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California officials playing “Russian roulette” with state’s energy future, Sempra Energy Resources claims

July 3, 2002 — California officials are engaged in “political shenanigans” imperiling the development of critically needed new energy-generating infrastructure throughout the Western United States, Sempra Energy Resources warned recently.

“Regrettably, California officials are playing a game of “‘Russian roulette” with the state’s energy future in hopes of scoring political points as elections approach,” said Michael R. Niggli, president of Sempra Energy Resources, the power-generation unit of Sempra Energy.

“Their reckless political shenanigans are undermining the very contracts that serve as the foundation for getting new power plants built — plants that they acknowledge are necessary to serve California’s current and future energy needs.”

These same power contracts also have helped drastically reduce prices for power in the volatile ‘spot’ power market, he said.

Niggli’s comments came in response to a legal filing recently by the California Department of Water Resources (CDWR) seeking to void a 10-year energy-supply contract with Sempra Energy Resources. July 3 was the legal deadline for CDWR to answer Sempra Energy Resources’ request that the state court issue a declaratory judgment upholding the company’s performance under the contract.

“We have a solid, legally binding contract, under which we are meeting all of our obligations,” Niggli said. “Over the life of our contract, we will be supplying up to 1,900 megawatts of reasonably priced electricity to power homes and businesses throughout the state. Even though our contract permits us to fulfill our energy-supply obligations from a mix of sources — including our own plants or market purchases — we are investing more than $1 billion to develop in excess of 2,100 megawatts of new power generation in the West. These clean, efficient new power plants are to begin operations next year, right on schedule.”

“The contract is clear, and we are confident the court will confirm what we already know — that we are living up to our end of the agreement,” he added.

Niggli said the state’s latest charges are “outrageous” and “a feeble attempt” to tip any renegotiations of the company’s contract in the state’s favor.

“These charges by state officials not only are scurrilous and completely without merit, they are insulting to everyone who is working to help California out of its energy crisis,” Niggli said. “We refuse to be bullied by state officials or to have our work disrupted by their shameless political shenanigans.”

The cost of power under Sempra Energy Resources’ contract is among the lowest in the state’s portfolio, even lower than several contracts recently renegotiated with other companies by CDWR.

“The average cost of our contracted power when the bulk of our deliveries begin next year — about 5.5 cents per kilowatt-hour — will be about 20-percent less than the average reported cost of all the other contracts in the state’s portfolio,” Niggli said.

To help meet California’s needs, Sempra Energy Resources is developing three new power plants in the region and already has committed 80 percent of the capital required to finance them. The projects are Elk Hills, a 550 megawatt (MW) joint venture in Bakersfield, Calif.; Mesquite Power, a 1,250 MW facility in Arlington, Ariz.; and Termoelectrica De Mexicali (TDM), a 600 MW plant in Mexicali, Mexico. The Elk Hills project is on schedule to begin operating next spring. Both the Mesquite and TDM plants are also on track to begin operations next year.

Copies of Sempra Energy Resources’ May 28, 2002, legal action seeking a declaratory judgment by the court are available upon request. A copy of the supply agreement between Sempra Energy Resources and the California Department of Water Resources, signed May 4, 2001, is available on the company’s Web site, www.sempraenergyresources.com .

Sempra Energy Resources — a subsidiary of Sempra Energy Global Enterprises, the umbrella for Sempra Energy’s growth businesses — acquires and develops power plants and energy infrastructure for the competitive market.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2001 revenues of $8 billion. The Sempra Energy companies’ 12,000 employees serve more than 9 million customers in the United States, Europe, Canada, Mexico, South America and Asia.

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