First came the announcement that San Diego Gas & Electric Co. customers would be seeing a refund of $390 million cash this summer , a spot of relief from the usual high electricity bills during the summer.
Then rates went up.
Under a plan approved last month by the California Public Utilities Commission, SDG & E; announced the average residential customer would receive about $260, while the average small-commercial customer would get about $870. The refund is scheduled to come in the August billing cycle, said Edwin A. Guiles, president of SDG & E.;
Except consumers have noticed that for their July bill, costs have increased.
Jodi Beebe, hot line coordinator for the Utility Consumer Action Network, noted that phones have been “ringing off the hook” with complaints about the high cost of electricity, which has risen sharply in the last few months.
On April 1, electricity was going for 3.206 cents a kilowatt-hour. By June 3, the price had risen to 3.936 cents, and to 6.186 cents by the end of the month, she said.
The price is expected to rise as high as 8.240 cents per kilowatt-hour over the summer. An average home uses about 500 kilowatt-hours of electricity a month, she said.
Ed Van Herik, a spokesman for SDG & E;, said the refund and the increased cost for electricity are two different issues. In 1998, the industry restructured as the utility market was opened to competition. As a result of restructuring, SDG & E; got out of the business of electricity generation, he said.
Electricity Commodity
SDG & E; has no control over the “electricity commodity” charge, or the actual cost for the electricity. That charge comprises about one-third of the bill, and will fluctuate with supply and demand in California’s competitive marketplace, Van Herik said.
Van Herik noted in today’s deregulated marketplace, customers have the option of staying with SDG & E;, or going to a different energy provider. In either case, SDG & E; is charged with delivering that electricity to the customer’s door, he said.
Whomever the customer contracts with, the utility provider must purchase the electricity from the California Power Exchange, which he described as a “stock market for electrons.” The prices of electricity change every hour, fluctuating as demand increases or decreases, Van Herik said.
That means lower bills for customers in San Diego’s mild winters, but higher prices in the summertime, when demand is highest, he said.
Patrick Dorinson, spokesman for the California Independent System Operator, said that the demand is especially tight this summer. As the operator of the state’s electricity grid, the Cal-ISO has already had to declare a “Stage Two” power emergency statewide on several days.
A Stage Two power emergency means that the state is down to less than 5 percent of its electricity reserves. Businesses that have volunteered to have their power cut in exchange for reduced utility bills will experience power outages while the Stage Two alert is in effect, Dorinson said.
A Stage Three alert, triggered when the state’s energy reserves go down to 1.5 percent, would be even more severe. That would mean involuntary but temporary “rolling blackouts” throughout several geographical areas. The blackouts would be only a few hours long, and pass from area to area on a rotating basis, Dorinson said.
Temporary Effect
State Sen. Steve Peace, D-El Cajon, one of the chief designers of the state’s restructuring efforts, said that the high price for electricity is only a temporary effect of the restructuring. And some steps have already been taken to alleviate the problem, he said.
One of the primary reasons the utility industry was restructured in the first place was that no power plants have been built in California in the past 30 years. As a result, many areas could not meet the demand, Peace said.
California ended up having to buy some of its electricity from outside the state. But as their own demands went up during the hot summer months, the market became tight and the price of electricity kept going up, he said.
Restructuring the industry was designed to allow entrepreneurs to come into California and sell the electricity they generate. This would make it feasible to build more power plants, helping the state meet its energy needs. It would also drive the cost for electricity down for both residential and business customers, as different providers scrambled to sell energy, Peace said.
So far the system is mostly working, Peace said. There are currently 20 power plants either on the drawing board or in various stages of approval. And when energy demand is low, electricity providers compete heavily with each other to sell, he said.
San Diegans are still feeling impacts from the old system. As temperatures climbed throughout most of the West, prices are rising here. So about 80 percent of the price jump consumers are experiencing would also have occurred in a regulated market as well, Peace said.
Electricity Use Up
Complicating matters is the fact electricity use is way up, as well. California is already at the level of energy use experts had predicted wouldn’t happen until the year 2015, Peace said.
Peace has taken some steps to prevent prices from going any higher. On June 22, he sent a letter to the Cal-ISO, asking it to reduce its rate cap from $750 per megawatt-hour of electricity back down to $250, where it had been before it was lifted last August, he said.
The Cal-ISO board agreed to change the cap when it met June 28, reducing it to $500. The board was scheduled to meet again last week to consider reducing it further, Dorinson said. The rate the ISO pays for electricity has already reached its cap several times this summer. That’s because as temperatures get hotter, the ISO needs more electricity and has to buy it from the generators at a premium, he said.
Peace noted the California Public Utilities Commission could take additional action over the summer to protect San Diego ratepayers. He declined to state what those actions might be.
Van Herik noted that there are several things people can do to limit their electricity bills. Customers can request the “level pay plan,” which means their bills will be roughly the same amount year round, based on average use. SDG & E; does not charge any extra for this service, he said.
Conserve Or Switch
Also, customers can reduce their usage. By conserving electricity, insulating homes and limiting energy use in the hot summer months, customers will save money, while also helping the state meet electricity demands during peak-consumption periods, Guiles said.
Customers can also shop around for other electricity providers. Clean Earth Energy, Inc. and Utility.com each offer a savings of roughly 20 percent on the cost of electricity over their competitors, Beebe noted.
In the meantime, customers can look forward to the promised refund, a result of the very same industry restructuring, Guiles said.
State regulators and legislators figured that the costs of changing over to a market-based system would take four years, ending March 31, 2002. However, SDG & E; was able to recover its costs more than two years ahead of schedule , by last July, Guiles said.
Because the costs were recovered more quickly than anticipated, SDG & E; is able to return $390 million to its customers, he said.
Guiles also said consumers will continue to see a savings on the portion of their bill that SDG & E; does control. The “base” electric rate covers the actual delivery service of bringing electricity into the home or business.
SDG & E; customers can expect to pay about 5 percent less for the delivery of electricity than they paid in 1997, he said.
