Costs, Competition Fuel Urge to Diversify
Utility diversification is not an issue limited to San Diego Gas & Electric. It is, in fact, a statewide issue.
“It’s an idea whose time has come, and it’s a very necessary next step in the development of our industry,” according to Steve Edwards, manager of special projects at SDG&E.;
SDG&E;’s plan to create a holding company and subsequently diversify its revenue base will keep the utility “financially viable,” Edwards said, adding that utilities that do not diversify will be “threatened” by increased competition from unregulated energy companies.
“We’re facing more and more competition,” Edwards said. “The cost of providing our primary products is going up, and we have essentially a locked-in customer base.”
Edwards suggested that opponents of utilities’ diversification “put their glasses on” and look at the “solar panels that are popping up on everyone’s roofs. Every time someone installs (solar energy devices), we lose sales.”
SDG&E; is also feeling heat from diversified utilities, Edward said. An East Coast utility, operating through a joint venture, eventually plans to produce photovoltaic cells that transform sunlight into electricity. “You don’t have to go very far to see that technology at work,” Edwards added. “Caltrans already uses (photovoltaic cells) on 50% of its signs.”
Although Edwards acknowledged that SDG&E; must meet customers’ needs, he added that the utility must also assure shareholders that the utility will “maintain the good financial health that we’ve recently achieved.”
That health depends on competing successfully in the “parts of our business that have moved out of the monopoly sphere and into a competitive environment,” he maintains.
The utility is also arguing that its proposed diversification will draw a “larger pool of investors” and that “Wall Street is happy about our proposal.”
Although Edwards acknowledged that the PUC has a “primary responsibility to see that utility customers are well-served . . . and that resources are not misused in some fashion,” he added that the commission is “not equipped to judge how we can best serve our shareholders.”
However, SDG&E; has promised to give the California Public Utilities Commission access to the books of any subsidiaries it creates, Edwards said. “This kind of (diversification) doesn’t occur overnight,” Edwards said. “Look at PacifiCorp, which has been at it for 20 to 30 years.”
