Lockyer Sues Sempra Over Power Tactics
Sempra Energy’s electricity traders created phony congestion on power lines, evaded price caps and “committed large-scale fraud” during the state’s energy crisis, California Atty. Gen. Bill Lockyer said in a lawsuit Wednesday.
The lawsuit, filed in Sacramento Superior Court, alleges that employees of Sempra Energy Trading engaged in Enron-style schemes to boost its profit at the expense of California electricity customers during the state’s 2000-01 energy market meltdown.
“Sempra was a good student of the Enron manipulation games” and used trading tricks like “Death Star” and “Ricochet” more than 5,000 times in California, Lockyer said.
The nicknames refer to some of the methods Enron Corp. traders used to profit in the deregulated electricity market: The Death Star tactic created the appearance of congestion on power lines so the company could profit from relieving it; the Ricochet maneuver briefly exported price-capped power out of California so it could be sold back into the state at sharply higher prices.
Lockyer said he expected to file a second suit against Sempra -- this one over its actions in the natural gas market -- once he received clearance from the California Public Utilities Commission. Together, the two cases could yield penalties of more than $2 billion, Lockyer said.
San Diego-based Sempra Energy, which owns the trading company as well as Southern California Gas Co. and San Diego Gas & Electric Co., denied the lawsuit’s allegations and lashed out at Lockyer for filing it.
“The attorney general’s actions today are nothing more than commercial blackmail,” Sempra spokesman Doug Kline told Bloomberg News on Wednesday. He said Lockyer threatened to sue the company if it didn’t settle various energy crisis-related disputes with the state.
Sempra associate general counsel W. Davis Smith called the new case “meritless,” and said that Lockyer’s “motives are made even more transparent by the fact that the courts have dismissed these types of cases filed by him in the past.”
In 2003, Sempra agreed to pay $7.2 million to settle similar allegations against its trading unit in a case before the Federal Energy Regulatory Commission. The company didn’t admit wrongdoing.
Sempra, which is in the middle of a class-action trial on antitrust issues, called the timing of Lockyer’s new litigation “highly inappropriate given the trial underway in San Diego.”
Lockyer disputed the notion that his lawsuit would affect the San Diego case. He said he spoke to the trial judge about the state’s planned litigation, “and he felt confident that the jury would not be affected.”
Lockyer added, “We’re fighting for ratepayers and taxpayers in California.”
Assemblyman Keith Richman (R-Northridge), who is running against Lockyer in the 2006 election for state treasurer, said Wednesday that the attorney general should be investigated for potential conflict of interest in the Sempra matter.
Tom Girardi, the lead attorney for plaintiffs in the San Diego case, has contributed to Lockyer political campaigns in the past, said Richman, who has received contributions from Sempra. Lockyer’s new Sempra lawsuit “potentially benefits his campaign contributors” because it could somehow give Girardi an advantage in his settlement talks with Sempra.
A Girardi spokesman said he couldn’t be reached for comment.
Lockyer said that he and Girardi were close friends, but added that the two men were at odds over Sempra.
“I’ve argued with him about this case,” Lockyer said of Girardi. “He thought we should settle. We’re not settling.”
