Posted on 07/02/2002 6:45:10 PM PDT by randita
State sues to end $6.6 billion contract with Sempra Energy Resources
By JENNIFER COLEMAN Associated Press Writer
Published 5:40 p.m. PDT Tuesday, July 2, 2002
SACRAMENTO (AP) - The state Department of Water Resources filed a fraud lawsuit against Sempra Energy Resources Tuesday, seeking to end a 10-year, $6.6 billion contract because the energy company hadn't fulfilled its promise to build a power plant by April.
The lawsuit alleges that the energy company told the state that it would build its Elk Hill power plant in Bakersfield by April 2002. Instead, the energy company has been purchasing energy on the open market and reselling it to the state at the contract price, said DWR spokesman Oscar Hidalgo.
"We think they've behaved in very bad faith in their negotiations with the state. They have put generating profits in front of generating electricity," he said.
The 570-megawatt plant, a joint venture with another energy company, will be operating by next summer - right on schedule, said Sempra spokesman Doug Kline.
The company did discuss whether to open Elk Hills early in a "simple cycle" mode, he said. The plant is designed to be a "combined cycle" plant, which is more efficient and environmentally friendly.
"There was some discussion about bringing it online early, but it wasn't part of the contract," Kline said.
Hidalgo said the state had agreed to pay a premium for energy from the Elk Hills plant - paying $160 a megawatt hour - because the company promised to build the facility in time for this summer, boosting the state's energy supply.
"There's not any reason for us to believe that any of these plants are going to come online," said Hidalgo. "Sempra has six plants they're due to give us, and they've indicated they have no obligation to build any of them."
Sempra contends that the contracts don't call for any power plants to be built, only for a certain amount of power to be delivered, Kline said.
In May, Sempra asked a state court judge to affirm that the company was fulfilling the contract. DWR responded to that suit Tuesday, and filed a counter-complaint against Sempra in San Diego Superior Court for fraud and breach of contract.
The complaint comes as the state is trying to renegotiate its long-term energy contracts, which critics say lock the state into paying high prices long after the energy crisis fades.
Sempra Energy Resources president Michael Niggli said the state's lawsuit was "a feeble attempt" to tip any renegotiations of the company's contract in the state's favor.
Hidalgo denied that, saying the negotiations over the contracts are now being overseen by the Federal Energy Regulatory Commission.
"This is no ploy to get them to renegotiate the contract," he said. "It's a very serious matter in which we believe they are trying to substitute market available power at a long-term contract price. They are ignoring their responsibility to build new power plants."
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On the Net:
Read DWR's complaint at http://www.cers.water.ca.gov/newContracts.html
Sempra Energy Resources: http://www.sempra.com
The Peoples Republic of California, profits are bad serving the State is the only allowed activity.
Sempra is not in breach of contract.
While the contract contains an "operations schedule" the contract specifically forbides California from penalizing Sempra if the project (Elk Hills) isn't opened on schedule or opened at all, for that matter.
Too many people directly out of the California School System!
LOL!
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