Sempra named in price-spike investigation

- Sempra Energy recently disclosed that federal investigators are probing the company regarding the spike in natural gas prices last year that sent costs soaring more than 45 percent from Thanksgiving to mid-December.

The disclosure came on the same day that the Williams Cos. announced that it agreed to forgo $140 million to settle allegations of market-rigging during the state's electricity crisis of 2000-01.

San Diego-based Sempra said that it has been subpoenaed by the Commodity Futures Trading Commission in an investigation of higher natural gas prices. The increases have raised home heating costs and led some major industrial users of natural gas to seek an inquiry.

Sempra revealed the CFTC subpoena in a filing with the Securities and Exchange Commission, saying also that it is cooperating. Jennifer Andrews, a Sempra spokeswoman, said the company believed the subpoena was part of a broader industry investigation.

"We don't believe we are a specific target of the probe," Andrews said.

Through its Southern California Gas and San Diego Gas & Electric subsidiaries, Sempra has 6.1 million natural gas customers. In addition, a Sempra subsidiary in Connecticut is a trader of the commodity.

A CFTC spokesman declined to comment on the Sempra subpoena, citing a policy to neither confirm nor deny the existence of investigations.

Earlier this year, the commission announced settlements totaling $50 million with six companies over gas price reporting violations. The companies were alleged to have used false price reports or phony trades in an attempt to manipulate the market for natural gas.

Earlier El Paso Corp. agreed to a $1.7 billion settlement to resolve allegations that it manipulated gas supplies to California during the crisis.

Federal investigators have found that traders reported bogus natural gas prices during California's electricity crisis, when higher gas prices were used to justify inflated electricity prices. Power plants burn natural gas to produce electricity.

Sempra conceded some discrepancies in its reporting during the crisis but characterized them as minor in reports to the Federal Energy Regulatory Commission.

The deal announced recently between Tulsa-based Williams, Pacific Gas and Electric Co. and Southern California Edison Co. could resolve the Oklahoma company's exposure to refunds related to the state's electricity crisis.

Under the agreement, Williams will reduce by $140 million the amount it is owed by the utilities. That debt totaled $230 million before yesterday's announcement.

The company admitted no wrongdoing under the settlement.

"The big thing is it provides certainty as to our power operations," said Brad Church, a spokesman for Williams. If municipalities and cooperatives join the settlement, Williams will be free of its liability in the Western energy crisis, he said.

But the settlement amount will be reduced if municipalities and cooperatives don't join in the settlement, Church said. And the deal must also be approved by federal and state regulators and the U.S. Bankruptcy Court overseeing PG&E's reorganization.

Williams in 2002 agreed to a settlement valued at $417 million over allegations of market rigging during the electricity crisis brought by officials of California, Oregon and Washington. The company also trimmed $1.2 billion from the cost of its long-term electric supply contracts with California.

In 2001, Williams and AES Corp. also paid an $8 million fine to the Federal Energy Regulatory Commission related to an allegation that they shuttered a generating plant during the crisis to drive up prices.

FERC ordered a dozen companies last year to provide $3.3 billion in refunds, but California has asked for an additional $6 billion. Williams was not named in FERC's order.

Bankrupt PG&E said its debt to Williams would be cut by $75 million. Edison did not provide a figure, but is believed to be in line for most of the remaining $65 million in debt relief. The companies said the reductions would lead to savings for their millions of customers.

"This settlement brings us another step closer in closing the book on California's energy crisis," said Roger J. Peters, PG&E's senior vice president and general counsel. "We are pleased to be able to reach an agreement with the Williams Cos. that is fair to the company and is in the best interests of our customers."