Lawsuits claim Californians gouged by natural gas conspiracy Filed: 12/19/2000

By ROBERT JABLON

Associated Press Writer

LOS ANGELES (AP) — California's soaring energy costs are partly the result of "a massive conspiracy" by two of the state's largest natural gas companies, according to two lawsuits filed Monday.

The suits, which seek class-action status, claim that Southern California Gas Co., San Diego Gas & Electric and their parent, Sempra Energy, conspired to artificially restrict natural gas supplies and eliminate competition.

"It was the largest gouging of energy consumers in American history" and threatened both California's economy and its electrical system, which relies heavily on gas-powered generating plants, the suit claims.

"Something smells here, and it's not just the gas," said Albro Lundy, an attorney working on one suit.

The suits seek unspecified damages that could total billions of dollars.

"Any allegations that the company or its subsidiaries violated any antitrust or other laws are completely false," Sempra said in a statement.

Sempra noted that on Dec. 7, SDG&E asked federal regulators to impose a cap on natural gas transportation prices to the California border.

The cap "if approved, would lower costs for California gas customers," Sempra said.

The suit also names El Paso Energy Corp., the country's largest natural gas pipeline company, and three of its related companies.

"We haven't had a chance to review the suit yet and therefore we really can't discuss it," El Paso spokeswoman Kim Wallace said from Houston.

The two Superior Court suits, which are virtually identical, claim restraint of trade, unfair competition and unlawful business practices. One deals with natural gas prices and the other with electrical rates.

They claim that executives of SoCal Gas, SDG&E and El Paso met in a Phoenix, Ariz., hotel room in 1996 and hatched a plan to retain market share in the face of California's newly deregulated natural gas industry.

They agreed not to compete against each other in the region's gas delivery markets.

"They also conspired to prevent other pipelines from being built that would have competed against them and lowered natural gas prices in these markets," one suit contends.

"Their unlawful collusion has contributed significantly to the recent astronomical increases in the price of natural gas and electricity. As a result, Southern California customers have had to pay billions of dollars extra for their natural gas and electric needs," the suit says.

Three weeks after the meeting, the then-parent companies of SoCal Gas and SDG&E announced they had agreed to merge. The firms obviously knew about the proposal before the meeting "and they needed an agreement from El Paso not to oppose the merger," said Lance Astrella, a Denver attorney involved in one suit.

The suits claim that El Paso, which was going to buy an energy company called Tenneco Inc., agreed to cancel Tenneco's planned pipelines to carry cheap Canadian and U.S. gas to Southern California.

If granted class-action status, one suit would represent an estimated 1,600 business and industrial users of natural gas. The other would represent potentially millions of electricity consumers.

Last month, the Federal Energy Regulatory Commission found that electricity rates in California were "unjust and unreasonable." However, regulators said they found no evidence that electrical companies had conspired to raise the price of electricity.

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-- Martin Thompson (mthom1927@aol.com), December 19, 2000