San Diego-area utility's share of California power crisis costs may grow
The San Diego Union-Tribune --Jul. 22
Jul. 22--Larger San Diego Gas & Electric Co. customers, who already pay the highest electricity rates in the state, would see rates climb further if regulators adopt proposals offered this week on shifting more than $900 million of the state's power crisis costs to the local utility.
The contracts were urged upon the state in 2001 as keys to halting a
devastating electricity price spiral that began the previous year. The deals are
now viewed as overpriced burdens, tying ratepayers to $7 billion in excess
electricity costs for most of the next decade.
The two proposals issued this week by the California Public Utilities
Commission would move $930 million of the costs over the next eight years to SDG&E
customers, causing steep rate hikes for commercial and other large electricity
users, according to Lee Schavrien, SDG&E vice president of regulatory
affairs.
He said the plans are a "cost shift" urged upon the commission by
Southern California Edison and Pacific Gas and Electric Co. and said SDG&E
will do what it can to defeat them.
"These costs should be allocated on a fair basis," Schavrien said.
"This is purely arbitrary and is intended to benefit Edison and PG&E at
the expense of my customers."
He argued that SDG&E's share of the costs under the proposals would far
exceed what its customers use as a percentage of all power consumed statewide.
An official of Southern California Edison says SDG&E customers got a free
ride for the first years under the long-term power deals, avoiding the
above-market power costs paid by customers elsewhere in the state. That's
because in earlier PUC proceedings, SDG&E's view of long-term contract cost
allocation largely prevailed.
The new proposals would more equitably distribute the overpriced electricity
costs in the contracts ts among all major utility customers, said John Fielder,
a senior vice president for Edison.
"SDG&E is only picking up its fair share of uneconomic costs under
these contracts," he said.
Edison also argues that SDG&E customers get a far higher percentage of
their power from the long-term contracts than Edison customers. Fielder added
that Edison's original proposal for distributing the costs was supported by The
Utility Reform Network, a Bay Area-based consumer group, as well as by the
Office of Ratepayer Advocates, a consumer advocacy group within the PUC.
That proposal, which Edison says it will continue to press for, would shift
about $1 billion in costs to SDG&E, as opposed to $930 million under the
decisions now before the PUC.
Fielder also said it is ironic that SDG&E is complaining about paying for
the long-term power contracts because another unit of Sempra Energy, SDG&E's
parent company, holds one of the most overpriced contracts with the state.
"That contract is responsible for about 15 percent of the $7 billion in
above-market costs," he said.
California officials have long complained the Sempra deal is overpriced but
have failed to negotiate or litigate changes. Sempra has defended the agreement
as a good one for the state.
Schavrien of SDG&E said the PUC never afforded the local utility an
opportunity to explain the economic effects of allocating more than $900 million
in contract costs to local customers. He said the impact would be severe for
large electricity customers and the entire region.
If either of the proposals were accepted, for example, Schavrien estimated
that a typical restaurant would see electricity rates rise by roughly $500 per
month, or nearly $6,000 a year. Other business customers could face similar
increases.
Residential customers who use smaller amounts of power would continue to be
protected by a rate cap.
The draft rulings are slated for consideration by the PUC at its August 19
meeting, but commission agendas are frequently changed.
Michael Shames, executive director of the Utility Consumers' Action Network,
a San Diego-based advocacy group, said the PUC is likely to consider the
potential additional costs from the proposals in the context of other major
decisions it will soon make regarding local power rates.
Shames noted that while the PUC is also now considering an SDG&E proposal
to shift one of the long-term power contracts it now administers to PG&E.
SDG&E says that agreement needs to be shifted so it can contract for cheaper
power from a planned new plant on Otay Mesa.
In addition, Shames said he expected the PUC to order a rate hike for SDG&E
customers as a result of its periodic review of utility costs.
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