Power company thinks the PUC is dim


Experienced consumers know that whenever a company says it’s changing its services to serve them better, it’s wise to count the silverware and make sure the doors are locked. But San Diego Gas & Electric Co. has lately unveiled a groundbreaking advance in the art of shafting customers and disguising it as an act of love.

The utility wants to give some of its 1.2 million residential customers the option to prepay their electric bills. Think of it as similar to a prepaid cellphone for which you buy a basket of minutes in advance; in this case you would put money in an SDG&E account, and when your electric usage drains it down you would refill it with cash or by bank card to keep the lights on.

What could be more convenient than that? The utility says this option gives its lucky customers a fabulous degree of flexibility in paying for and managing their energy use. For example, they’ll get virtually real-time readings of their electrical consumption via smart meters, which will allow them to crank their usage down when money is tight.

It’s proper to ask what must lurk inside the mouth of this gift horse, and here it is: The program would allow SDG&E to circumvent consumer protections governing disconnections, including the conditions, timing and required notice to customers. Put simply, if any prepay customers run into financial trouble, it will be infinitely easier for SDG&E to cut them off without a word of warning.


That’s a great deal for the utility. But does it sound like a plan designed to serve the customer better? Not to the Utility Reform Network, a consumer advocacy group that contributed to a lengthy brief against the plan filed with the Public Utilities Commission. “Instead of looking for ways to keep the lights on, SDG&E is looking for ways to shut them off,” says Mindy Spatt, TURN’s communications director. “It’s very hard to see advantages for the customer here.” The San Diego-based Utility Consumers’ Action Network further contends that the proposal would violate the state’s utility law.

SDG&E has proposed the program to the PUC as part of its regular rate proceeding, so the commission eventually will have its say. The PUC has scheduled informational hearings this month in San Diego County. Neither of the state’s two other major private utilities, Southern California Edison and Pacific Gas & Electric Co., has yet filed a similar proposal. But it’s a good bet that if SDG&E puts this thing across, there won’t be a timepiece in the world sensitive enough to count the nanoseconds that pass before they ask to join the club.

The important context, glossed over by SDG&E in its presentation about the program to the PUC in February, is that electricity isn’t just any commodity, to be enjoyed or dispensed with at whim. It’s fundamental to people’s health and safety. That’s why the law typically imposes stringent limitations on how and when a customer can be shut off for nonpayment or late payment.

In California, the rules include a minimum 14-day advance notice of a pending disconnection, plus outreach by mail, phone or a visit from a utility representative no more than 48 hours before the scheduled shut-off. Those notifications must include information about how to dispute a bill or request a payment extension, and where to find government assistance. The utility must offer the customer a payment plan stretched out over three months at least, and it can’t shut the customer off in the meantime or while a bill is in dispute.

How many of those conditions would apply to a prepay customer? None. The utility could automatically shut off their lights four days after their accounts dropped to zero, or a day after they went $20 in the red. No notice, no calls; the customers would be treated as having “voluntarily” disconnected.

As a come-on, the utility says it won’t require pre-payers to post the customary new-customer cash deposit of up to two months of an average bill. It won’t require full repayment of unpaid balances before delivering service — instead it will apply a portion of the prepaid account to a customer’s debt over time. “This is for people barred from having electrical service,” SDG&E spokeswoman Stephanie Donovan explains, “such as those who can’t make a two-month deposit, or have an existing bad debt or have no credit history.”

Yet that pinpoints what’s worst about this plan: It’s aimed squarely at low-income customers, the very people most in need of protection by all the rules and regulations SDG&E proposes to chuck. Donovan denies the company is “targeting” low-income customers with the prepay option. But that’s just premium-grade hogwash. The incentives for signing up are specifically designed to appeal to that market segment, unless you think it’s the mansion owners in La Jolla who have trouble scraping together a deposit of two months of utility charges. Anyway, the utility has other options for helping those who can’t afford a deposit (which isn’t required by law); it can require a reduced deposit from low-income customers, for instance, or let them build it up over time.

More than 50 utilities around the country already offer prepayment options, and data from those programs leave no doubt about the target market. A study of Arizona’s M-Power prepayment program by the power industry’s Electric Power Research Institute found that the percentage of participants with yearly incomes below $30,000 rose from 64% in 1999 to 82% in 2010. That year, the median income of those in the program was $17,900, which is below the federal poverty line for a family of three.

SDG&E says it has designed its proposal to meet concerns raised by the National Consumer Law Center. It won’t accept certain at-risk customers, such as seniors, the disabled or those with serious medical problems. It will launch as a three-year pilot program for up to 1% of its residential customers, or up to about 12,000, and grow from there.

The utility says the program, which would start no earlier than Jan. 1, 2014, would be entirely voluntary. Sure; given the alternatives faced by the target customers, it’s about as voluntary as the choice offered by a knife-wielding mugger with the words “Your money or your life.”

SDG&E even has the temerity to argue that dispensing with the required field visit before disconnection will save customers money, since they will “not be subject to a field service fee.” The best interpretation of this claim is that SDG&E must think the PUC is a bunch of idiots. Let’s pray the commissioners don’t live down to its expectations.

The utility posits a host of other purported customer savings. Prepay customers won’t incur disconnection or reconnection charges, which is nice as far as it goes. On the other hand, the cost and inconvenience they face to pay their bill could soar. It costs $1.50 per transaction to pay SDG&E bills electronically or with an ATM, debit or credit card. If the pattern seen in Arizona holds true, customers could be making an average of seven payments per month; if so they’ll pay more than $10 a month for the privilege of keeping SDG&E fed.

For customers already living paycheck to paycheck, that’s customer service at the level of the payday loan industry. Accounts also can be topped off by cash or check at an authorized payment location, of which there are several dozen in the utility’s territory, but of course that means taking the time to visit one.

What about the question of whether prepayment deals really do allow customers to manage their power consumption better? It’s doubtful. Tracking the minutes used on a prepaid phone can be fairly straightforward, and cutting down usage is as easy as sticking the device in your pocket. It’s still available for emergencies.

Electrical usage is harder for the average person to gauge and not nearly that discretionary. Turning the lights off might get you marginal gains, but there aren’t many ways to put a full stop on your electricity consumption short of carting your refrigerator out to the curb and doing without clean laundry. Studies do show that prepay customers tend to use less power, but there’s evidence that it’s because they spend more time sitting in the dark to stretch their resources or more time disconnected. Either way, it’s a gas lamp-era solution to a 21st-century problem.

There is one good feature of SDG&E’s proposal — it presents the PUC with an easy decision. The answer to this scam should be “no.” Period.

Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at, read past columns at, check out and follow @latimeshiltzik on Twitter.