San Diego Business Journal

After dominating the news and political agenda for more than a year, the sting of California's energy crisis has diminished somewhat.

The state's two largest electric utilities , Pacific Gas & Electric and Southern California Edison , are on a path toward restored financial health, power supplies are currently adequate, and the costs of electricity and natural gas have fallen dramatically. There is good reason to be optimistic about these developments.

Whether we will be able to take the critical final steps in our recovery here in San Diego, however, is still up in the air. The California Public Utilities Commission is considering the final elements of a proposed settlement entered into between Gov. Gray Davis and San Diego Gas & Electric Co. This settlement, also known as a memorandum of understanding, would eliminate any future balloon payments by SDG & E; customers to repay hundreds of millions of dollars in debt for uncollected electricity costs accrued during the energy crisis.

This mountain of debt is the result of wild gyrations in the price of electricity under a flawed deregulation plan in the state , a story that most Californians know all too well. In San Diego, where energy prices first skyrocketed in the summer of 2000, customers saw rates double, then triple.

AB 265

In an attempt to limit the short-term economic damage, in the fall of 2000, the state Legislature capped the retail cost of electric power at 6.5 cents per kilowatt-hour for SDG & E; customers, passing AB 265. The new law provided that, in return for capping the retail cost, SDG & E; would be permitted to recoup its prudently incurred wholesale power costs , which, at the time, were nearly triple the 6.5-cent legislative cap , from customers at a later date.

The unpaid electricity costs have been collected in a regulatory balancing account that, at its peak, reached $750 million. While there was some thought that wholesale energy prices would drop after the summer of 2000, the prices kept climbing, reaching 25 cents per kilowatt at the end of last year.

Although the situation has since stabilized, the tab for most of those high energy costs remains unsettled. If San Diegans had to pay that bill now, during a time of general economic slowdown and increased security costs, the burden could strike a serious blow to our economy. But that hammer need not fall.

Business Support

Under the terms of the agreement, SDG & E; has agreed to contribute more than $319 million , almost half the amount of the debt, so that we all can put this matter behind us. Our customers will be spared any rate increases stemming from the debt, and we will all be able to move forward without the crushing burdens of the past unpaid electricity bills.

A broad range of local business and community leaders support our agreement with the state, including the San Diego Regional Chamber of Commerce, California Restaurant Association, United Way of San Diego County, the San Diego-Imperial Labor Council, the San Diego County Hispanic Chamber of Commerce and the Downtown San Diego Partnership.

With all this community support, why hasn't the CPUC already approved the settlement?

Although the agreement eliminates the balancing account without a base-rate increase, the agreement has some critics, who claim that there is a better way to pay off the debt. After filing documents with regulators on the agreement and testifying about it, the critics are attempting to derail the process by floating alternative proposals. If successful, these proposals will instigate litigation that could drag on for years and prolong uncertainty for our customers and company.

Here are the facts:

SDG & E; and the governor's team spent four months in intensive negotiations to resolve the debt and a host of other issues on the table. Together, we forged a compromise that puts many outstanding issues of the energy crisis behind us.

The essence of the agreement is very simple.

CPUC Actions

The agreement eliminates any potential future balloon payments by SDG & E; customers to repay the debt and does so with no increase in base electric rates. Those future payments could total an estimated $400 for the typical homeowner to between $1,400 and $12,000 for the typical small- and medium-sized business, respectively.

The CPUC already has acted favorably on several of the key implementing provisions of the agreement and has announced its intent to address the remaining items by the end of November. The CPUC's final approval would ensure our customers are not faced with future balloon payments.

The people of San Diego deserve relief from this mountain of uncollected debt, sooner rather than later. No real purpose is served by delaying CPUC approval of this innovative compromise, which will put at least some of the dark days of the energy crisis behind us, once and for all.

Guiles is chairman of SDG & E;, a subsidiary of Sempra Energy.