Lee Schavrien, Senior Vice President, San Diego Gas and Electric
Lee Friedman, Economist, Professor of Public Policy UC Berkeley
Related Story: SDG&E Rate Hike Goes Into Effect In September
ALLISON ST. JOHN: Mike Mueller thank you very much for updating us we will keep you updated on the progress of the Pirates 9 miles from Julian out on the Laguna mountain in East County. We are well into some kind many San Diego rely on air conditioning to stay cool if you are hefty electricity user you're likely to see your bills go up coming up about how we as consumers may be motivated to get more efficient with energy use the bills could go up by about 15% if you spend about $100 per month on your bills so a little earlier today I spoke with Lee Schavrien who is a vice president of SDG&E about the rate increases going into effect in September Lee thank you so much for coming in,
LEE SCHAVRIEN: You're welcome.
ALLISON ST. JOHN: Apparently all day long electricity users will be affected by the rate increase give us a cut off point will be affected or who won't.
LEE SCHAVRIEN: Essentially 75% of our customers will be slightly affected and then about 25% of our customers will have a material increase in their bills.
ALLISON ST. JOHN: And the letter that was sent out to the people who will be affected I believe anybody who will be affected will be sent a letter is that correct?
LEE SCHAVRIEN: That's correct.
ALLISON ST. JOHN: It mentions at the top that the closure of San Onofre is one of the issues a lot of people thought the closure of San Onofre their bills would go down rather than up why is that not the case?
LEE SCHAVRIEN: The letter was talking about the commission has got a proceeding not going today that will eventually that will adjust rates retroactively once it stopped finished with the proceeding but those are ongoing right now.
ALLISON ST. JOHN: The CPUC is as you say on the middle of this but according to a repair isn't supposed to play for a plant that's online and off-line for it eight months and it's been off-line for 18 months of people requesting why should they continue to pay for the plant in Cedar increase
LEE SCHAVRIEN: I would like to tell the listeners they made the rate subject to Senate of free subject to refit they will be tracked in an account and they will be adjusted based on how the commission determines they should be adjusted.
ALLISON ST. JOHN: Is it possible there may be an adjustment day on the line but that the repairs need to wait and see what the CPUC suggests
LEE SCHAVRIEN: That's correct
ALLISON ST. JOHN: We know we have San Diego attorney Mike Aguirre filed a motion saying the CPUC is hiding material evidence that would be used to justify a rebate. Does SDG&E basically charge its ratepayers the same as Southern California Edison or are you independent from them?
LEE SCHAVRIEN: We are independent from Southern California Edison but we charge our percentage chair is the approximately 25% since 25% of what Edison charges. Edison has an 80% ownership.
ALLISON ST. JOHN: But basically in terms of the policy of what the utility is charging its customers for San Onofre SDG&E pretty much follows the lead of Southern California Edison.
LEE SCHAVRIEN: That is a correct statement.
ALLISON ST. JOHN: For anyone who is thinking they should see a rate decrease they have to wait for the CPUC for indecision and meantime the rate starting in September are going to be increasing tell us how much by?
LEE SCHAVRIEN: For those rates that are not commodity related but just for the operations of the business, that's the pipes, the wires, that if a customer has a 500 kW per hour usage where they're built is about $100 they will see somewhere around a $15 increase. But if they use 1000 kWh and their bill is around 250, they could see as much of $75 a month increase.
ALLISON ST. JOHN: Is there any way that they could mitigate the increase?
LEE SCHAVRIEN: Absolutely. I urge all of your listeners to go to SDG&E.com and there are some ways that you can efficiently use your energy i.e. reducing the amount of kilowatt hours values.
ALLISON ST. JOHN: So now there is a report just out by a Florida-based not-for-profit that's called, is a utility called JEA that ranks utilities around the country and puts SDG&E as the third highest in terms of water charges its customer and Southern California Edison comes the top of the list. Can you explain why it is the San Diego answer being caused charged more than anyone else in the country?
LEE SCHAVRIEN: That's a very good question and you cannot just look at the rate. What it costs to serve customers in San Diego is roughly the same as the cost to serve customers in New York or anywhere else but the actual usage in San Diego is lower than anyone else in the nation because we have a wonderful climate so you are spreading the same house over fewer kilowatt hours of the rate will be higher but if you look at the same analysis done by the same organization our bills are some of the lowest in the nation.
ALLISON ST. JOHN: So it's a bit like water the irony is the less you use, the more you can charge.
LEE SCHAVRIEN: On a per rate basis, that is a correct statement.
ALLISON ST. JOHN: So now we are going to be speaking with someone who's saying that there way that rates are structured will be key to the way that California can reach its goals to reduce greenhouse gases. This is the big question how do you structure rates to encourage conservation to it courage during that
LEE SCHAVRIEN: Today's rates do not necessarily do that especially for the 75% of customers there's little incentive for them to save rates because the rates have not been impacted since 2000. There is an assembly bill before the Legislature right now, A.B. 327 that wants to change that so it charges customers for what it cost to serve them. Let me give you an example of why the rate structure in California today is broken. If the customer uses 1000 kWh per month, a family of four, they do everything they can to conserve energy, but in the first week of the month they use 250 kWh it cost them $37. But if in week two they use another 250, that now costs $47 because there is an incremental increase in the tears that the rates have. The last week cost $74 that does not give the right price signal to customers to conserve because they are picking up for the costs that aren't being paid for by the lower user customer.
ALLISON ST. JOHN: So is SDG&E motivated to change its rate structure?
LEE SCHAVRIEN: Absolutely SDG&E has been at the forefront of pushing and supporting assembly Bill 327 that will get rates etc. what does it cost to serve you the customer. You should pay no more and no less than what it cost to serve you.
ALLISON ST. JOHN: And does SDG&E have another request for another rate hike in the works in the pipe now before the CPUC?
LEE SCHAVRIEN: This a commodity one that's currently pending before cost of the nobles to meet the state energy mandates they are more expensive to ever nobles that's currently pending before the commissioner right now.
ALLISON ST. JOHN: So there are more increases in the pipeline.
LEE SCHAVRIEN: That's right
ALLISON ST. JOHN: I'd like to thank you so much for coming in
LEE SCHAVRIEN: You're welcome.
ALLISON ST. JOHN: That is Lee Schavrien, senior vice president for SDG&E. Next we will focus on the way that utility companies like SDG&E will power California that now will affect California's goal to changes in greenhouse gases by 2050. This is a big question. Next 10 is a privately funded organization focuses on educating the public on it critical issues affecting Californians and they recently put out a report on ideas to help California meet this goal of reducing greenhouse gases. Lee Friedman wrote the report which is called electricity pricing for efficient greenhouse gas reductions and Lee, thank you for joining us.
LEE FRIEDMAN: Thank you for having me on, Allison.
ALLISON ST. JOHN: Let's start with a very practical example of when we decide to do the laundry, can that actually help reduce carbon emissions?
LEE FRIEDMAN: Yes absolutely. Particularly if you are careful about the time that you did that the study that I wrote has four basic recommendations to it. And the motivation behind the study as to to with how are we going to reduce efficiently our greenhouse gases in the next years looking at baby as far as 2030 and the main legislation we have in place now is a be 32 which only goes into 2020 there is no guidance for what may happen beyond that. So this study is trying to fill the gap by looking at our pricing policies. One of the policies that you were just asking about that I'm referring to, the, what do you run your washing machine and your dishwasher concerns the time of use pricing. I agree with the last speaker that there is a disconnect right now between our current electricity rates and what the actual cost of service is and I think that this Disconnect is the contract that the cost of service varies enormously over the time of the day. It's much more expensive to run electricity in the midafternoon then it is later in the night and it also produces a lot more greenhouse gas emissions when you run the dishwasher or the laundry, if you run it at six o'clock instead or run it at nine o'clock you get a big reduction.
ALLISON ST. JOHN: Why is that?
LEE FRIEDMAN: It's because different generators to make electricity are running at those times and in the afternoon period of time, the peak period of time, we often have to use our least efficient most highly generating powers that everybody needs you have businesses running at the time have people getting back to their houses at that time and getting ready for dinner and those are the stress hours on the system whereas later you can do the same, get your dishes just as clean and get your laundry clean but with much less of a cost and much less greenhouse emissions so that's why we need to move to a system of time varying rates based on these costs.
ALLISON ST. JOHN: Time varying rates so that is what we do not have and what we may be moving towards I understand there's some state legislation moving in this direction?
LEE FRIEDMAN: The state has some legislation that is pending I think it was just mentioned
ALLISON ST. JOHN: AB 327?
LEE FRIEDMAN: Yeah, A.B. 327 that legislation I think is still being drafted so we are not sure exactly what it's going to end up saying but I think it will free the hand of the Public Utilities Commission to work with the utilities to try to provide the best rate structure going forward so I don't think, and I think that will give them the opportunity to move to these time varying rates.
ALLISON ST. JOHN: So do you think that the consumer would be motivated to change their habits? How important is it that they are motivated to change their habits if they knew that it would cost less to do their laundry later in the evening for example?
LEE FRIEDMAN: I think the motivation can be quite strong, especially if the rates are cost based as they should be. Right now, many people are paying more than $.30 a kilowatt hour in the middle of the night for their electricity when the actual cost of making that electricity and delivering it in the middle of the night is much closer to five cents per kilowatt hour. So not only would it be easy and simple for people to understand oh, I could save quite a bit of money by just delaying a little bit when I have my dishwasher run, but one of the more important things for greenhouse gases concerns the extent to which we will electrify our vehicle fleet. Make use of electric cars and plug-in hybrids, electric vehicles and so on.
ALLISON ST. JOHN: You write that currently--
LEE FRIEDMAN: Right now the same person thinking about buying a car right now and saying I have to charge about $.30 per kilowatt hour at night will have one reaction and will have a quite a different reaction if they can charge up at five or six cents per kilowatt hour that's extremely important to meeting the greenhouse goals and it would be very valuable to try to fix the price signal so that its cost based inexpensive at night and more expensive during the day.
ALLISON ST. JOHN: Is California ahead of the game and thinking about this change to the way we charge for electricity?
LEE FRIEDMAN: Oh yes, well, oh sorry I thought you were asking a different question, California is ahead of the game in terms of thinking about how to reduce its greenhouse gases. I think it is not ahead of the game yet in terms of how it prices its electricity. And I'm hoping that it will get ahead of the game in the coming years. There is a proceeding going on right now at the Public Utilities Commission in which they are rethinking how they charge residences for their electricity. And I'm optimistic that they will take advantage of that proceeding to improve the rates and encourage people to move on to these time varying rates.
ALLISON ST. JOHN: Good, Lee Friedman, thank you so much for joining us.
LEE FRIEDMAN: You're welcome thank you very much for having me, Allison