Business to Benefit Most From SDG&E; Rate Cutback

The state Public Utilities Commission on Tuesday ordered San Diego Gas & Electric to cut its electric rates by a record $141.2 million beginning Jan. 1, a move that will help commercial and industrial users more than residential customers.

The rate decrease announced in San Francisco will push SDG&E;’s average electric rate to its lowest point since 1981, the utility said Tuesday.

The new rates, which were linked in part to falling fuel prices, will reduce a “typical” SDG&E; residential gas and electric bill (based on the monthly use of 400 kilowatt hours of electricity and 40 therms of natural gas) by 3.1%, to $60.17 from $62.07. SDG&E;’s typical combined electric and gas bill hit a record high of $72.75 a month in 1983.

However, residential electric bills for about 5% of SDG&E;’s 1 million residential customers in San Diego and Orange counties--consumers who use relatively little electricity--will increase slightly on Jan. 1 because commissioners also authorized SDG&E; to collect a flat $4.80 monthly fee that will help the utility cover the cost of generating electricity.

Additionally, in keeping with a recent change in PUC policy, the bulk of Tuesday’s dramatic rate decrease will be split among SDG&E;’s larger industrial and commercial customers--not its residential customers.

Rates Being Redesigned

The PUC ordered SDG&E; to cut its overall electric revenue--the amount of money that it collects from its customers--by 10.2%.

However, while combined residential electric and gas bills will fall by about 3%, SDG&E;’s larger commercial and industrial customers will enjoy electric rate decreases of between 15% and 18.6%.

Those lower commercial and industrial rates are “in keeping with the PUC’s announced plan to redesign rates so that ultimately each class of customer will pay according to what it costs the utility to provide service,” according to PUC spokeswoman Carole Kretzer.

Under existing rates, “residential and agricultural customers do not pay full costs, and larger customers pay more,” Kretzer said.

The PUC’s push to reduce commercial and industrial electric rates also was apparent in the Los Angeles area, where residential customers of Southern California Edison will see a 4.9% rate increase on Jan. 1--while industrial and commercial customers will realize an overall electric rate decrease.

SDG&E;’s “average” electric rate for all residential, commercial and industrial customers will dip to 9.7 cents per kilowatt hour, the first time that average rate has fallen below 9.8 cents per kilowatt hour since 1981, according to Doug Hansen, SDG&E;’s pricing manager.

But in addition to ordering the record rate reduction, commissioners promised to use an upcoming 1988 general rate case to examine “SDG&E;’s persistently high costs” of providing electricity.

That promised review was “a victory for SDG&E;’s customers,” according to Gary Estes, executive director of the San Diego Energy Alliance, a group of industrial and commercial electric customers.

SDG&E; Will Have to Explain

“Now the utility will have to explain to the PUC why its costs are so high compared to other utilities,” said Estes, who led a protest against a proposed SDG&E; commercial and industrial rate that would have made co-generation projects uneconomical. The rate package approved by the PUC on Tuesday will not make it uneconomical for large electric customers to generate their own power, according to Estes.

Michael Shames, executive director of the San Diego-based Utility Consumers Action Network, applauded the $141.2-million rate decrease but argued that commissioners should have followed a PUC staff recommendation that would have cut electric rates even further.

That PUC staff recommendation would have forced SDG&E; to reduce rates by $185.2 million. However, commissioners did not adopt the staff proposal to reduce rates by the additional $44 million.

The rate decrease approved by commissioners on Tuesday was actually the result of several unrelated decreases and increases, including:

- A $72.3-million decrease that reflects the falling price of fuel that is burned to generate electricity.

- A $105-million rate decrease generated by a July 20 PUC decision that forced SDG&E; shareholders--rather than ratepayers--to pay certain disputed construction costs at the San Onofre Nuclear Generating Station.

- A $36.1-million rate increase that will insulate SDG&E; from anticipated inflation. As part of the $36.1-million rate increase, the PUC also reduced SDG&E;’s allowable return on equity to 12.75% from 13.9%. SDG&E; had requested that its allowable return on equity be set at 13.75%.

The largest SDG&E; electric rate decrease previously ordered by the PUC came on Jan. 1, 1986, when SDG&E;’s electric rates fell by $121 million. The PUC also ordered SDG&E; to cut electric rates by $80 million on Feb. 3, 1987.