Sempra Energy and California officials announced Wednesday they had reached a $410 million agreement in principle resolving substantially all of the remaining litigation tied to the state’s 2000-01 wholesale energy crisis. The deal requires FERC approval, which the parties said they expect before the end of this year.
The San Diego-based utility holding company also announced a $96 million after-tax, or 38 cents/share, earnings hit on first quarter results, lower overall projected earnings for this year and that results at its joint venture commodity trading business that is being sold were likely to be only “break-even” at best this year.
Reserves set aside in Sempra’s joint venture trading business with the Royal Bank of Scotland, RBS Sempra Commodities, will cover what Sempra called the largest portion of the payback to California energy consumers with the rest being recorded as reserves against Sempra’s first quarter earnings this year, which it will announce this coming Tuesday (May 4).
“This settlement closes another chapter on California’s energy crisis,” said Gov. Arnold Schwarzenegger, who added that his administration has negotiated more than $3.2 billion in settlements with various energy companies who reaped what the state maintained were excess profits in the 2000-01 wholesale energy market meltdown. The latest settlement is one of 39 negotiated by the California Attorney General’s Office over the past nine years.
California’s top regulator, Michael Peevey, president of the California Public Utilities Commission, said in these tough economic times when families in the state are hurting, “this settlement will help offset energy bills for consumers.” Peevey said he “appreciated Sempra’s cooperation” in reaching a deal on outstanding issues.
Attorney General Edmund G. Brown Jr., the former state governor (1975-83) who is seeking that office again this year, alleged that Sempra, the former Enron Corp. and other energy companies “created phony energy shortages” to rip off consumers during the crisis a decade ago, but under the terms of the settlement Sempra and its joint venture trading unit, RBS Sempra Commodities, specifically denied “any wrongdoing in the litigation claims” that have now been settled.
Sempra CEO Donald Felsinger said he was “pleased the matters related to the state’s energy crisis are behind us.” Felsinger called the deal a “fair and reasonable outcome” for both Sempra shareholders and the state.
The settled cases included claims against Sempra’s trading operations in the Federal Energy Regulatory Commission refund proceedings and claims against Sempra’s independent power generation business, Sempra Generation, concerning the validity, pricing and operation of a multi-billion-dollar, 10-year power supply contract with the state’s Department of Water Resources that is drawing to a close.
Sempra’s trading operations became part of RBS Sempra Commodities two years ago. An agreement to sell the international oil, metals and European businesses was signed with J.P. Morgan & Chase Co. last February, and an ongoing sales process is under way to sell the remaining North American natural gas and power businesses (see Daily GPI, Feb. 26).
Noting that both parts of the joint venture trading sale should be completed in the last half of this year, Sempra said its first quarter results will be definitely “negatively impacted” by the reserves for the proposed litigation settlement, along with being hurt by what the company called the prospects for “break-even operating results” at RBS Sempra Commodities, primarily due to poor performance in international oil marketing.
“The performance at Sempra Commodities is not expected to show significant improvement prior to the completion of the sales process because of low commodity prices and the disruptions caused by the sale,” a Sempra spokesperson said.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |