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Court Refuses to Throw Out Suit Against Sempra

The company, whose units include Southern California Gas, allegedly conspired to manipulate supplies during the state's energy crisis.

December 28, 2004|From Bloomberg News

An appeals court ordered Sempra Energy to stand trial on claims it should pay as much as $24 billion for manipulating the energy market during California's power crisis.

The state Court of Appeal in San Diego last week denied a request by Sempra and two of its units, Southern California Gas Co. and San Diego Gas & Electric Co., to dismiss the lawsuit, court clerk Rita Rodriguez said.

The suit, filed in 2000 by the state, various cities and customers, alleges that Sempra conspired with El Paso Corp. to block competition for cheaper Canadian natural gas. El Paso settled claims against it for about $1.7 billion.

The plaintiffs estimate Sempra owes them about $9 billion, which could be tripled under state law, after giving credit for El Paso's payment.

The state judge "erred in not granting" the company's motion to dismiss the case, Sempra said. "We look forward to demonstrating in court that plaintiffs' claims are completely without merit and directly contradicted by their own evidence -- and that the plaintiffs' damage claims are based on unrealistic assumptions and are grossly inflated."

The suit claims that executives of Southern California Gas and San Diego Gas & Electric -- whose parent companies merged in 1998 to form Sempra -- held a secret meeting in 1996 with El Paso, agreeing not to compete in the Southern California and Baja California natural gas markets.

Southern California Gas and El Paso executives met again in 2000 to create a plan to withhold interstate capacity and manipulate storage, the plaintiffs claim.

Because natural gas is used to fire almost half of California's power plants, any supply reduction could boost electricity prices.

A tenfold increase in energy prices in 2000-01 caused blackouts and pushed PG&E Corp.'s Pacific Gas & Electric Co., California's largest utility, into bankruptcy protection.

"Sempra has now burned the last of its available bridges in a desperate ploy to make this case disappear and hide its outrageous conduct," Thomas V. Girardi, a lawyer representing plaintiffs in the case, said in a statement.

"The company's delaying tactics over the past four years have only served to bolster the case we are eager to bring before a San Diego jury -- reflecting a conscious, cartel-like arrangement in which these Sempra entities colluded to both restrict the supply of natural gas and gouge the people of California through unnecessarily higher prices."

Shares of San Diego-based Sempra fell 40 cents to $36.75 on the New York Stock Exchange.

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