Federal Hearings Leave Open What Action to Be Taken
San Diego Gas & Electric Co. customers now have a temporary reprieve from high electric rates. But whether the crisis has been averted or merely delayed depends on what the federal government does next.
Members of the Federal Energy Regulatory Commission (FERC) held hearings in San Diego on Sept. 12. The commissioners took testimony on the cause of high electricity rates , with possible action due in November.
One of the speakers was Stephen Baum, chairman, president and CEO of Sempra Energy, SDG & E;’s parent company. He agreed the price for electricity has been skyrocketing.
“This has been an agonizing time for all of us,” he said. “Small businesses may have to fold because they cannot survive skyrocketing electricity prices. Homeowners across the county are struggling with electric bills that have doubled and tripled.
“If there ever was a case for you to use your remedial powers, including refunds of excessive charges, this is it,” he said.
Sempra spokesman Art Larson saidthe utility was looking for rate caps at the wholesale level. Current legislation imposes a cap only at the retail level , effectively forcing SDG & E; to pay more for the electricity it purchases than the 6 & #733; cents per kilowatt the utility can recoup from its customers, he said.
The wholesale cap would capture these costs upstream, saving SDG & E; customers from the massive debt they’ll incur once the retail rate cap expires Jan. 1, 2003.
‘Balancing Account’
The debt, in the form of a “balancing account,” is the difference between what customers are paying for electricity and the actual cost, Larson said.
Larson figures if no action is taken, the total debt could mushroom to anywhere between $600 million and $800 million , which would amount to a huge balloon payment for utility customers in 2003.
Larson would not speculate on what FERC might do. He also declined to state what Sempra would do, saying the utility would wait and see what the FERC does.
Michael Shames, executive director of the advocacy group Utility Consumers’ Action Network, noted that of the four commissioners who came to San Diego, only one felt the rates here did not meet the standard for being “just and reasonable.”
But that doesn’t mean the other three commissioners failed to see some kind of problem with San Diego’s rates. The commissioners wouldn’t have come out here in the first place if they didn’t feel there were some kind of a problem, he said.
Type Of Action In Question
Like Larson, Shames is waiting to see what FERC will do next. But he expects some form of relief from the federal agency.
“It’s very clear in my mind that unless something drastic happens between now and November, it’s likely they’re going to take some action. The question is what action is that going to be,” Shames said.
SDG & E;’s request was that the FERC impose bidding price caps on the state of California, while UCAN’s proposal called for price caps on the selling price, imposed throughout the West, he said.
This would make it more difficult to “game” the market, with suppliers selling to utilities out of state to get around the Power Exchange, Shames said.
Any action the FERC would take would lower the balancing account well below the $600 million to $800 million figure cited by Sempra, Shames said.
But even if the FERC takes no action, the debt may never rise that high. The California Public Utilities Commission has the authority to review the 6 & #733;-cent rate cap every six months, raising it or lowering it as needed.
If the balancing account gets too high, the rate cap can always be raised, so customers won’t face a large balloon payment in 2003, Shames said.
Also, in the next few years, any number of new developments can occur which may help alleviate the situation that got San Diego into the energy crisis in the first place. New power plants will be built to make more electricity available, while UCAN pushes for reforms at the Power Exchange and elsewhere, he said.
Congressional Hearing
Other changes include a possible decrease in the price of natural gas, and increased investment in alternative power, Shames said.
The FERC hearing was not the only action San Diego saw on its high electric rates. Two members of a subcommittee of the House Commerce Committee came out to San Diego Sept. 11 to hold a hearing on the cause of the energy problems locally.
Members of San Diego’s congressional delegation were also in attendance.
The committee members took the FERC commissioners to task at the meeting to impress upon them the need to take immediate action on San Diego’s situation.
Shames called the Sept. 11 meeting constructive, but added that he didn’t expect to see much action from House members.
Congress has been slow to act on energy issues, and with the legislative session drawing to a close, nothing will happen until the new Congress arrives in Washington, he said.
