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SDG&E Wants To Charge More For Using Less

Audio

Aired 11/6/09

San Diego Gas & Electric wants to charge residents who use the least amount of electricity more than those residents who use the most. SDG&E says the proposed rate change will allow the utility to bill customers for the real cost of electricity. How will the rate change affect your utility bills?

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Video unavailable. Read transcript below.

Above: SDG&E wants to increase rates for customers that use less energy and decrease the rates for those who use the most energy. San Diego Union-Tribune staff writer Onell Soto explains the plan.

GLORIA PENNER (Host): Here’s an interesting new proposal from your electricity supplier, San Diego Gas & Electric. The utility that services almost everyone in San Diego proposes to raise electricity rates but not for everyone. The increases are limited to people who use the least electricity. The rest of us get lower rates. So, Alan, does this mean you get penalized if you conserve energy and rewarded if you are an energy waster?

ALAN RAY (Senior Editor, KPBS News): Well, not according to San Diego Gas & Electric. And let’s remember that it’s not just SDG&E that’s involved in this. The three major utilities in California, that would be Southern California Edison, Pacific Gas & Electric and SDG&E, are all in this. And, actually SDG&E decided they didn’t want to get in with the others, so there would be a single hearing before the PUC. The answer, according to SDG&E and the other utilities is no. The answer, as far as they’re concerned, is that what they want to try to finally do after the meltdown of 2000-2001, they want to get back to the point at which the higher ratepayers are not subsidizing the lower ratepayers. So they’re trying to basically level the field a little bit.

PENNER: Explain this meltdown of 2000-2001, what are you talking about?

RAY: Well, when we went through the Gray Davis – actually, the problems that led to the impeachment of Gray Davis, the problems with the electric utilities, and when we were looking at brownouts, rolling brownouts and, you know, power grid locations that were sequenced, we put in – the state put in a series of tiers that would, according to state regulators and the legislature, that would force or encourage conservation of energy. The lower two tiers of the four, though, were frozen and what this – these bills would do would basically unfreeze those and allow them to rise a little bit.

PENNER: Okay, so this is to correct a situation that occurred in an emergency situation, is that what you’re saying?

RAY: That’s what they’re saying and…

PENNER: That’s what they’re saying.

RAY: …there’s a little bit of a time issue here on the other side because of these – the tier structure as we had it—and these rates are supposed to expire sometime around 2012 and there was some concern that if somebody didn’t do something now that the rate increases we might see then might be much bigger.

PENNER: Okay, so let me ask our listeners about that. You’ve heard Alan’s explanation why if you use less electricity you’ll be paying more, and if you use more electricity you’ll be paying less. Do you buy that explanation and is that a fair one? And how do you feel about what your utility is suggesting happen. It hasn’t happened yet but it is a proposal and it will go before the Public Utilities Commission. John, what’s your feeling on this?

JOHN WARREN (Editor and Publisher, San Diego Voice & Viewpoint): Well, I think there’s some interesting words being used when you’re talking about correcting something suggesting there was an error when, from a public policy standpoint, we want energy saving, we want the consumer to feel that they’re benefiting, that the PUC is there on their behalf. And now all of a sudden we have a situation we’re saying, oh, if we don’t do this, you guys who have been so diligent and saved money for everyone, you’re going to really hurt us in the long run so we’ve got to turn around and give a benefit to those who didn’t save and cost us more and we’re going to do it at your expense. I don’t care how you word it, it comes out absurd and I think that the public should reject it, the PUC should, and they should wait for the hearing in 2012 because there’s always going to be another hearing, another rate increase, so why not wait for then as opposed to putting this in the middle of a economic hardship that everyone is going through.

PENNER: I neglected to give our phone number before. It’s 1-888-895-5727, 895-KPBS. Tom, you heard what John had to say. Rates have been set to encourage conservation so that those who use more pay at high rates. Will this discourage conservation?

TOM YORK (Contributing Editor, San Diego Business Journal): Well, I think you have to separate out the green issues here from the economic issues and I think what the utilities want to do is move to a situation where everybody pays the same rate or relatively so. And then if you want to look at conservation, then maybe there’s other ways of doing that. But what we have now is kind of a mishmash and it just doesn’t – it doesn’t make a lot of sense from a business standpoint.

PENNER: Well, let’s hear what our caller has to say on this. Scott in Lakeside is with us. Scott, you’re on with the editors. Hello, Scott.

SCOTT (Caller, Lakeside): Hi, Gloria. I just wanted to make a comment related to the lead-in discussion of this topic. The lead-in – the lead-in discussion was correct. There was a state law passed in 2001 that capped the lower tiers of SDG&E’s residential rate classes. So, basically, when the cost increased to SDG&E, it could not allocate those costs to those lower tiers. It was required to allocate those costs to the upper tiers, meaning people who consumed more than the baseline allotted amount. Rates get kind of complicated but – So then what happened this year is that California adopted a law that was sponsored by Christine Kehoe, in fact, that lifted that prohibition. So now it doesn’t change the fact that the more you use, the more you pay, which is kind of in policy wonk terms called an inclining block rate structure. But what it does is it allows SDG&E to allocate the costs of those lower tiers, which will increase those costs a bit, and it will decrease the cost of the upper tiers, which have been artificially high for the last eight years.

PENNER: So you’re saying that it will equalize out what it is that people are paying, of course based on their usage.

SCOTT: That’s correct. Over the past eight years, the people in the higher tiers have been paying more than their fair share, effectively they’ve been subsidizing the lower tiers. The lower tiers have been getting an artificially low rate. So what SDG&E is trying to do and, in fact, what the state law is allowing the Public Utilities Commission to authorize is kind of a leveling of the playing field so that we can allocate costs more evenly among…

PENNER: Scott…

SCOTT: …the rate tiers.

PENNER: …you sound very informed. I must ask you whether you work for SDG&E.

SCOTT: I do not. I am the director of the Energy Policy Initiative Center at the University of San Diego School of Law.

PENNER: Okay, well, that helps. Thanks so much. We appreciate your comment. And every single one of the editors has his hand waving in the air. They want to respond to you. We’ll start with Alan.

RAY: Well, I would only say that, you know, TURN, The Utility Reform Network, among others, consumer groups in California is behind these changes. I mean, they are, at this point, supporting these changes. And my understanding of the reason they’re supporting them is that they’re concerned about what might happen if we get to those 2012 hearings, and the rate increases we might see then.

PENNER: All right, Tom, you – did you want to say something? If not, I have a question for you.

YORK: Well, I’ll just said that was what I had said, essentially commenting on the gentleman’s comments, which is that the utilities want to move towards a system where everybody pays the same rate.

PENNER: Why is the utility suddenly interested in spreading the cost of electricity more fairly?

YORK: Well, I think they just see the opportunity to jump on this now. I think there’s some political considerations and they’re moving in this direction as fast as possible.

PENNER: Well, since it’s the big power users that are going to benefit from – if this rate change takes effect, can we deduce that businesses are pushing for this change, John?

WARREN: Oh, I’m sure we are. And we can also deduce that Christine Kehoe carried the water for business to get the law in place to make it possible to come back to this regulatory reversal. So, I mean, it’s happening now because this is how long it’s taken, number one. It’s going to go, what, from thirteen cents to eighteen cents is the difference kilowatt hours is what they’re talking about so the poor people are going to pay twenty-four cents more. But what’s missing here? We’re in a recession with over 10% unemployment. State revenues are down a billion dollars. People who don’t pay their utility bills on time find themselves faced with a request or demand for security deposits. If they can’t pay their bills, how can they make security deposits? And then they end up with their service possibly being disconnected. So in the midst of this crisis, homeowners who’ve been there 30 years or so now face those kind of penalties because the law allows it and now we’re adding a rate increase just because it seems okay from – We can’t look at this just from a business standpoint.

PENNER: Well, you’re not the only one who is interested in this whole aspect of it, and we’re going to come back to many, many callers on the line to discuss this. This is the Editors Roundtable. I’m Gloria Penner.

PENNER: This is the Editors Roundtable. I’m Gloria Penner. And we are talking about SDG&E’s new proposal which, in effect, would lower rates for those who use the most energy and raise rates for those who use the least energy. And we’re talking about why that’s happening. Does it make sense? And what it might mean to the utility company and to you. At the table with me we have Tom York, San Diego Business Journal, John Warren, San Diego Voice & Viewpoint, and from KPBS News we have Alan Ray. And let’s start right away with Pershing in the College area. Pershing, you’re on with the editors. Hello, Pershing.

PERSHING (Caller, College Area): I have a comment to make. The first one is I am blind and I naturally use less electricity than most people would but – and this would end up being a tax on me as a disabled person. I agree wholeheartedly with what John Warren is saying and I am very curious, what are the political considerations that are moving SDG&E and Pacific Gas & Electric, etcetera, to push for this change now.

PENNER: Excellent question. Okay, John.

WARREN: One word: profits. Profits, and this is the timetable in accordance with the bill that Kehoe put in.

PENNER: But, John, SDG&E says it won’t collect more money if these changes go through. So why do it?

WARREN: Then it becomes an accounting issue. Let’s remember, SDG&E has just paid out, what is it, $14 million in terms of a settlement claim in another area because of recent fires. And they’re paying out over $700 million to the lawyers for insurance companies are seeking. They’re paying out money. It’s a shell game in terms of whether you’re counting it as a profit or business expense.

PENNER: Well, truthfully, Alan, this is a profit-making company. It has to respond to its shareholders.

RAY: Well, and I think you also have to remember one other thing about whatever happens here and that is, historically, the California Public Utilities Commission has been a creature of business and I don’t see that changing. Here, I don’t see the CPUC doing anything but agreeing to what San Diego Gas and PG&E and Southern California Edison want.

PENNER: So you expect it’s going to get through.

RAY: I’m pretty sure it will.

PENNER: All right, let’s hear from David in El Cajon and see what he has to say. David, you’re on with the editors.

DAVID (Caller, El Cajon): Well, good morning.

PENNER: Good morning. Please go ahead.

DAVID: I’m coming in from the type of person – I’m the type of person who tries to – You know, I have always supported the green energy – attributes of green energy and free energy. And after studying, in the seventies, the amount of total solar power that we get free in San Diego County and the southeast (sic) and finding that it was, in fact, around 200 watts per square foot raw solar power 24 hours a day, when I re – when I remodeled my house about four years ago, I invested solar power on my roof – in solar power and, of course, got it going and it was turned off for two months by San Diego Gas & Electric until they inspected it to see if it was safe to use, which of course it was. And so once they cost me another $600.00 on my own power bill to make me wait, they turn it on and approved it. And so then my bill went from $200 or $300 dollars a month down to $6 or $7 a month…

PENNER: Excuse me, David, we’re almost out of time so can you sort of make your point?

DAVID: This – I was reacting with – to the charges of power and energy in San Diego County and California that were permitted by deregulation which, to me, was the moral equivalent of the 9/11 of the power industry.

PENNER: I see. Thank…

DAVID: And…

PENNER: …you very…

DAVID: …they did this again. This is a bunch of malarkey. People who use more power should either change and go solar or pay more.

PENNER: Okay. Got your point. Thank you, David. Tom York.

YORK: Well, I think in the beginning years of, you know, green power, using all these alternative systems, including solar power, there’s a cost involved which would actually make the cost of delivering power a little bit more. So…

PENNER: Okay, very good. Well, on that note, we are going to move on because there is still much more to discuss and this one is a hot one because…

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