SDG&E; Confirms 6% Drop in Utility Bills Under Rate Reduction Order

San Diego Gas & Electric’s residential customers should notice a 6% cut in their January bills because of a $136.3-million rate reduction ordered last week by the state Public Utilities Commission (PUC), company officials said Friday.

The typical monthly residential bill will drop to $62.40 for 400 kilowatt-hours of electricity and 40 therms of gas, according to SDG&E; officials. That is the lowest level since December, 1982, when the typical monthly bill was $63.63.

SDG&E; officials said average residential gas and electric rates have dropped 14% since hitting an all-time high of $72.75 in December, 1983, when the typical residential customer paid $47.27 for electric service and $25.48 for natural gas. After the rate reduction in January, the electric bill will fall to $45.12, and the gas bill will drop to $17.28.

SDG&E;’s estimates matched those presented by the PUC last week when it announced the electric and gas rate reductions. The utility waited until Friday to confirm the PUC’s estimates because company officials had not yet seen the PUC’s entire rate decrease package, a utility spokeswoman said.

However, the utility still has not calculated how the PUC-ordered rate decrease will affect industrial and commercial customers.

The PUC based its rate decrease order--which included a $16.3-million gas decrease and a $120-million electric decrease--on a favorable economic climate, a continued decline in the costs of natural gas and other fuels, and lower inflation and interest rates.

Commissioners also linked part of the decrease to a decision to saddle SDG&E; shareholders--not customers--with fuel costs generated by “imprudent” SDG&E; management decisions. About half of the rate decrease was caused by the PUC’s decision to cut SDG&E;’s allowed return on equity--the relationship between the utility’s profits and the amount shareholders have invested in the utility--from 16% to 15%.

In making that cut, commissioners referred to “the dramatic improvement in SDG&E;’s overall financial condition since 1983.” The 15% allowance placed SDG&E; slightly below the 15.3% average return on equity allowed across the country at the end of September, according to the Edison Electric Institute, a Washington-based utility industry organization. For the last year, state public utility commissions have been cutting back allowed returns, according to an institute spokeswoman.

Because SDG&E; officials were aware of that downward trend, the utility was “disappointed but not surprised” with the PUC’s action, according to Henry Morse, SDG&E;’s manager of regulatory affairs.

Morse emphasized that SDG&E; had filed its original request for a 16 1/2% return more than a year ago, before the downward trend began. “Although the commission acted upon circumstances today, we think they’ve gone too low,” Morse said.