SDG&E; Studying Rate Hikes for Some Large Industrial Customers

San Diego Gas & Electric is considering a new electric rate schedule that would boost electricity bills for about 200 of its largest industrial and commercial customers and effectively kill future co-generation projects, according to SDG&E; customers who have seen the proposed schedule.

The proposal would be “disastrous” for most co-generation systems, according to Tom Mason, an Energy Factors executive and the president of the San Diego Co-generation Assn. Co-generation is an alternative method of power generation that produces electricity and steam used to power industrial processes.

SDG&E;’s proposed rate schedule is designed to make co-generation economically unattractive in the future, according to Mason, who added that “all proposed systems would be stopped in their tracks.”

A small number of customers will see dramatic increases in their bills if the proposal is approved by the state Public Utilities Commission, according to Doug Hansen, manager of SDG&E;’s pricing department. Overall, Hansen said, bills for about half of the county’s 400 largest industrial and commercial customers would increase by about 10%. The other half may see 10% decreases.

The proposal probably would boost electric rates for customers that use co-generation to reduce their dependence on SDG&E;, as well as for customers that use energy on an irregular basis, Hansen said.

Customers that “utilize energy on a fairly regular basis” throughout the day would probably see decreased bills, Hansen said. “Two-shift operations, for example, would benefit, while one-shift operations wouldn’t benefit.”

The rate proposal will be modified before being forwarded to state regulators within the next two weeks, according to Hansen.

SDG&E; is trying to redesign its industrial and commercial electric rates to “remove the subsidies that currently exist” for co-generators, Hansen said. “We favor co-generation as long as it doesn’t have to be subsidized (by other rate payers) to exist.”

Reaction from the hundreds of customers who have seen the proposal has been evenly divided, according to Hansen.

“It’s been about 50-50, which isn’t surprising, because half will be benefiting and half will not,” Hansen said.

Gary Estes, president of the San Diego Energy Alliance, complained that the proposal will “help anybody who has a high load factor” but wreak havoc with companies that are trying to plan energy budgets for coming years.

“I’ll save money on the (proposed schedule), so I should be embracing it, but in the longer term, co-generation is a more realistic option for a society with scarce resources,” Estes said. “SDG&E;’s actions are too shortsighted.”

“It’s important to realize that this thing is just a proposal and that it’s likely to be modified before it’s introduced,” said Michael Shames, executive director of Utility Consumers Action Network.

However, Shames faulted SDG&E; for sending “mixed signals” to its industrial and commercial customers, instead of offering the “stability and predictability” needed to complete strategic planning.