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Chevron Blamed for Utility’s $84M Gas Bill

SACRAMENTO, Calif. (CN) - A San Diego public utility is paying off a contract for subsidized electricity it no longer uses and its customers are footing the $80 million bill, the utility claims in court.

The complaint is Courthouse News' top download for Wednesday.

California regulators say Chevron sabotaged the finances of a subsidiary that once supplied the San Diego Gas & Electric with electricity, and refused to take over transportation costs after the contract expired. Chevron received more than $1 billion in payments from the state via its ownership in co-defendant Sunrise Power Company during a 10-year contract.

According to the complaint San Diego utility customers are paying $1.2 million per month because Chevron and the power company's new owners are dodging responsibility for a decade-old transportation contract.

"The consequence of Chevron's business decision was that California Department of Water Resources and the San Diego Gas & Electric Company and California electric ratepayers were left with the burden of paying for a substantial portion of the $80 million costs," the Jan. 29 complaint states.

At issue is the reassignment of transportation costs that the plaintiffs picked up for co-defendant Sunrise Power Company during the 10-year contract. The state paid for and transported natural gas to fuel Sunrise's power plant in Kern County via a pipeline owned by a third party.

While the electricity contract was only good for 10 years, the state says in order to transport fuel it had to sign a 15-year contract with pipeline owner Kern River Gas Transmission Company. To address the overlapping contracts, the plaintiffs signed a reassignment agreement with Sunrise that transferred the pipeline costs back to the company beginning in 2012.

The boondoggle began that year, when the state attempted to transfer its responsibility for transportation costs over to Sunrise per the reassignment agreement but the pipeline owner refused because Sunrise didn't pass a credit check.

"Defendants had managed Sunrise in such a manner that, at the end of the term of the [contract], Kern River contended that Sunrise did not meet the minimum creditworthiness standards specified in Kern River's tariffs," the complaint states.

With Chevron refusing to buoy Sunrise's credit or accept the reassignment agreement, the plaintiffs say they've been paying for the transportation of natural gas to produce electricity they no longer use on the public's dime.

"Instead of cooperating on the reassignment Chevron refused, stating it was not a party to the reassignment agreement and, therefore, had no contractual obligation to accept reassignment," the 18-page complaint states.

The plaintiffs' contract with Kern River expires in 2018 and they claim transportation costs continue to rise.

Chevron sold off its ownership of Sunrise Power in 2014 to co-defendant NRG Energy, which the plaintiffs say has also refused to cooperate with the reassignment agreement.

A spokesman with Chevron declined to comment, telling Courthouse News the company hasn't received a copy of the complaint.

The Department of Water Resources and the San Diego Gas & Electric Company are suing Sunrise Power Company, NRG Energy and Chevron for breach of contract and improper distributions. The California Attorney General's Office and San Diego Gas & Electric general counsel Larry Davis are representing the plaintiffs in Sacramento County Superior Court.

A spokesman for the department said the complaint "speaks for itself," and that he would wait for the lawsuit to progress before giving further comment.

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