispute involves some long-term power supply contracts SDG&E had at a fixed price well below the spiked prices in the wholesale market of mid-2000 through 2001. The utility has a proposal before the California Public Utilities Commission in which it would retain $198 million, and another $351 million of profits would revert to ratepayers in offsetting the need for future rate increases, according to a San Diego-based utility spokesperson.

Originally the issue of the power contract profits was supposed to be resolved by a now defunct agreement with Gov. Gray Davis, similar to what eventually turned into a federal court settlement between the CPUC and Southern California Edison. Prior to that, SDG&E had sued the CPUC in state court. Since the agreement with the governor fell through, the utility has filed another lawsuit in federal court at the same time it has tried to hammer out a settlement with the state regulators.

As part of testimony to the CPUC, SDG&E’s regulatory affairs vice president, Lee Schavrien, defended the company’s actions, saying that contrary to criticism from consumer groups, the utility “did not mislead” the general public. Schavrien noted that SDG&E’s power purchases through the now defunct California Power Exchange (Cal-PX) were strictly pass-throughs in which it recovered its costs in retail rates. However, the power contracts in question were outside of the Cal-PX as direct access deals between the utility and suppliers on a relative long-term, fixed rate set before the state’s wholesale prices skyrocketed in mid-2000.

A local San Diego County supervisor, one of the most powerful local elected officials, Dianne Jacob, has maintained that SDG&E “lied” to her, and consequently she does not think that the utility shareholders should “pocket anything” from the contracts, which “belong to the people of San Diego,” she was quoted as saying in a San Diego Union-Tribune report.

Local consumer advocate Michael Shames was even more blunt: “It’s now hard to distinguish SDG&E from Enron or Reliant or Dynegy, or other companies that gouged California during the crisis.”

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