San Diego Power Ratepayers Get a Breather
No one knew it at the time, but being the first region in the state to feel the pain of energy deregulation has proved to be an advantage, if only temporarily.
Last summer, as the area’s utility became the first in California to adapt to energy deregulation, electricity bills skyrocketed, setting off events that threaten the economy and lifestyle of the entire state.
But as the rest of the state wrestles with blackouts and the threat of bankruptcy for its investor-owned utilities, San Diego County is an eerie isle of seeming normality.
The state’s two other major private utilities, Southern California Edison and Pacific Gas & Electric, have seen their bond ratings reduced to junk status and their stock prices tumble. Only a federal fiat has guaranteed that the two cash-strapped utilities will continue to be able to buy large quantities of power.
But San Diego Gas & Electric’s bond rating is excellent, its stock price is respectable, and the company, which serves 1.2 million customers in San Diego County and southern Orange County, is able to buy power.
Residents in the utility’s service area still grouse freely but are no longer demonstrating in the streets and packing public meetings--even though utility bills here are higher than ever.
“It’s kind of like when you slam your finger in the car door and it hurts like blazes right off,” said Samuel Harris, an El Cajon accountant, explaining the San Diego mood on the utility controversy. “Later it doesn’t hurt as much, so you stop yelling. That’s kind of where we’re at now.”
The reason for the turnabout lies in the rescue bill for SDG&E; customers passed by the Legislature in September. The bill rolled back and capped electric rates for all but the largest commercial and government customers and also provided a way for SDG&E; to recoup those costs later.
Thus while SDG&E--like; Edison and PG&E--is; being forced to buy electricity from power-plant owners at costs far above what it can charge customers, SDG&E; has something the other two lack: what Wall Street analysts call a “recovery plan.”
The local rate cap lasts only until Dec. 31, 2003, after which SDG&E--unlike; the other big private utilities--can bill its customers for those deferred charges. Also, SDG&E; can, at any time, seek permission from the Public Utilities Commission to slap a fixed surcharge on bills.
That time may be soon.
Company officials say a number of moves are being considered to reduce the $450 million “under-collection.” One of those moves, to be announced later this week, could be seeking PUC permission for a surcharge.
By comparison, PG&E; and Edison are billions in arrears to power-plant owners and have no immediate way to pass those costs to customers.
Last summer, when the Legislature appeared slow to react to the escalating utility bills, it fueled a view that is common here: that the Legislature, dominated by Los Angeles and San Francisco, is unconcerned about San Diego.
“When we were taking the brunt of it [last summer], we felt absolutely ignored by Sacramento and the Legislature,” said Scott Barnett, executive director of the San Diego County Taxpayers Assn. “But lucky for San Diego, they finally realized up there that it’s not just a San Diego problem.”
SDG&E; customers became the first in the state to pay the full cost of energy in an unregulated market because SDG&E;, the hometown utility of deregulation champion state Sen. Steve Peace (D-El Cajon), sold its generating plants faster than other utilities. That entitled it, under the 1996 deregulation law, to start passing costs directly to consumers.
The result, contrary to predictions, was that bills doubled and tripled last summer, sending San Diegans to Sacramento for relief. In reaction, the Legislature passed a rate relief bill sponsored by two San Diego legislators.
Six months later, as the problems have moved north with a vengeance, Edison and PG&E; are pleading with Gov. Gray Davis and other state leaders for what SDG&E; already has: assurance from the Legislature or the PUC that it can begin charging its customers the full cost of electricity.
“The critical question,” said SDG&E; spokesman Doug Kline, “is whether the state will do enough to [close] this chasm between what the utilities have to pay and what they can charge.”
The deregulation disaster continues to be big news here, but the sense of impending calamity may have eased, for the time being. In the summer, street-corner protests were common and the San Diego City Council was confronted by hundreds of angry ratepayers at meetings.
Even as SDG&E; consumers are being hit with the increasing price of natural gas--which is not capped by the legislative action--the public demonstrations of outrage have largely abated.
“The sense of crisis is still pretty prevalent but at least we’ve got some time,” said George Loveland, San Diego’s senior deputy city manager.
Another factor that has helped cool local tempers is that SDG&E;, like Edison, has not yet been targeted for the kind of blackouts that have hit Central and Northern California when the electric grid has been overloaded.
With no blackouts yet to rekindle their anger, utility protesters at public meetings have dwindled to a few regulars. But kilowatt-watchers say this is not a sign that San Diegans are not anguished by their fate.
“I see the community as taking a collective breather,” said Michael Shames, executive director of the Utility Consumers Action Network. “We had the wind knocked out of us last summer. This isn’t apathy, it’s just a breather.”
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Times researcher Nona Yates contributed to this story.
