SDG&E; Gives Bright Report, Users a Dim One, as PUC Arrives

“For the past three years electric rates have been coming down. What does this mean for you? In 1988, you’ll be paying about the same for electricity as you did in 1982. “

--from a San Diego Gas & Electric Co. newspaper advertisement that ran in San Diego and Orange counties during February.

The above advertisement, signed by SDG&E; Chairman, President and Chief Executive Tom Page, acknowledged that the utility’s high rates have at times “created difficult situations” for the utility’s customers.

The perennially high rates have also bedeviled Page.

Since 1983, the utility’s average monthly residential bill (based on the use of 400 kilowatts of electricity and 40 therms of natural gas) has fallen 17% to $60.19.

But many utility customers refuse to believe that SDG&E;’s residential electricity rates--or their gas and electricity bills--have been going down at all.

That dissatisfaction with SDG&E; is expected to be focused at public hearings the state Public Utilities Commission will sponsor in San Diego today and in Escondido on Tuesday. The San Diego hearings are held every three years in order to give SDG&E; customers a chance to air grievances before a commissioner.

‘Literal Horror Stories’

“We’ve lined up 20 people to tell literal horror stories about their experiences with SDG&E;,” said Michael Shames, executive director of the San Diego-based Utility Consumer Action Network.

Former San Diego Mayor Roger Hedgecock recently has used his radio show to publicize a “rate-watchers committee,” and he hopes that a flood of disgruntled consumers will use the hearings to vent frustration with high utility bills and other alleged improprieties by the power company.

Hedgecock’s rate watchers plan to march past SDG&E;’s downtown office building this morning while on their way to the 2 p.m. PUC hearing at the County Office Building.

SDG&E; has fanned the flames with several recent actions:

In January, the utility triggered a sharp public reaction when it supplied hard-to-find Super Bowl tickets--at cost--to members of the PUC, the very body that regulates California’s utilities.

It drew heated criticism by signing a preliminary rate agreement with the PUC’s public staff division, a move that some critics described as a back-room maneuver. One knowledgeable utility observer complained that the agreement should be thrown out because “either you’re a regulated utility that’s regulated in the public eye or you’re not.”

SDG&E; enraged some customers with a debate over whether ratepayers should receive a proposed $44-million rebate in 1988, as suggested by a PUC staff member, or in 1989, as favored by SDG&E.; The power company prevailed and the refund will occur in 1989.

Hedgecock’s rate-watchers group grew especially incensed when SDG&E; recently tacked a $4.80 monthly service charge onto residential bills. The utility has defended the charge by arguing that it did not increase monthly bills because rates were decreased by a like amount.

SDG&E; managed to anger other customers last month by announcing that its top 16 officers earned total compensation of $2.7 million during 1987. It argued that it was making progress because in 1986 it had 21 top executives who had earned $3.2 million.

No matter how rancorous this week’s public hearings might become, it is unlikely that SDG&E; will face the bitterness it did during the early 1980s.

In 1981, SDG&E; removed its corporate logo from its cars after several were vandalized by angry customers.

In 1982, as SDG&E;’s average residential bill worked its way toward a record high of $72.75, Page donned a Groucho Marx disguise before accepting the San Diego Press Club’s “Headliner of the Year” award.

In 1983, only 29% of the utility’s customers described themselves as favorably disposed toward SDG&E;’s performance.

The company’s public relations staff was fielding as many as 80 calls a day from reporters around the world who wanted more information about a utility so hated by its customers.

Former SDG&E; spokesman Dick Licciardi blamed SDG&E;’s problems in part on “three or four reporters in this town who made a living from writing that SDG&E; rates were going up, even when they were not.”

But Licciardi, who handled SDG&E;’s media relations “during the six worst years of the company’s history,” also remembers handling many distasteful press releases--including one for a $250-million electricity rate increase.

“There was not much good in that no matter how you phrased it because it translated into higher rates,” said Licciardi, who left SDG&E; in 1984 but still does public relations work for SDG&E;’s unregulated, non-utility businesses.

Today, the utility believes that its image--which is directly tied to rates and service--is improving.

A record 59% of Page’s customers view its recent performance as “somewhat to very favorable,” according to a 1987 survey conducted for SDG&E.; A year ago, 49% of customers were inclined to describe the company in a favorable light.

To some critics, SDG&E;’s rate-related problems are tied to the fact that even with inflation figured in, electricity being sold “at 1982 prices” isn’t that much of a bargain.

For example, SDG&E;’s 1983 rates were the second-highest in the nation among 30 cities surveyed by Public Power, the magazine of Washington-based American Public Power Assn. SDG&E; ranked 13th in a similar survey conducted by the U.S. Department of Energy in 1979.

Today, SDG&E; finds itself listed third, behind New York City’s Consolidated Edison and Hawaii’s Kauai Electric Co.

Page contends that the national surveys paint SDG&E; in an unfavorable light because they are based on a higher average consumption than that of the typical San Diego customer.

He has voiced his strong desire to knock SDG&E; off those lists.

“I don’t like being the high-cost producer,” Page said last week. “I don’t like being referred to as ‘second-highest, among the highest (or) formerly the second-highest.’ I want to have it say ‘used to be in the top 10.’ ”

Despite a four-year string of electricity rate reductions, SDG&E; remains one of the nation’s most expensive electricity producers.

The utility’s high rates are partially tied to decisions made in the 1960s and 1970s, when SDG&E;, along with other utilities, was anticipating a continued wave of unprecedented demand for electricity that would probably continue through the remainder of the decade.

Projects Abandoned

During those decades, SDG&E; proposed construction of new coal-fired and nuclear generating plants to meet the demand.

During the early 1960s, SDG&E;, Southern California Edison and Arizona Public Service Co. announced plans to build the $1.3-billion coal-fired Kaiparowits power plant in Utah. But in 1976, the utilities, citing lengthy regulatory delays, environmental lawsuits and uncertain construction costs, abandoned the project.

Two years later, SDG&E; ordered an end to preliminary work on the proposed $2.3-billion Sundesert nuclear power plant, again citing unanswered environmental, regulatory and construction costs.

In retrospect, the project cancellations probably saved SDG&E; enormous financial difficulties.

“They’d be bankrupt if they’d done Sundesert,” said Shames, of the consumers group, alluding to ill-fated construction projects that devastated utilities in Long Island, New Hampshire and Louisiana.

But in 1979, with the cost of oil rising and no new plants coming on line, SDG&E; was forced to keep burning oil to supply 58% of its electricity. The financially troubled company had only one new source of lower-cost electricity--Units 2 and 3 at San Onofre--expected to come on line in the 1980s.

Unable to build new electrical generation plants to meet expected demand, SDG&E; decided to recast itself as an “energy broker.”

As part of that process, it built the Southwest Power Link, a transmission line that gave the utility access to the relatively inexpensive electricity being produced in the nation’s coal-rich Southwest.

Most critics of SDG&E; actually agree that the company was wise to build the power line. But some, including UCAN’s Shames, are pressing the PUC to rule that SDG&E; needlessly increased customers’ electricity bills by paying far too much for the imported power.

Decision Faulted

Shames also doubts the wisdom of SDG&E;’s decision to shed its traditional utility role, because “the downside of being a broker is that when the market becomes a seller’s market, you’ll find yourself at the mercy of a lot of merciless companies.”

UCAN also has pushed SDG&E; to stop thinking about new construction and meet future demand by turning to lower-cost co-generation projects that reduce the cost of electricity for users and the utility.

Shames also wants SDG&E; to “pay more attention to conservation programs and alternative energy prospects . . . because there aren’t too many things that they can do to lower their rates.”

During today’s public hearing, Shames will ask the PUC to investigate several aspects of SDG&E;’s performance during recent years, including operating and maintenance costs, which he described as out of line.

Page predicts that within “a couple of years” SDG&E; won’t be the highest-priced electric utility in California.

That will occur, he said, because SDG&E; has filed rate decreases for 1988 and 1989--while its sister utilities--Southern California Edison and Pacific Gas and Electric--are applying for increases.

The competition between utilities is most evident along the southern edge of Orange County, where SDG&E; faces a stiff challenge from SCE for SDG&E;’s rapidly growing base of 60,000 customers. The fight heated up recently when Laguna Beach, which is served by SCE, annexed South Laguna Beach, which is served by SDG&E.;

Just two years ago, “there was a significant rate disparity” between high-cost SDG&E; and SCE, Page acknowledged. But “it won’t be long before our residential rates are at least equal and possibly less than our neighbor to the north.”

But some observers doubt that SDG&E; will lose its title as the state’s most expensive electric utility.

Narrowing the Gap

“Unless SDG&E; makes substantial changes in the way it does business, I don’t foresee it being a lower-cost producer,” Shames said.

“They’re hopeful that they can narrow the gap (with SCE), but there’s no way that (SCE) will get (the rate increase) it’s asking for,” he said.

Meanwhile, residential customers are lobbying the PUC for lower rates at the very time SDG&E; is interested in lowering rates for another group: the increasingly angry industrial and commercial customers who, for the past decade, have absorbed even heftier rate increases than their residential counterparts.

Last year, SDG&E;’s industrial and commercial customers for the first time banded together to fight a proposed rate hike.

“We beat SDG&E; really bad,” said Gary Estes, an executive with San Marcos-based Hunter Industries who organized the effort. “Now SDG&E; knows if they go and get real outrageous, our community of energy users will get together and go beat them again.”