L.A.: GAS PRICES FIXED CITY'S LAWSUIT ACCUSES GAS SUPPLIERS OF COLLUSION.

Byline: Rick Orlov Staff Writer

The cities of Los Angeles and Long Beach sued the Southern California Gas Co. and several other energy providers Tuesday, accusing them of conspiring to control the flow of natural gas to drive up the price over the past five years.

City Attorney James Hahn accused officials of the company, along with those of El Paso Natural Gas, Sempra Energy and El Paso Merchant Energy, of developing an agreement during a private 1996 meeting to not build new pipelines and to divide California into markets for a monopoly.

``They cut up the markets like a piece of pie and California was that pie,'' Hahn said at a City Hall news conference. Hahn is a candidate for mayor in the April 10 election.

``As we've begun to experience blackouts, a lot of the blame is going on energy deregulation. But it was more than that. This was the result of an unethical, invidious effort by several of the providers of natural gas to limit our ability to get cheaper gas.''

Officials at the Gas Co., now known as Sempra Energy, denied any wrongdoing.

``The allegations that Sempra, the Gas Co. or anyone else violated any anti-trust or other laws are completely false,'' said Rick Morrow, a vice president with the company. ``We have been and will continue to look out for the customers and to prevent price spikes.

``We are shocked the cities of Los Angeles and Long Beach are choosing this route to express their frustration with the current energy crisis rather than look for long-term solutions.''

Hahn said he began to develop the lawsuit after reading a newspaper article in February about a private lawsuit against El Paso Gas in Texas, in which documents were obtained regarding a September 1996 meeting by executives of the different firms in Phoenix, Ariz.

In addition, Hahn said notes from a Southern California Gas Co. official contained the agenda, which also limited the construction of new pipelines in Southern California that would have brought in cheaper natural gas from Canada.

Morrow confirmed there was such a meeting but disputed its purposes.

``We were attempting to get out of some long-term contracts because we had an oversupply of gas,'' Morrow said. ``That was it.''

Spokeswoman Denise King also disputed allegations that the company was profiting from the higher prices.

``We are required by the Public Utilities Commission to get the lowest price gas we can,'' King said. She said the company has called Hahn's office and offered to meet to explain the situation.

The lawsuit will be handled for the city by the private firm of Engstrom, Lipscomb and Lack, which will be paid a 15 percent contingency fee for whatever damages are recovered.

Hahn, who hopes to get an early court order reducing rates, said his office is empowered under state law to file such a suit, and he estimated damages could eventually be in the hundreds of millions of dollars if the city is successful.

``It could take years to get this to trial, but we are in this for the long haul,'' Hahn said.

The City Council approved filing the suit, which Hahn said could lead to a civil judgment in the ``hundreds of millions of dollars.''