Court Upholds Invalidation of SDG&E; Deal

A long-term contract for San Diego Gas & Electric Co. to buy Canadian natural gas was invalidated by a change in California’s regulation of SDG&E; gas rates, a federal appeals court ruled. In a 3-0 decision, the U.S. 9th Circuit Court of Appeals upheld a federal judge’s order allowing Alberta-based Canadian Hunter Marketing Ltd. to get out of a supply contract it signed with SDG&E; in 1991. The contract took effect in 1993 and was halted in 1996 by the judge’s order. SDG&E; signed the agreement to guarantee a long-term, economical supply of gas. Canadian Hunter wanted higher prices than it could get in Canada, where the market was depressed at the time. But Canadian prices had risen by late 1993 and Canadian Hunter sought to overturn the contract. The ruling was based on a provision that SDG&E; had added to keep prices down.