Utility Board Tells SDG&E; to Trim Price of Gas, Power

San Diego Gas & Electric will ring in the New Year by slashing its 1986 electric rates by as much as $120 million and reducing its gas rates by $16.3 million a year--its largest overall rate decrease ever, the state Public Utilities Commission ruled Friday.

That means the monthly residential electric bill for 400 kilowatt hours will drop $3.61, to $45.05, according to PUC officials. A gas bill for 40 therms of gas will drop 11 cents per month, to $17.35.

SDG&E; officials, however, said they could not confirm what the average reduction would be until they have a chance to study the PUC’s decision. Henry Morse, SDG&E; manager of regulatory affairs, said the aggregate reduction may be only $85 million, depending on how the rate cut is calculated. The company on Monday will release its own assessment of what the PUC rulings mean to the pocketbook of its residential users.

“January should be a real nice month for consumers,” said Michael Shames, executive director of Utility Consumers Action Network, the local public interest group that pushed the PUC to sharply reduce SDG&E;’s electric and gas rates.

In three actions, PUC officials slashed rates because of a “favorable economic climate” that included falling prices for natural gas and other fuels, and a continued decrease in inflation and interest rates.

The PUC also noted a “dramatic improvement” in SDG&E;’s financial condition, which included an “upgraded bond rating and a substantial reduction in the business risks (that the utility) faces.”

The public watchdog agency did not provide a breakdown of the $120-million decrease, but it said the figure resulted from the following actions:

- A general rate case that the PUC conducts every three years to gauge the utility’s operation and maintenance costs.

- A “fuel-cost” adjustment for the utility’s electric operations.

- A “cost-of-gas” adjustment for the utility’s gas operations.

- A pair of Dec. 4 PUC decisions, one of which ordered the utility to pass along $9.2 million accumulated because of a drop in the price it paid to its suppliers for natural gas. The second ordered SDG&E; to refund $9.9 million to its customers to cover two “imprudent” fuel contracts and the costs generated by a fire which the PUC said could have been avoided.

The Dec. 4 decisions will appear as one-time credits on January bills. The utility’s natural gas customers will receive average credits of $5.25, while certain electric customers will receive a 35-cent credit.

However, SDG&E; explained that the reduction estimate of $85 million was based on 1985 energy-use figures while the PUC based its estimate on projected 1986 figures.

About half of the general rate case figure decided Friday was tied to the PUC’s decision to limit the utility’s “return on equity”--the relationship between the utility’s profits and the amount shareholders have invested--to 15%, said Morse. SDG&E;’s return on equity this year was nearly 16%.

Although the 15% allowance fell short of the 16.2% return the utility had requested, Morse said the PUC decision was not unexpected because allowances across the nation have been dropping for the past year. “It’s disappointing, however, because we don’t think it adequately reflects the risks associated with running a utility business these days,” he said.

Morse said that although the lower return on equity probably would not affect the utility’s ability to borrow money, it could alienate some investors who are seeking investments with a higher return.

A SDG&E; spokeswoman said the “aggregate” decrease caused by the PUC ruling was the largest in the company’s history, but she was unable to provide figures for other reductions.