SDG&E; Expects to Fit Project Under $94-Million Lid

San Diego Gas & Electric expects to complete the demonstration phase of the Heber geothermal project without spending more than the $94-million cap set in 1982 by the state Public Utilities Commission.

But because that $94 million is coming from SDG&E;’s customers--and not its shareholders, because the plant is seen by the PUC as a possible benefit to customers--at least one group within the PUC is questioning how much money should be poured into the Heber plant, especially if low oil prices keep Heber from passing muster as a cost-effective alternative to gas, nuclear or coal-fired electric-generating plants.

The plant has cost more to build than SDG&E;’s initial estimate, but payments to Unocal and Chevron corporations have been lower than anticipated, according to Robert Lacy, project manager. SDG&E; did not release the figures.

A spokesman for PUC’s public staff division, which represents utility customers in PUC proceedings, said Heber “is a good technology, but the next question is what do we do after spending all of this money--scrap it or put it into commercial operation. We have a dilemma right now (because) oil prices are down.”

If the price of a barrel of oil doesn’t rise, SDG&E; could be forced to mothball the plant or sell its majority ownership to another company.

The public staff has not, however, pushed SDG&E; to abandon the demonstration plant, largely because SDG&E; customers--who are paying some of the nation’s highest electric rates--have already spent a “considerable amount of money” on the plant, according to the public staff spokesman.

The public staff might suggest that commissioners study several funding options, including the possibility of forcing SDG&E; shareholders to pay some of the demonstration plant’s construction and operating costs. In addition, because all Southern Californians would benefit if the geothermal technology succeeds, the public staff wants commissioners to consider drawing funds from utilities throughout Southern California.

SDG&E; remains confident that the plant will become cost-effective.

“It isn’t a question of whether oil prices will rise, it’s a question of when,” a utility spokeswoman said.