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Attorney general accuses Sempra of widespread market manipulation

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SACRAMENTO (AP) -- California's attorney general filed a lawsuit accusing a Sempra Energy affiliate of using illegal, Enron-like tactics to generate hundreds of millions of dollars in higher electricity prices during the energy crisis of 2000-01.

"This is a close second to Enron," Attorney General Bill Lockyer said Wednesday, referring to the now-defunct energy company that used colorfully named maneuvers like Death Star and Fat Boy to boost electricity prices. "I suggest this is Enron's twin brother in terms of the extent they ripped off California consumers."

He said a second lawsuit accusing Sempra of illegally manipulating natural gas prices was probable and that the two cases could amount to nearly $2 billion in damages.

"We expect some company in Texas or elsewhere that's not a California corporate citizen to be more cavalier about ripping off California, but this is a California company that played the Enron game, ripped us off for hundreds of millions of dollars and thinks they ought to get away with it," Lockyer said.

A spokesman for San Diego-based Sempra Energy, Doug Kline, characterized the lawsuit as a "shameless and unethical attempt" to pressure Sempra to settle a separate, $23 billion lawsuit filed in San Diego by a number of energy consumers.

"The timing of this action is appalling and irresponsible given the class-action trial under way in San Diego," Kline said.

Lockyer said there was no connection between the two cases and that Sempra was attempting to "cloud the issue."

"It's like the bank robber claiming the arresting officer was the bad guy," he said.

W. Davis Smith, vice president and associate general counsel for Sempra Energy, said the allegations made by Lockyer had been dealt with by a $7.2 million settlement in 2003 with the Federal Energy Regulatory Commission in which Sempra did not admit any wrongdoing.

"The charges have no merit whatsoever," Smith said. "The issues, which have been recycled from the dark days of the energy crisis, are designed to exploit the genuine pain that many people suffered during the energy crisis."

But Gov. Arnold Schwarzenegger said "intensive negotiations" between Sempra and the state hadn't produced a satisfactory settlement and that Lockyer had legitimate claims to pursue in court.

"We must pursue all legitimate claims against those who unfairly profited at our expense," he said in a statement.

Lockyer filed a lawsuit in Sacramento County Superior Court accusing Sempra Energy Trading Corp. of engaging in more than 5,000 acts of unfair competition and illegal commodities transactions starting in 1999.

"It wasn't just one accidental event," he said at a news conference. "It was a pattern of active manipulation of the energy markets."

He said the illegal Sempra tactics included:

-- Filing false schedules with the California Independent System Operator, manager of most of California's electricity system, to create the illusion of congestion on the state's power grid and then getting paid to relieve the fake congestion.

-- Getting paid by Cal-ISO to keep electricity in reserve for an emergency and then not keeping it in reserve.

-- Exaggerating the amount of power it intended to generate to boost income.

-- Exporting electricity from California and then selling it back to California customers at higher prices.

Lockyer said that last maneuver, known a "ricochet game," was the most egregious tactic used by the company and involved enough electricity to supply the entire state for two days at peak demand.

The lawsuit is one of nearly 100 filed by the attorney general's office against energy companies since the state was hit with skyrocketing electricity prices, power shortages and rolling blackouts in 2000 and 2001, Lockyer said.

So far those cases have generated $5.3 billion in settlements, although Lockyer said the state's ratepayers may be only able to collect about $3 billion, mostly in the form of lower electricity bills in the future.

Assemblyman Keith Richman, R-Chatsworth, said the federal government should investigate whether Lockyer was filing the lawsuit to help plaintiffs' attorneys involved in the San Diego case who are among his campaign contributors.

A spokesman for Lockyer, Tom Dresslar, said the attorney general's actions were "completely appropriate" and accused Richman of acting as a "stooge for one of the biggest rip-off artists in the energy crisis."

Both Richman and Lockyer are planning to run for state treasurer next year.

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On the Net: www.ag.ca.gov

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