2. Background
On November 21, 2005, the Attorney General of the State of California, on behalf of the Commission, filed a "Complaint for Damages, Statutory Penalties and Injunctive Relief" against Sempra Energy, SDG&E and Southern California Gas Company (SoCalGas).1 The complaint alleges that SDG&E/SoCalGas misrepresented the amount of pipeline capacity available to transport natural gas to Baja California and did not disclose to the Commission the potential for curtailment of customers in Southern California. After service was initiated to transport natural gas over the two utilities' pipeline systems to Sempra Energy affiliates, which sell and distribute natural gas within Baja California, SDG&E curtailed natural gas service on 17 days during the energy crisis in the winter of 2000-2001. In California, two major customers, which operated electric power plants, were curtailed and were forced to switch to fuel oil to generate power.
Following settlement negotiations, on September 21, 2006, the Settling Parties2 reached an agreement (Settlement Agreement) to fully resolve their dispute and avoid the uncertainty and substantial costs caused by the pendency of the complaint. The Settlement Agreement provides SDG&E customers with certain benefits, including the option of additional supplies of energy at Commission-regulated rates. Specifically, the Settling Parties agreed that SDG&E would receive an option to obtain, at book cost effective October 1, 2011, ownership of an approximately 480 MW gas-fired power plant (and associated electric transmission facilities) located in Boulder City, Nevada and owned by El Dorado Energy LLC.3
According to the Settlement Agreement, SDG&E must decide whether to exercise the El Dorado Option within 45 days of the Commission's Phase II decision in the Long-Term Procurement Plan (LTPP) proceeding (Rulemaking (R.) 06-02-013). SDG&E's decision is subject to review by the Commission, and the Settlement Agreement provides that the Commission must decide, by December 31, 2007, whether SDG&E should exercise the El Dorado Option.4
The timing for issuance of the Phase II decision in the LTPP now differs from the time frame contemplated by the Settling Parties when they executed the Settlement Agreement. The Phase II decision in the LTPP has not yet been issued (although it is expected by the end of the year). Given the December 31, 2007 deadline for a Commission decision regarding whether SDG&E should exercise the El Dorado Option, SDG&E decided it no longer made sense to wait for a Phase II decision in the LTPP before bringing the El Dorado Option to the Commission for a decision. Therefore, SDG&E filed the application on August 8, 2007 and proposed a procedural schedule to ensure a decision by the end of 2007.
1 San Diego Superior Court Case No. GIC 857224.
2 Settling Parties include Sempra Energy, SDG&E, SoCalGas, Attorney General, and the Commission.
3 The offered price of the El Dorado Option, as defined in the Equity Purchase Option Agreement, is equal to the closing book value of the plant at the time of transfer in 2011, which is currently estimated by El Dorado to be $189 million.
4 This deadline may be extended upon mutual agreement of Sempra Energy, SDG&E, SoCalGas, and the Commission.
