Neighbor Cities Feuding Again Over Money

Ever since a gusher made Signal Hill one of the richest oil fields in the nation, the small town has rebelled against its big neighbor, Long Beach. Signal Hill became a city in 1924 to keep Long Beach from taxing its black gold.

Now, the cities are feuding again -- this time over gas, not oil.

At issue are millions of dollars that Long Beach is expected to receive from Sempra Energy as part of a settlement in an antitrust lawsuit over alleged price-gouging during the 2000-01 energy crisis.

Under Sempra’s proposed $1.7-billion settlement to ratepayers throughout California, Long Beach would get $6 million for cushioning residents from the full impact of spiking gas prices. Long Beach also would take control of money designated for the 500,000 ratepayers of the gas company it owns and operates, Long Beach Energy.

The ratepayer money -- which, according to a formula in the proposed settlement, probably would be about $13 million, minus legal fees -- would be awarded to Long Beach “to use as it sees fit,” the proposal states.

Such language upsets Signal Hill Mayor Larry Forester, who said he worries that his city’s 11,000 customers of Long Beach Energy won’t get their fair share from their big neighbor.

He believes that much of the money earmarked for ratepayers will wind up in Long Beach’s general fund, and says Signal Hill gas customers have been burned before.

“It may not be a large amount of money per ratepayer, but it’s the principle,” Forester said. “Ratepayers in both cities paid the higher cost. Why aren’t they getting it back?”

Long Beach City Atty. Robert Shannon insists the city will put the settlement money into its gas fund, and that ratepayers in both cities will benefit from it in the form of credits or capital improvements.

But Signal Hill officials are not assuaged.

Signal Hill last month filed an objection to the settlement proposal, which is set for a June 8 hearing in San Diego Superior Court.

The objection points to what happened in a similar settlement with Houston-based El Paso Corp., which was accused of manipulating prices in the energy crisis.

In that 2003 settlement, Long Beach was supposed to receive $7.45 million, while Long Beach Energy ratepayers would split another $7.45 million. Signal Hill questions why ratepayers ended up with far less. Long Beach says, of the total $15 million, only a third was paid upfront minus attorney fees, the $10-million balance is being paid twice yearly over 15 to 20 years, and notes that the city gave ratepayers two-thirds instead of only half the initial payout. Still, in the end, ratepayers received very little -- refunds of just $12 for residential customers and $60 for small-business owners, according to Long Beach documents.

This time, Forester is wary, he said, especially because Long Beach officials have told him differing versions of how the Sempra settlement would be divided.

Forester and Signal Hill City Councilman Ed Wilson said Long Beach Energy Director Chris Garner told them at a January lunch with Long Beach Assistant City Manager Christine Shippey that the city would pass on 10% of the $6 million it expected to get to the 10% of Long Beach Energy ratepayers who are Signal Hill residents.

“What we were told in person, and what the court papers state, are two different things,” Forester said. “And I wouldn’t be doing my job as mayor if I didn’t ask questions.”

Garner doesn’t deny Forester’s account. But he says he misspoke and now knows that Signal Hill accounts for only 2% of Long Beach Energy’s customers, and that, under the proposed settlement, ratepayers wouldn’t directly share in the $6 million due to Long Beach.

“It’s a horrible misunderstanding, and I think we can work it out if we just sat down together,” Garner said. “But I think what happened is that ... communication shut down when attorneys got involved.”

The relationship between the cities is tense now, said Brian McMahon, the attorney hired by Long Beach to represent the city and the Long Beach Energy ratepayers in this class-action lawsuit and the El Paso suit.

“There is a great deal of distrust on both sides, certainly on the part of Signal Hill,” McMahon said. But he said Long Beach Energy gas customers should not worry that money set aside for them would go to the general fund, because that’s illegal.

“The language was not intended to give the city free rein to grab money intended for the ratepayers and send it to the general fund,” McMahon said

The phrasing that gave Long Beach the ratepayer money “to use as it sees fit,” he said, “was intentionally vague” to give the gas company as much flexibility as possible in order to best return the money to customers, he said.

“It didn’t occur to me that I needed to word it to protect the ratepayers from the avarice of any public official,” he said, adding that he doesn’t believe that to be necessary now.

Recently, Forester and Wilson took their complaints to citizens, writing a letter in the Signal Hill Tribune, a weekly newspaper.

“The Long Beach city attorney widely publicized that he sued the natural gas companies on behalf of customers, and he added that if Long Beach ‘wins any damages it will pass them on to consumers,’ ” Forester and Wilson wrote. “That promise was quickly forgotten as Long Beach officials are poised to divert as much money as possible away from consumers.”