Seeking to close a case that could have bankrupted the company, Sempra Energy agreed yesterday to pay $580 million to settle a class-action suit alleging it rigged natural gas supplies around the time of the state's power crisis in 2000 and 2001.
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At the heart of the plaintiffs' case was the allegation that Sempra's utility companies – SoCal Gas and SDG&E – conspired with El Paso Natural Gas Co. to restrict the supply of gas into this region. In 2003, El Paso settled a case making similar allegations on terms California officials valued at $1.6 billion.
By restricting natural gas supplies, according to the plaintiffs' allegations, Sempra not only inflated prices of that commodity but substantially inflated the price of electricity during the 2000-01 energy crisis when power prices soared and California consumers ultimately paid what state officials have estimated as tens of billions of dollars in overcharges.
Because most electricity in the state is generated from plants burning natural gas, increasing the fuel's cost increases the price of electricity.
A key incident, according to the plaintiffs, occurred in 1996 when 11 executives of the companies involved in the alleged conspiracy gathered in a Phoenix hotel room without staff or counsel present.
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