UCAN Director on Future of SDG

Q: What does San Diego Gas & Electric need to do now to be well prepared, as a stand-alone utility, to meet the region’s future energy needs?

A: My primary concern with SDG&E; is that it has lost its competitive edge. It was seen as an aggressive innovator during the mid-’80s. (But) that image--within the company and outside the company--was abruptly halted in 1988, one month after Chairman Tom Page was in Fortune magazine declaring the benefits of this aggressive energy management program. Some of SDG&E;’s visionaries left.

That edge needs to be restored. If they do restore it, there are a tremendous number of opportunities for San Diego--with Mexico just around the corner and the glut in the Southwest not going away, the way they projected, and with the new technologies coming . . . . That’s why I was so turned off . . . by the idea of merging with Edison.

After looking into it, I realized we were blowing our chance of really doing something innovating and exciting--and I don’t think risky. I don’t see us going back to the days of the late ‘70s, early ‘80s where we were crunched by fuel increases. And the nice part is that I am not alone. The California Energy Commission and the PUC staff agree . . . .

Q: Tell us a little more about the energy glut not going away.

A: The glut, according to SDG&E;, was forecast to be drying up in the early-to-mid 1990s. And SDG&E; repeated that refrain in the last three years. It wasn’t true then, and it is not true now. Because the population growth rates projected for the Southwest have not been realized, and will not be close to being realized; and San Diego’s own growth rate will be a little slower than they had forecast, we expect the energy glut to be available through the late ‘90s and possibly into the next century . . . .

I don’t think that we will have rate increases in the near future. In fact, just the opposite, I see our rates going down over the next two to three years. But if we don’t get off our butt, we could be in for rough times down the road.

Q: Do you think SDG&E; can restore its competitive edge under Page?

A: I don’t know.

To be honest, I really think they can. Tom has proven his ability to do it. I mean, he did it five or six years ago . . . . But I have real concerns over what effect the last few years have had on Tom Page. Is this going to be a Dallas episode where (the merger) was just a dream? Where it’s gone and never mentioned again? Or will there be . . . some sort of lingering effect? I don’t know.

I can tell you that based upon the calls I get from SDG&E; employees, they have serious concerns. While this merger has been pending, they were really disaffected with the 19th floor (where management’s offices are located). It was considered the company, and then the 19th floor, which was divorced from the company. Now, granted, the people who call me are the ones that are going to be most disaffected . . ., but that’s pretty serious talk from three or four years ago, when people would defend (Page) to the death.

Q: What does the community have to do?

A: The main (thing) . . . is this concept of a blue ribbon panel or some kind of mechanism that the community puts in place, that essentially says to SDG&E;, listen, for the last three years we have been fed a line. Frankly, we are going to put your feet to the fire somewhat and assure that you are telling us the truth, or that at least you are giving us all of the information we need so we are no longer in the dark.

UCAN is fine, but UCAN is an advocacy organization. I think that our role is somewhat different, somewhat of a communication link between the utility and community leaders, or at least people who are knowledgeable in the field, so they can understand the information that SDG&E; . . . gives them. I think (the panel is) an important mechanism. I don’t know if it needs to be there in perpetuity, but for the time being I think it needs to be there.

Q: Who would you envision being on such a panel?

A: I envision it being similar to the panels that Mayor Pete Wilson impaneled, in 1980 and again in 1983 and ’84 . . . . He brought together members of the community, engineers, some academics, one or two judges--when the rates were very high--to understand what SDG&E;’s strategy was for dealing with this problem . . . .

Q: Since rates have gone down, customer acceptance of SDG&E; has skyrocketed. Are people going to care, as long as energy is cheap and reliable, and they think the service is good?

A: I’ll find out (if UCAN disappears) . . ., because UCAN is funded by people who care about the rates; there’s no institutional funding . . . . . But in this community, given the history, I just sense there is distrust (of SDG&E;). And, of course, we have media far more attuned to utilities issues than any other city in the state. So I think there is heightened sensitivity. That may compel San Diegans to care.

Historically, when people do polls, most people put utility rates 10th, 12th, 20th in terms of importance. But what’s fascinating to me, is that every time there is discussion of a utility tax . . ., city councils or county (supervisors) will not touch it. Someone will raise it and they’ll look (at) it, and it will go away. It’s because people are really sensitive about utilities when it hits their pocketbook . . . .

Q: Should SDG&E; sign contracts with Edison for some of its power?

A: Not unless Edison lowers its price. Right now Edison’s power is not cost effective. We can get it cheaper from just about any other utility in the Southwest . . . .

Q: How about buying plants?

A: To me, the big issue is whether (a) plant is going to be cost effective relative to other options . . . . The incentive is for utilities to buy, because of the rate-based methodology set by regulators . . . . Utilities are rewarded for adding on and not rewarded for contracts. My idea is, let’s not encourage utilities to build; let’s encourage them to manage . . . .

Q: The California Energy Commission has very optimistic projections for how much of future power needs can be met by conservation. How realistic are they? And how is SDG&E; situated to maximize conservation?

A: The CEC is optimistic; on the other hand, SDG&E; generally has been pessimistic. Recently what we have found, is that SDG&E;’s estimates are always, always too conservative.

Q: Does that harken back to the era when they were told to conserve, but they didn’t make any money off it?

A: That’s part of it. But the market (has also been) much more receptive to energy efficiencies . . ., than the utility had anticipated . . . . If (SDG&E;) expected (a) program to save X amount of kilowatt hours, it actually saved a whole lot more.

Q: By market, do you mean residential consumers?

A: Actually, SDG&E; focuses more on large, industrial and commercial customers. But as . . . an example on the residential side, UCAN had pushed real hard for . . . SDG&E; to start educating the public on fluorescent light bulbs, which are far more efficient than incandescent. SDG&E; said it didn’t think there would be that much demand. Well, we sent out a notice to UCAN members that (SDG&E;) now had a program in which you get one, free light bulb. SDG&E; got swamped. They ran out of their entire six-month allotment in two months. So I think there is a receptiveness by people to conserve.

Q: Does the regulatory system include incentives for SDG&E; to conserve?

A: Right now, yes, (although) it’s an area of controversy. The Natural Resources Defense Council pioneered a concept of ratepayers paying the utilities to conserve, to allow utilities to make profits on conservation programs.

The regulators’ argument is if we don’t conserve, and we have to build power plants, our rates will be X high. If we encourage the utilities, even pay them a profit to conserve . . ., there will be some savings relative to the alternatives. SDG&E; is not doing this out of the goodness of their hearts, or because it sees it as a public duty to encourage people to use their energy wisely. They’re doing it because they want to make money off it.

It’s something that the consumer groups, TURN and UCAN, have gone along with so far, but I’m not entirely sure that we will continue to go along as we have.

Q: What change of strategy do you see for consumer groups?

A: I think the consumer groups are going to say that we want the utilities to go out there and to encourage conservation and develop a market place for (it). And to open the door so that smaller companies can provide conservation equipment and services. We don’t want the utility to dominate that marketplace.

Q: What kinds of things would smaller companies provide?

A: The same things as the utilities, which essentially is consultation and advice in how to take advantage of energy-efficient technologies and selling those technologies . . . .

In the East, you have a lot of individual suppliers competing with utilities. They will go into a building for an industrial person and say, you pay us X amount and we will save you this amount off your bill by installing this, this and this technology. There’s no reason it couldn’t be done in San Diego. They were doing it here in the early ‘80s, then it died.

Q: You mentioned big industrial customers. Are they still going to flee the system?

A: I’m not opposed to cogeneration. I had that controversial position regarding the Navy. The Navy is not talking about going off-line now, it’s talking about going off line in 1997. By that time, SDG&E; says it needs to build a power plant. Why build a power plant? The Navy is willing to build a power plant for us. That argument went nowhere, but I still maintain it.

Q: Should a second-generation nuclear plant be built at Sun Desert near Blythe, which is the site most likely to be able to win approval?

A: If the utilities can prove it is cost effective, I don’t care if they build a plant based on cow manure. Nuclear has not been shown to be cost effective. Should they use that site to build something in the future? Yeah, if we need it. Although I’d rather it be some other kind of technology.

Q: What motivated you to get into this field, and the merger fight?

A: One historian has it that when I was very young, the utilities disconnected our family’s power unfairly, and we starved in the cold, New York winter. It’s not true, but it sounds so good.

The true story is I’ve been interested in energy since high school, and when I went to (the University of San Diego) law school, I hooked into the Center for Public Interest Law, with an interest in being involved in regulatory oversight of energy issues.

And when I was up there, SDG&E; kept getting all these rate increases; and the PUC was saying, we would like to deny you this rate increase again, but we don’t have another side to the story. There is no one out there to prove to us that this rate increase is unnecessary. So I sort of called their poker bluff. I said if such a group were created, would you give them access to (SDG&E;’s bill) inserts . . . . Their first reaction was to say no. Then SDG&E; really screwed up with an oil deal. That got the PUC angry, and they said, Shames go do it. That’s how UCAN got started.

Q: So, now the big question.

A: Am I going to run for City Council? The answer is, I may be crazy enough to take on Edison and win, but I don’t know if I’m crazy enough to take on an incumbent.

Q: Is that a no?

A: If I were a betting person, I would say no.

Q: Is it a goal down the road?

A: Not City Council, but I love public policy. So I expect down the road--it could be two years, it could be five--I’d like to get involved in something political, either working for a public policy person or running for elected office.

One of the things that got me intrigued in the political spectrum was working with the Coalition for Local Control. It was one of the greatest benefits to come out of, what I otherwise think was, a sorry affair. It was a really wonderful experience.

In the past, I had seen . . . the Chamber of Commerce’s interests (as) antithetical to ours. Having a Dave Moore (business manager the local 465 of the International Brotherhood of Electrical Workers), who was not a fan of mine, nor me of him; having a Barb Bamberger (Sierra Club conservation coordinator) and Lee Grissom (president of the Greater San Diego Chamber of Commerce) and Dan Pegg (president of the San Diego Economic Development Corp.) and David Nuffer (of Nuffer Smith Tucker public relations) . . . all together was a fascinating dynamic. One of the reasons we had that press conference . . . was to say we are going to stay together.

Q: The group kept a very low profile. How often did you meet?

A: We met fairly frequently. If not for the Coalition for Local Control, (Senate Bill) 52 may very well have been rejected by Gov. Deukmejian. And if not for 52, the merger might not have been rejected.

The coalition was very active while that legislation was being heard. Once the regulatory hearings started, we met only about once a month. Then they fired up again when letter-writing was necessary. But we intentionally kept it low profile, because (of the) diversity and different views. The really tough part was learning to trust each other. The way people do things in business is not the same way they are done in union halls.

I would love to see more of that happen in the few items where people are united or quasi-united. I know it’s not a new idea.

Q: What areas would it work best in?

A: The airport, water, the library issue. It has to be one where there is already consensus that something has to be done, and the question is how to go about doing it. I don’t think (it would be appropriate) with growth, where there’s not consensus--do we need to slow growth or not.