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THE CALIFORNIA ENERGY CRISIS

L.A., Long Beach File Suits Over Gas Companies' Prices

Energy: Separate actions allege a conspiracy and gouging. Suppliers blame rising demand and a fluctuating market.

March 21, 2001|TINA DAUNT and DAN WEIKEL | TIMES STAFF WRITERS

Seeking damages that could reach "into the billions of dollars," the cities of Los Angeles and Long Beach on Tuesday filed separate lawsuits alleging that a coalition of gas companies illegally conspired to eliminate competition, drive up natural gas prices and discourage the construction of electricity generating plants in California.

Officials from the two cities alleged that Southern California Gas Co., San Diego Gas & Electric and El Paso Natural Gas Co. violated the state's antitrust law and engaged in unfair and fraudulent business practices that caused gas prices to skyrocket.

The cities are the first California municipalities to take action against the gas companies. A number of similar lawsuits filed by antitrust attorneys, state regulators and private citizens are pending elsewhere.

The energy companies deny any impropriety. They contend that California is the victim of its own soaring electricity demand and overreliance on fluctuating spot markets for natural gas.

"The conspiracy theories that have been promoted have no basis in reality," said Denise King, spokeswoman for Southern California Gas' parent company, Sempra Energy, which also was named in the suits. "Southern California Gas continues to look out for the best interest of its customers."

The lawsuits filed in Los Angeles County Superior Court accuse the companies of conspiring to manipulate the price of natural gas by agreeing to kill pipeline projects that would have brought ample supplies of cheaper natural gas to Southern California.

They allege that executives for the energy companies made the pact during a meeting in a Phoenix hotel room five years ago to discuss "opportunities" arising from the state's newly deregulated electricity market.

"The fulfillment of the illicit plan has had devastating effects on Southern California gas consumers," according to Los Angeles' suit. "Gas prices in the Southern California market have skyrocketed, and the Southern California gas consumers are paying the highest prices in the nation."

In recent months, natural gas prices have tripled across the nation for a number of reasons, including a shortage of supplies to meet demands for home heating. Prices have increased far more in California, where natural gas is a central factor in the state's energy crisis. The state relies on the clean-burning fuel to generate half its electrical power.

"This not only led to price-gouging of all natural gas consumers, from homeowners to government to industry, but it contributed to the current electrical power crisis in California," said City Atty. James K. Hahn, a mayoral candidate who urged the City Council to pursue the case.

Chris Garner, Long Beach's utility director, said that since November, the average residential bill for gas in Long Beach has more than doubled, to $175 a month. Some customers, he said, have seen rate increases of 500%.

"The people of Long Beach are being gouged by energy conglomerates who are artificially manipulating the supply of natural gas and reaping excess profits at the expense of the public," said City Attorney Robert Shannon.

Holding a special meeting, the Los Angeles City Council voted 12 to 0 Tuesday to file the suit.

"If the allegations are true, they are extremely serious," said Councilman Mike Feuer, who is a candidate to succeed Hahn as city attorney. "And there appears to be some important evidence that substantiates the allegations in the complaint, which means that this lawsuit is, I think, more than a viable lawsuit."

Councilman Mark Ridley-Thomas added: "We cannot tolerate this and we must use the full weight of the law to try to correct it."

A growing number of lawsuits around the state are targeting California's natural gas suppliers. El Paso Corp., which owns the main pipeline transporting out-of-state gas to Southern California, has been targeted repeatedly by utility companies, state regulators and antitrust attorneys.

Some of the first antitrust lawsuits were filed against Sempra Energy in December. They were brought by Continental Forge Co., a Compton-based aluminum forging business, and Andrew and Andrea Berg, who own a business in San Diego.

The cities' lawsuits request that the defendant companies be barred from such conduct in the future, and they seek civil penalties and damages.

Shannon estimates that Long Beach could collect more than $100 million in damages, including triple penalties for antitrust violations.

"We are filing this for our citizens," Shannon said. "They include the poor, the elderly, people living on fixed incomes and small business owners."

The Los Angeles suit was filed on behalf of all Californians. Officials place damage estimates "in the billions."

Hahn, however, warned council members that it could take the city a year or more to resolve the suit.

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