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Role in State Energy Crisis Denied

Sempra's CEO testifies that a natural gas price surge had little effect on electricity costs in 2000.

November 01, 2005|From Associated Press

SAN DIEGO — The top executive of Sempra Energy told a jury Monday that a steep increase in natural gas prices had little effect on the wild price increases in electricity that struck California in 2000.

"I don't want to say it was trivial, but it was quite small," Sempra Chairman and Chief Executive Stephen Baum said during his second day of testimony in a civil lawsuit being heard in San Diego County Superior Court.

Baum's remark under questioning by a Sempra attorney appeared aimed at undercutting the premise of a massive class-action lawsuit against Sempra and its two utilities -- Southern California Gas Co. and San Diego Gas & Electric Co.

The lawsuit claims that the California utilities conspired to limit supplies of natural gas, which is used to run power plants.

A giant pricing chart shown to jurors by Sempra's attorney was headlined "Electricity caused the energy crisis -- not natural gas."

Baum gave jurors a detailed tutorial on what in his view caused California's power crisis. His reasons included a long hiatus in the construction of new power plants, an unusually hot summer followed by an unusually cold winter, a drop in hydroelectric power supplies from the Pacific Northwest and companies that were unfairly taking advantage of a newly deregulated market.

"We thought some of the market participants were gaming the market and we wanted it investigated, stopped," Baum said without naming the culprits.

The lawsuit charges that 11 executives of the two California utilities and El Paso Corp. met at a Phoenix hotel in September 1996 to hatch a scheme that sent electricity prices skyrocketing four years later.

El Paso allegedly abandoned plans to bring cheap Canadian natural gas to California. Southern California Gas, in turn, declined to compete against El Paso on a pipeline project to serve a power plant in Samalayuca, Mexico.

San Diego-based Sempra vehemently denies wrongdoing. It says the 1996 hotel meeting was an effort by Southern California Gas to save money for its customers by ridding itself of unused capacity it was leasing on Houston-based El Paso's pipeline system.

Baum is the first witness in a trial that is expected to last three to five months.

At the time the alleged conspiracy was hatched, he was chief executive of Enova Corp., then SDG&E's parent company. Sempra was formed in 1998 in the merger of Southern California Gas and SDG&E.

Sempra faces potentially crippling damages if it loses. Under California law, the nearly $8 billion in damages alleged by consumer plaintiffs would triple to about $23 billion if the company loses.

The plaintiffs are led by Continental Forge Co., a Compton company that makes precision aluminum parts. Los Angeles County and 11 other plaintiffs recently settled for an undisclosed amount. The Los Angeles County Board of Supervisors last week authorized a settlement for $4.6 million.

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