Tuesday, Nov. 5, 2002 | 11:17 a.m.
A lawsuit has been filed by Attorney General Frankie Sue Del Papa accusing major out-of-state natural gas companies of conspiring to overcharge consumers in Southern Nevada during the energy crisis in the West.
"(These) corporate giants knowingly and intentionally concocted an illegal scheme to take advantage of consumers of natural gas and electricity to the tune of hundreds of millions of dollars," Del Papa said.
Monday's suit names El Paso Corp. and Sempra Energy and two of its subsidiaries, Southern California Gas Company and San Diego Gas and Electric.
Denise King, a spokeswoman for Southern California Gas, said the company has not been served with the suit and that she could not comment on the specifics. But she said there have been a number of such suits filed and they have been consolidated.
King said there is no merit to the other legal actions.
"They have overlooked certain facts and are based on speculation," she said.
El Paso Corp. could not be reached for comment.
The Nevada suit, filed in district court in Las Vegas, said El Paso and Southern California Gas, which owned the two dominant pipeline companies, conspired from 1996 through June 2001 to drive up the price of natural gas.
Senior Deputy Attorney General Chris Van Dyck said today that gas and electricity consumers in Southern Nevada are considered part of the class-action suit as indirect purchasers of fuel.
The two big energy utilities in Southern Nevada -- Nevada Power Co. and Southwest Gas Corp. -- routinely pass through the cost of fuel to their consumers.
Van Dyck explained that Southwest Gas and Nevada Power are not defendants in the case, but raised their rates to consumers because of the rates alleged to be illegally inflated.
"Indirect purchasers are just as harmed and the statutes allow us to file suit on behalf of them," he said.
Steve Boss, president of the Nevada Energy Buyers Network and an expert on utility rate structures, said Nevada's suit is similar to one filed against gas producers by the state of California.
"Both Southwest Gas and Nevada Power essentially pass through their costs of acquiring fuel to residential and business customers, Nevada Power because it converts the gas to electricity," Boss said. "What Nevada is saying is that if the California suit has merit, we were similarly affected."
Boss said if the state is successful in its suit, the settlement probably would occur with the two utility companies, which likely would pass it through to consumers in the form of a rate adjustment.
Van Dyck said it hasn't been determined how consumers would be paid back if the state succeeds in the suit.
Walt Higgins, chief executive officer of Nevada Power, was traveling today, but issued a brief statement about the state's suit.
"We haven't seen the complaint, but we're anxious to learn more about its specifics," Higgins said. "We have believed for a long time and have said many times that it is likely that there was significant manipulation in the California and Western marketplace. That is why we have filed suit against Enron in the Bankruptcy Court and we are continuing to closely examine all aspects of the issue. This includes our suits against power marketers, including El Paso, at the Federal Energy Regulatory Commission."
In 2001, of the 9.9 million megawatt hours of power produced by Nevada Power, 42.5 percent of it was generated at natural gas-fired plants.
Representatives of Southwest Gas could not be reached for comment.
The suit says that two days after California passed its electric deregulation law, representatives of El Paso and Southern California Gas held a secret meeting on Sept. 25, 1996, at an airport motel in Phoenix.
They allegedly agreed to stop construction or expansion of competitive pipelines by restricting the availability of capacity on the El Paso pipeline.
King said there was never any agreement reached at that meeting. She said there was an overcapacity of gas coming into California and ways were sought to relinquish some of that capacity so rates could be reduced to the customers of the utility.
State Consumer Advocate Tim Hay said the natural gas companies prevented the expansion of the Kern River Pipeline, which passes through the Las Vegas area. It would have allowed consumers in Clark County the benefit of sufficient competition in the natural gas market and sufficient diversity of supply.
This could have averted the massive run-up of natural gas prices and related rises in electricity prices that reached a climax in the energy crisis of 2000-01, Hay said.
"(By) preventing Kern River's expansion and by perpetuating and exploiting Southern Nevada's dependence on the El Paso pipeline system, the conspirators' conduct unlawfully and artificially caused the extreme natural gas price, increases that hit Southern Nevada natural gas and electricity consumers," Hay said.
Hay said these antitrust suits permit triple damages, and he said the state will seek anywhere from tens of millions of dollars to hundreds of millions. That money would be returned to the ratepayers, he said.
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