Neighboring California utilities, Sempra Energy’s Southern California Gas Co. and Edison International’s Southern California Edison Co., traded accusations during the opening last week of evidentiary hearings in an 18-month-old state regulatory investigation of the wholesale natural gas market during the state’s energy crisis in 2000-2001. SoCalGas has had to fight off relentless accusations by Edison that the gas utility and its Sempra affiliate, San Diego Gas and Electric Co., constrained supplies from storage to push up wholesale gas prices.

The hearings are expected to continue through July 16, dealing with the first phase of the California Public Utilities Commission’s probe centered on the two Sempra utilities. The second phase of the investigation will look at the other major private-sector utilities in the state, Pacific Gas and Electric Co., Las Vegas-based Southwest Gas Corp., and Edison, which is a major gas wholesale buyer.

At the opening day of the hearings, Edison and SoCalGas continued to squabble over documents the electric utility wants from the nation’s largest natural gas distributor. The gas utility allegedly is refusing to provide some requested information or it is taking longer than Edison would like to come up with the data.

The charges are that SoCalGas, which operates the only major natural gas storage system in the southern half of the state, manipulated storage levels downward going into the 2000-2001 heating season, helping to drive up wholesale gas prices, which in turn helped contribute to the extreme wholesale electricity price spikes during that period.

The CEO of Sempra Energy’s utilities, Edwin Guiles, appeared as a policy witness in the opening hearings, adamantly denying that the gas utility drove up prices, and stressing instead that it undertook gas hedges to lessen the impact of market price surges on its retail customers.

Earlier this year, the CPUC administrative law judge in the case reviewed loans that SoCalGas provided non-core customers in 2000, and alleged false reporting of trades and prices to national trade press by both Sempra utilities. In addition, the judge has agreed to review Sempra’s risk management unit and the CPUC-authorized gas-cost incentive regulatory mechanism under which both of its utilities operate.

Edison has sponsored an outside economist expert witness that alleged that SoCalGas could have manipulated the Arizona border prices for gas in the early winter of 2000-2001 because it has no competition for storage in its service territory. Edison alleges the gas price manipulation cost its retail power customers millions of dollars in higher retail electricity costs.

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