SDG&E; Needlessly Boosted Its Rates, PUC Official Says

A report released this week by a regulatory agency in San Francisco recommends that San Diego Gas & Electric make refunds and rate reductions totaling $101.6 million to its customers because utility managers have been imprudently buying high-cost electricity from Southwestern utilities.

SDG&E; has been buying “expensive” electricity from three companies in New Mexico and Arizona since the late 1970s, needlessly boosting electric rates in San Diego, according to William Dietrich, a project manager for the public staff division of the state Public Utilities Commission.

SDG&E; has failed to negotiate lower-cost contracts with the three utility companies even though it “had several opportunities to do so,” according to Dietrich.

The public staff division, which represents the public in matters before the commission, recommended that SDG&E; refund $75.3 million for electricity already purchased and reduce future rates by $26.3 million to account for high-cost electricity that will be purchased between June, 1987, and April, 1989.

The public staff’s report has been turned over to the state Public Utilities Commission, which will review the disputed contracts during hearings in San Diego in late April. The commission is not expected to reach a decision on the contracts until late in the year, according to Dietrich.

Questions about the electric power that is carried into San Diego on the Southwest Power Link initially were raised two years ago by the San Diego-based Utilities Consumers Action Network.

SDG&E;’s decision to buy electricity from the three coal-burning utilities may have seemed economical in the late 1970s when gas and oil prices were high, Dietrich said, but energy prices subsequently tumbled. The availability of lower-priced gas and oil has made SDG&E;’s gas- and oil-fired plants more cost effective than the purchased electricity, according to Dietrich.

SDG&E; has characterized the Southwest Powerlink--and the importing of electricity from coal-fired plants in the Southwest--as an appropriate way to meet its electric supply needs. The utility also has said that the PUC approved its electricity contracts with Tucson Electric, Public Service Co. of New Mexico and the Alamito Co.

Dietrich contended that SDG&E; received approval only for a contract to use the Southwest Powerlink to import electricity generated by a Mexican utility.