San Francisco, Santa Clara Counties File Sweeping Lawsuits Against Nation’s Major Natural Gas Providers

Herrera Says Consumers, Taxpayers Shouldn’t Be Forced To Bear Cost For Illicit Price-Gouging

San Francisco and Santa Clara Counties today filed separate lawsuits against the country’s major natural gas providers accusing them of gouging California consumers out of billions of dollars by illegally manipulating the price of natural gas. The lawsuits, filed in San Diego Superior Court by the Burlingame, Calif.-based law firm Cotchett, Pitre, Simon & McCarthy, said in part: “This case is about anti-competitive, unlawful, unfair, and fraudulent conduct under California law that was motivated by greed and facilitated by industry insiders for one purpose: to generate increasingly larger profits from the sale of gas to retail customers in California.”

The suits charge that those named — primarily producers, marketers, traders, transporters, distributors and/or sellers of retail natural gas — caused California gas retail prices to escalate to about six times the national average because of the gas providers’ “unfair and deceptive conduct” during the state’s energy crisis.

“It is clear that the illegal actions of the gas sellers and traders artificially increased the price of gas for millions of California consumers as well as for public entities like San Francisco,” said San Francisco City Attorney Dennis Herrera. “Neither consumers nor taxpayers should be forced to bear the costs of illicit price gouging, and I’m confident we’ll see justice done through the actions we’re filing today.”

The suits, filed in San Diego County because certain of the defendants have their headquarters there, accuse the gas providers of conspiring to artificially inflate natural gas retail prices by reporting false sales to the publishers of the industry’s natural gas price indices. As a result the indices published false information, driving up the price for natural gas charged to Santa Clara and San Francisco counties, according to the lawsuits.

“The major gas providers took aim at California and for at least two years it was open season statewide as they worked together to inflate prices at an ever escalating clip,” said Joseph W. Cotchett of Cotchett, Pitre, Simon & McCarthy. “These lawsuits by Santa Clara County and the City and County of San Francisco, both large consumers of natural gas for their public facilities, send a clear signal to gas providers that they now have to answer for their fraudulent manipulation of prices.”

The gas providers also engaged in “wash trades,” the entering into sham transactions for the simultaneous purchase and sale of the same amount of natural gas for the same price to both companies to create the illusion of high demand and increased prices, the suit said.

Those named in the suit include San Diego-based Sempra Energy and its subsidiaries, San Diego Gas & Electric and Southern California Gas Co., and Mary Kathleen Zanaboni, a Long Beach, California-based trader for Reliant Resources. Other companies named, along with some of their subsidiaries, were Dynegy, Reliant Energy, CenterPoint Energy, Coral Energy, WD Energy, Encana Corp., Aquila Inc., CMS Energy, and Cantera Gas Co.

“These gas providers knowingly and fraudulently worked in concert to send the retail price of natural gas skyrocketing,” said County of Santa Clara County Counsel Ann Miller Ravel. “California residents were hit twice, first as individual rate payers and then as taxpayers who bear the cost for public facilities. This unlawful conduct is the focus of Santa Clara County’s lawsuit.”

The lawsuit on behalf of the City and County of San Francisco reunites the Herrera-Cotchett legal team that reached a $43.1 million settlement on behalf of the San Francisco Unified School District last week in its litigation against Strategic Resource Solutions, a subsidiary of Progress Energy, for defrauding City schools and installing faulty heating, power and lighting systems.