Jury selection started Monday in a California Superior Court in San Diego County regarding a class action lawsuit against Sempra Energy and its two major utility affiliates, alleging that they conspired with others back in the pre-western energy crisis late 1990s to drive up wholesale natural gas prices at the California-Arizona border.

Separately, in San Francisco federal court at the end of the month, a second trial tied to the 2000-2001 crisis begins in which four former Reliant traders face criminal charges of wholesale power market manipulation.

Sempra attorneys over the past year or so have attempted unsuccessfully various motions aimed at short-circuiting the class action lawsuit that could eventually carry as much as $23 billion in awards with California’s provision for trebling damages, and Monday they started a jury trial before Superior Court Judge Ronald Prager. Sempra and the Reliant criminal defendants have repeatedly said they have done nothing wrong.

Sempra’s so-called Continental Forge case hinges on a meeting in the fall of 1996 in Phoenix among the Sempra utilities — Southern California Gas Co. and San Diego Gas and Electric Co. — and the pipeline, El Paso Natural Gas Co., in which the parties allegedly conspired to divide up the natural gas market in California and prevent new supply access for the state. The alleged conspiracy — just ahead of the state’s opening of a restructured electricity market — was to allow the players to dominate unregulated wholesale markets for both gas and electricity.

It all 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 attorneys argue just as strongly that a combination of 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.

According to a report in the Los Angeles Times Monday, Sempra is still willing to negotiate a settlement, but has categorically stated it would never admit any guilt. The company said at mid-year it cumulatively had spent $241 million so far defending itself and the two utilities in this legal action, which has been ongoing for almost four years.

Potential jurors were told by Judge Prager the trial could last up to six months. Legal and other analysts have questioned how the alleged conspiracy that was supposed to have taken place nearly a decade ago can be tied in with the state’s energy crisis that ended four years ago.

The multi-billion-dollar litigation was originally to have begun a jury trial early last month (see Daily GPI, Sept. 13). Sempra and plaintiffs’ attorneys made a joint motion to limit the scope of the case, and the judge granted the motion, so the initial trial will include two plaintiff sub-classes — residential gas and electricity customers in Ventura County, the county immediately northwest of Los Angeles, and all other Southern California Edison Co. electric utility customers — with an estimated exposure at up to $1.2 billion.

In the other case involving the former Reliant energy traders, wholesale energy market manipulation is being alleged, but otherwise that case is very different from Sempra’s class action suit, since it is criminal, involves four individuals and doesn’t involve the Houston-based company, which last August settled all its outstanding litigation and regulatory actions tied to the 2000-2001 crisis in a $445 million agreement. Reliant’s deal did not involve the company admitting any guilt to the various charges it faced at the time.

Transcripts of routinely recorded trading calls are at the heart of the federal prosecutors’ case against the former Reliant employees.

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