Davis Seeks to Cut Electricity Bill Payments

In an attempt to quickly cut electricity bills by half for residents of San Diego and south Orange County, Gov. Gray Davis called on the California Public Utilities Commission to check soaring rates as soon as Aug. 21.

He called his proposal to stretch payment of bills over two years or longer a “rate stabilization,” not a rollback, but the effect would be to cut to $65 or so monthly bills that lately have averaged more than $100 for homeowners.

PUC President Loretta Lynch called the governor’s proposal smart. “This is exactly what’s needed. We can set a rate and adjust it as circumstances warrant,” said Lynch, one of two Davis appointees on the five-member board. They will take up the matter Aug. 21.

Michael Shames, executive director of the Utility Consumers’ Action Network in San Diego, said the governor’s action means there may be relief as soon as this month for San Diego Gas & Electric’s 1.2 million customers, including 100,000 in South Orange County. Homeowner and business customers of the utility have seen bills more than double this summer under the deregulation California launched in 1998.

Last week, the PUC rejected a Utility Consumers’ Action Network proposal to freeze rates in San Diego at July 1, 1999, levels. Lynch said at the time that she feared such action would run afoul of federal authority to set prices for wholesale electricity.

On Wednesday she said she believes that the governor’s proposal is workable and will not conflict with federal authority. The PUC can still lower rates if cooler weather eases the price of electricity, she said. And if a gap develops between the amount of money SDG&E; collects from its customers and what it must pay power producers for electricity, Lynch said, that should serve as an “incentive” for Sempra Energy-owned SDG&E; to work harder to find cheaper wholesale electricity.

Lynch criticized SDG&E; for not pursuing long-term contracts with power companies, which could shield the utility from price swings. The state’s other two major investor-owned utilities, Southern California Edison and Pacific Gas & Electric Co., have been much more aggressive, she said, in trying to hold down costs as electricity supplies have tightened and prices have soared this summer.

“The other utilities have come in consistently with creative proposals on how they can protect their customers,” Lynch said. “San Diego has not.”

Steve Baum, chief executive officer of Sempra, blamed SDG&E;’s troubles on an uncompetitive electricity market and said the Federal Energy Regulatory Commission needs to step in and set wholesale electricity prices.

“What we want FERC to do is to take a look at the Western market, which we believe is not workably competitive,” he said, “and to stop the gouging.”

SDG&E; shopped for stable power prices, Baum said, but could not find a power plant owner willing to sign a contract for less than five years. In today’s wild market, he said, such a long contract could lock the utility into paying too much should the price of electricity drop.

Baum said SDG&E; will cooperate with the PUC if it chooses to average customers’ bills over time. But he warned that residents will ultimately pay the interest if the utility is forced to borrow money to cover its costs.

An effort to roll back rates is also being launched in the Legislature. State Sen. Dede Alpert (D-Coronado) said she will introduce a bill today to cap electricity rates for SDG&E;’s customers at the levels of June 1, 1999, which would cut the typical bill in half.

Davis said he is confident that the PUC will carry out his suggestion. But Alpert said the governor’s plan is not retroactive, unlike her proposed legislation.

“No other consumers in the state are paying these high prices,” she said, “and it’s not fair.”

The millions of Californians served by Southern California Edison and PG&E; are shielded, at least until early 2002, by a rate freeze installed by the Legislature in its 1996 deregulation bill.

At a news conference Wednesday with grocery chain executives who have agreed to voluntarily conserve electricity in thousands of stores, the governor repeatedly blamed soaring wholesale electricity costs on “gouging” by out-of-state-based power companies.

He also reaffirmed his support for deregulation, which California launched to bring down electricity rates that were 30% or more higher than the national average.

“Eventually deregulation will work,” Davis said, “but there are growing pains.”

California began lifting state regulation, most drastically in the territory of SDG&E;, just as an electricity shortfall that was decades in the making hit hardest. The state’s thriving electronic gadget-based economy, plus the fact that no major new power plants have been built in California in 10 years, combined to shrink the state’s reserves repeatedly to critical levels on the hottest days of the last two months.

The private firms that bought power plants from the state’s three big utilities, which are required to sell off assets under deregulation, responded by raising the price of the electricity they offer for sale.

Davis attacked those price spikes, which are being passed directly on to San Diego consumers, as profiteering. He called on the Federal Energy Regulatory Commission to use its authority to declare California’s fledgling electricity market uncompetitive and thus open the way to consumer rebates.

“I believe in making a profit,” said the governor, “but charging seven, eight, nine times the price you pay for electricity is simply unconscionable.”

The private electricity companies that now own about 40% of the state’s generation capacity argue that they are part of California’s solution.

Out-of-kilter supply and demand are to blame for recent spikes in wholesale prices, said Tom Williams, spokesman for Charlotte, N.C.-based Duke Energy North America, which purchased several large PG&E; power plants in 1998.

“High prices at the wholesale level would exist today in California with or without deregulation,” he said. “They exist in Arizona, Nevada and other parts of the West.”

Duke intends to invest more than $1 billion in building, revamping and expanding power plants in California so it can deliver, by 2003, enough additional electricity to supply 1.4 million people, Williams said.