Sempra Energy and utilities settle litigation with state regulators and Attorney General

Oct 13, 2006

Media Contact:
Art Larson

Financial Contact:
Karen Sedgwick

Sempra Energy

Sempra Energy

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        SAN DIEGO, Oct. 13, 2006 – Sempra Energy and its California utilities, San Diego Gas & Electric (SDG&E) and Southern California Gas Co. (SoCalGas), today announced the settlement of a lawsuit brought by the California Public Utilities Commission (CPUC) and California Attorney General related to service curtailments of certain industrial SDG&E natural gas customers in 2000-01.   The settlement also resolves two CPUC investigations related to the price of natural gas and affiliate-compliance issues.

        As part of the settlement, Sempra Energy and its utilities deny any wrongdoing.

        The estimated after-tax cost of the settlement is less than $5 million and will not have a material effect on the company’s 2006 earnings.

        “Virtually every energy company doing business in California during the energy crisis has been the subject of litigation and regulatory probes,” said Neal E. Schmale, president and chief operating officer of Sempra Energy.  “Removing the financial uncertainties of these energy-crisis-related cases allows us to keep our attention focused on building the new energy infrastructure required to meet the current and future needs of our customers.  We look forward to resolving the remainder of these cases.”

        Major provisions of the settlement are:

        •   SDG&E has an option to purchase, subject to the approval of the CPUC and the Federal Energy Regulatory Commission, the 480-megawatt El Dorado Energy power plant in Boulder City, Nev., in 2011 for book value, which will be approximately $180 million.  The natural gas-fired plant is owned by Sempra Generation, a non-utility affiliate of SDG&E.  The original cost of the plant when it went into operation in May 2000 was about $280 million.  The decisions by SDG&E and the CPUC as to whether the option should be exercised are expected to be made in 2007.

        •   Sempra Energy will pay approximately $5.7 million to SDG&E electricity customers over a two-year period, beginning in 2009, to reduce SDG&E’s electric-procurement costs. 

        •   SDG&E and SoCalGas together will pay the California Attorney General a total of $2 million to offset legal costs.

        One of the required conditions of the agreement is that, within 90 days, the CPUC closes its investigation into higher prices for natural gas at the California border in 2000-01 and an investigation into affiliate-compliance issues.  The closing of the border price investigation will ensure that SoCalGas and SDG&E retain regulatory incentive awards, previously recorded as income, that were subject to refund in the CPUC proceeding.

        The case being settled, related to curtailment of natural gas service, was pending in San Diego County Superior Court.

        The settlement does not cover the California Attorney General’s November 2005 litigation against Sempra Commodities.

        Sempra Energy (NYSE: SRE), based in San Diego, is a Fortune 500 energy services holding company with 2005 revenues of $11.7 billion.  The Sempra Energy companies’ 14,000 employees serve more than 29 million consumers in the United States, Europe, Canada, Mexico, South America and Asia.

This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  When the company uses words like “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “would,” “should” or similar expressions, or when the company discusses its strategy or plans, the company is making forward-looking statements.  Forward-looking statements are not guarantees of performance.  They involve risks, uncertainties and assumptions.  Future results may differ materially from those expressed in the forward-looking statements.  Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission and other regulatory bodies in the United States and other countries; capital markets conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes in commodity prices; the availability of natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company.  These risks and uncertainties are further discussed in the company’s reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, and on the company’s Web site,

Sempra LNG and Sempra Pipelines & Storage are not the same companies as the utilities, SDG&E or SoCalGas, and are not regulated by the California Public Utilities Commission.  Sempra Energy Trading, doing business as Sempra Commodities, and Sempra Generation are not the same companies as the utilities, SDG&E or SoCalGas, and the California Public Utilities Commission does not regulate the terms of their products and services.