PUC Caps Electric Bills of Some San Diego Users

Under pressure from San Diego politicians warning of an “economic earthquake” triggered by high electricity costs, the California Public Utilities Commission voted Monday to temporarily cut electricity bills in San Diego--but not deeply enough to win much praise.

They capped the costs for the 70% of San Diego consumers who use the least electricity.

“They did nothing to help me today,” said San Diego restaurant owner Susan Baumann, who had traveled to San Francisco for the hearing, after the PUC’s 3-2 vote. Under the plan, Baumann would get a reduced rate on the first 1,500 kilowatt-hours of electricity consumed in a restaurant that uses 20 times that amount each month.

Baumann’s electricity bill at the Bali Hai restaurant jumped from $5,700 in June to $10,204 in July, as San Diego Gas & Electric passed on the soaring price of wholesale electricity. SDG&E;’s 1.2 million customers, including some in southern Orange County, are the first in the state to bear the market cost of electricity since California set deregulation in motion in the mid-1990s.

San Diego politicians weren’t happy either. They favored a plan that would have imposed a ceiling of 6.5 cents per kilowatt-hour--about half the wholesale electricity price recently--for residential and small business customers of SDG&E; until 2003. Two of Democratic Gov. Gray Davis’ appointees to the PUC, Carl Wood and Loretta Lynch, voted for that plan but were outnumbered by three holdover appointees of former Gov. Pete Wilson, a Republican.

Assemblywoman Susan Davis (D-San Diego) and state Sen. Dede Alpert (D-Coronado) said they will look now to the Legislature to save the area from what they warn is a severe economic recession as businesses shut down and lay off employees to avoid electricity costs. They have written a bill, already passed by the state Senate, that would roll back and freeze San Diego electricity rates. The Assembly could take up the bill as soon as today.

So far, deregulation has delivered not the cheaper electricity it promised but a more than doubling of the average electricity bill in San Diego. Utility customers elsewhere in the state are protected by a rate freeze at least until early 2002, and the same institutions that engineered deregulation--the PUC and the Legislature--now find themselves scrambling to halt soaring rates before they spread to millions of customers of Southern California Edison and Pacific Gas & Electric Co.

On Aug. 3 the PUC rejected a consumer group’s petition to freeze rates in San Diego, in part because commissioners doubted their legal authority to do so. But as prices continued to rise, Gov. Davis called on the PUC to find a way to cut bills.

The plan approved Monday guarantees a monthly electricity bill of no more than $68 for a homeowner who uses 500 kilowatt-hours of electricity or less, as about 70% of SDG&E;’s residential customers do. Likewise, businesses would pay no more than $220 if they kept electricity consumption to 1,500 kilowatt-hours a month, said Commissioner Henry Duque, who wrote the plan. Any electricity consumed beyond those thresholds would cost the full market price.

For comparison’s sake, a McDonald’s restaurant in San Diego typically uses 1,450 kilowatt-hours of electricity a month, according to the PUC.

Davis said that although he supported the other proposal, the Monday vote was a step forward.

The PUC decision is retroactive to June 1, so those consumers who stayed under the thresholds earlier this summer will get credit on future electricity bills. The reduced rates step up slightly after Jan. 1 so that a homeowner bill of $68 would rise to $75. The plan remains in effect through all of next year.

Duque said his plan would encourage conservation without financially jeopardizing SDG&E.; Steve Baum, chief executive officer of SDG&E; parent company Sempra, estimated that the utility will have to borrow about $100 million, at 6% interest, to cover the difference between what it pays for electricity and what it can collect from ratepayers under the new PUC decision.

“This is a large relief and an immediate relief for a large sector of our customers,” Baum said. The utility is not necessarily guaranteed permission to someday recoup its losses from ratepayers; the PUC put that decision off pending an investigation of whether SDG&E; has made the best effort to hold down wholesale electricity costs this summer.

But Baum said he is confident that the investigation will find that SDG&E; acted as prudently as possible within PUC-imposed constraints.

“There’s a disconnect in people’s understanding between what we could do . . . and what they say we should have done,” Baum said.

San Diego County Supervisor Dianne Jacob disagreed. “We got little or no relief today, so we’ll take the battle to Sacramento,” she said. “I am extremely, extremely disappointed. It is obvious that it’s all fallen on deaf ears.”

Alpert said it will be difficult to get the minimum eight Republican votes that she figures the rollback bill, AB 2290, needs to give it the necessary two-thirds vote in the Assembly before the Legislature adjourns Aug. 31.

Scott Baugh of Huntington Beach, leader of the Assembly’s minority Republicans, criticized the bill Friday as a “mirage” that does nothing to fix California’s fundamental shortage of electricity generation.

Baugh called on Davis to order a special session of the Legislature in September to hash out long-term solutions to the shortage of electricity and corresponding high prices, which many experts blame on a 10-year hiatus in major power plant construction in California.

Alpert said her bill does not preclude a special session. “[It] does not solve the electricity problem in California and we don’t pretend it does,” she said.

Commissioner Wood, a skeptic on deregulation who represented utility worker unions during negotiations over the legislation that launched competition in 1996, said the Legislature’s involvement is a sign of the PUC’s failure.

“I’m very disappointed,” he said of the Monday vote. “I don’t believe the commission majority really feels the urgency of the situation.”

Before the vote, Wood described a friend, retired and living in La Mesa in San Diego County, who suffers from a heart condition yet must worry about using his air conditioning to stay cool.

“What we’re doing today is a serious matter,” said Wood. “It’s literally a matter of life and death.”