SDG&E; Bid on Refund Is Rebuffed

San Diego Gas & Electric on Monday reached what a company spokesman called “the end of the line” as the U.S. Supreme Court refused to review a 1984 state Public Utilities Commission ruling that described an SDG&E; 1979 fuel oil contract with a supplier as “unreasonable” and forced the utility to return $45 million to consumers.

Citing a lack of a “substantial federal question,” the court declined to review SDG&E;’s claim that the PUC failed to provide the utility with its “constitutional right of a fair and impartial hearing.”

The court’s decision will not affect gas or electric rates because the utility returned the $45 million to consumers during 1985, according to a company spokesman.

The Supreme Court’s refusal to review the utility’s appeal grew out of a 1984 PUC ruling that branded a 1979 SDG&E; oil contract with Tesoro Alaskan Petroleum as “unreasonable.” Commissioners ruled that shareholders should absorb the $45 million because the utility’s managers incorrectly judged the future availability of cheaper natural gas when it extended a fuel oil supply contract with Tesoro.

The PUC refused SDG&E;’s request for a rehearing and the utility appealed the decision to the California Supreme Court, which last September refused to review the PUC ruling.

“This is the end of the line for us on the appeal,” SDG&E; spokesman David Smith acknowledged .

Meanwhile, as if to underscore the vagaries of estimating the relationship between the price SDG&E; pays for fuel oil and natural gas, the utility on Monday announced that it has stopped burning natural gas at its power plants--and has turned to cheaper low-sulfur fuel oil.

“We’re enjoying the price competition . . . between oil and natural gas,” said Mike Niggli, SDG&E;’s director of fuel and power contracts. “We’re going to keep buying and using oil as long as it’s cheaper than natural gas.”

During March, SDG&E; will take delivery of 400,000 barrels of oil from Alaska and Australia that was purchased on the spot market for the “lowest prices paid since 1978,” according to Niggli.

The switch to spot market oil could save utility customers nearly $1 million a month, Niggli said.

Falling oil prices recently forced Southern California Gas Co., SDG&E;’s natural gas supplier, to lower its prices to $2.80 from $3.40 per million British thermal units, Niggli said. However, SDG&E; has found fuel oil at even lower prices, he said.

In an unrelated move, the utility declared a quarterly dividend of 56 cents per share on common stock. The company will also pay dividends on its cumulative preferred and preference stock.