California’s large industrial customers are fighting over El Paso’s $1.6 billion settlement payment, which was approved earlier this month by a California Superior Court in San Diego. The state attoney general’s office confirmed that it is the largest antitrust class action settlement in the state’s history.

The state court phase of the settlement approval process drew one vocal objection from the California League of Food Processors (CLFP). Some observers indicated that the judge acted off-handedly in tossing aside the food processors’ arguments that Southern California members of the settlement group will get more of the El Paso payment than they deserve while their counterparts in northern California will get far less than they should have.

What it called “flaws” in the industrial claims process inside the larger settlement mechanisms “skew the payments under the settlement in favor of Southern California consumers and to the detriment of Northern California consumers,” the CLFP said in a filing to the San Diego court last October. The food processors argued that the allocations of the settlement’s financial benefits should be “consistent with the allegations being settled and the underlying market realities and must not be skewed in favor of consumers in one part of the state.”

The action is the first of two separate court approvals needed before the FERC-approved deal can be made final. Next is a federal district court in San Diego, but the California Attorney General’s office said no date is set for that filing.

Superior Court Judge J. Richard Haden signed a final order granting approval to the class action against El Paso and the settlement. The California court case arose from allegations that El Paso withheld capacity on its interstate gas transmission pipelines serving California, contributing to the unprecedented wholesale natural gas and electricity price spikes in 2000-2001 throughout the West. El Paso has steadfastly denied any wrongdoing.

“The settlement here was reached after more than three years of investigation, discovery and litigation,” Haden said. “Plaintiffs retained electricity and natural gas industry experts and antitrust economists. Plaintiffs’ intensive formal and informal discovery continued throughout the litigation and included reviewing over 1.65 million pages of documents and 30,000 electronic files, deposing El Paso witnesses, and working extensively with industry experts.”

Earlier this month, FERC okayed the deal, which includes the attorney generals from the states of Washington, Oregon and Nevada, in addition to California. However, for the settlement to be valid it needs rulings from the state and federal courts in San Diego where legal action against El Paso and others also was filed. More than $1 billion of the $1.6 billion deal is slated to go to California.

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