Who will want to do energy business in CA?
March 24, 2001, 12:30PM
California suit challenges natural gas industry
Associated Press
SAN FRANCISCO -- Several natural gas companies, including Houston-based El Paso Corp., face a class-action lawsuit accusing them of manipulating the state's market and unfairly driving up prices.
It was the latest in a series of lawsuits this week against companies involved with supplying, transporting and selling natural gas to California, accusing them of wrongdoing.
Antitrust lawyer Francis O. Scarpulla and Lieff, Cabraser, Heimann and Bernstein, which is currently litigating class action antitrust suits against Microsoft and the music industry, sued Thursday in San Francisco Superior Court.
The lead plaintiff is Sweetie's, a bar in San Francisco's popular North Beach neighborhood. The suit is on behalf of Sweetie's and all California businesses and individuals that bought or will buy natural gas between March 1, 2000 and May 1, 2001.
"Obviously we all know there have been enormous increases in the price of natural gas," said attorney Barry Himmelstein. "One might fairly suspect that competitive forces are not working as efficiently as they should."
Excluded from the suit are the utilities, generators and anyone else who bought natural gas to fuel a power plant or to resell it.
The suit claims that defendants, including Houston-based El Paso Corp., which owns the main pipeline transporting out-of-state gas to Southern California, "rigged the bidding for natural gas pipeline capacity to gain market power in the California natural gas spot market and then abused its market power to manipulate the prices."
"El Paso artificially inflated demand on the Arizona side of the border, which resulted in reduced supply on the California side of the border and then took advantage of the shortage," Himmelstein said.
El Paso Corp. spokesman Mel Scott said El Paso had not been served the suit and refused to comment on its charges.
"We're doing everything we can to keep the flow of gas going west," Scott said. "We've been doing everything we can to delay noncritical maintenance projects as long as it doesn't have anything to do with safety."
The suit also names El Paso Natural Gas Company, El Paso Merchant Energy, Mojave Pipeline Co., El Paso Tennessee Pipeline Co., El Paso Merchant Energy Holding Co. and El Paso SPM Co.
The cities of Long Beach and Los Angeles also sued several natural gas companies this week, accusing them of conspiring to drive up prices by limiting the transport of gas.
The cities' lawsuits say Southern California Gas Co., San Diego Gas and Electric, El Paso Natural Gas. Co., Sempra Energy, El Paso Corp. and affiliated companies decided in a Phoenix hotel room in 1996 to block construction of gas pipelines that could have helped the state avoid its power crisis.
The companies deny any collusion.
The allegations are being investigated by state Attorney General Bill Lockyer, who is also looking into high electricity prices. Lockyer this week told state senators he has subpoenaed several documents from power suppliers; He said he could not share those records with lawmakers.
State lawmakers also are investigating whether market manipulation helped drive up California's natural gas prices and add to the state's energy problems.
The California Public Utilities Commission filed a complaint with the Federal Energy Regulatory Commission last April accusing the natural gas companies of manipulating the market, hoping the commission would take action before the winter heating season.
The complaint is on the commission's agenda for March 28, said Harvey Morris, senior attorney with the PUC.
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