Countywide

San Diego Gas & Electric Co. asked the California Supreme Court on Tuesday to overturn a $45-million fine levied against it by state regulators over a 1979 Alaskan fuel oil contract.

SDG&E; argued in papers filed with the court that the California Public Utilities Commission “applied hindsight” and “simply ignored the realities of 1979” when it found the utility’s fuel oil contract unreasonable.

The 1984 PUC decision found SDG&E; had acted unreasonably in a renegotiated contract with Tesoro Alaska Petroleum Co. to buy 15,000 barrels a day of low-sulfur oil to fuel its power stations.

SDG&E; later got out of the contract at a cost of $6.55 for every undelivered barrel of oil when it determined that the oil would not be needed due to the lower cost of natural gas. The buy-out cost SDG&E; $45 million.

The utility argued that the original agreement with Tesoro was reasonable so the buy-out actually saved utility customers $25 million.

But PUC President Donald Vial said the commission reasoned that the utility “never should have gotten customers in that mess in the first place.”

He said the City of San Diego stepped in and challenged the original Tesoro agreement. The PUC sided with the city and ordered the utility to return $45 million to customers.

SDG&E; argued the PUC had no power to go back four years and review the original agreement. The power to “continuously reassess the reasonableness of a contract can only lead to chaos for public utilities in California,” the company wrote.

The PUC voted 3-2 in December, 1984 to order the utility to repay the funds.

Appeals of PUC decisions go directly to the state Supreme Court, which can take 90 days to rule on whether or not to hear the case.