Consumer Report Terms SDG&E;’s Profits ‘Absurd’

Two consumer groups that represent a wide range of San Diego Gas & Electric’s customers on Tuesday linked the utility’s electric rates, which are among the nation’s highest, to poor management and the desire for excessive profits.

“Significant (rate) cuts are possible,” according to Michael Shames, executive director of San Diego-based Utility Consumer Action Group, which says it represents about 65,000 disgruntled SDG&E; residential customers.

The group and the San Diego Energy Alliance, which represents 41 of SDG&E;’s industrial and commercial customers, on Tuesday issued a report that is highly critical of the utility’s managers. The report was prepared by Drazen-Brubaker & Associates, a Portland, Ore.-based consulting firm, and JBS Energy, a Sacramento-based consulting firm.

The report scored SDG&E; for consistently blaming its electric rates on “a lack of cheap hydroelectric power . . . and uncontrollable expenses.”

“Many of the costs that SDG&E; says are uncontrollable are indeed being controlled by other utilities in California,” Shames said during a Tuesday press conference. “SDG&E; seems to have a great deal of difficulty in assessing (its operation).”

The report hit hard at what Shames described as an “absurd” level of profits that he said were connected to a $175-million boost in SDG&E;’s electric rates between 1982 and 1986. SDG&E; has enjoyed a 16.25% return on equity in recent years, far above the industry average of 14.5%, according to the study.

PUC Criticized

Shames criticized the state Public Utilities Commission for permitting SDG&E; to operate at its current profit margin.

The report also suggested that SDG&E; is paying extravagant salaries to its executives and mismanaging contracts to buy electricity from utilities in the Southwest.

SDG&E; spokesman William Reed described the report as being “full of distortions and manipulations.”

Reed maintained that the report is dated and inaccurate because it fails to include “major” rate reductions approved by regulators during the last two years.

“They focused on 1981 through 1985, when they should be looking at where we are now,” according to Reed, SDG&E;’s manager of regulatory affairs.

Electric rates increased by 25% during the study period but subsequently fell by 30%, according to Reed.

Reed contended that SDG&E;’s profits are “in line” with those booked by other regulated utilities in California.

Shames defended the report, stating that it was “prepared by two respected consultants” who have testified numerous times before utility regulators in California and other states.