SDG&E Proposes Rate Increase
JOANNE FARYON (Host): San Diego Gas and Electric wants customers to pay a total of 29 million dollars more in utility rates because of higher insurance costs. But a ratepayer's advocacy group and a county supervisor says the increase isn't fair. They're asking the Public Utilities Commission to deny the request. KPBS Reporter Amita Sharma has been covering the story and she joins me now. Amita, why does SDG&E want this increase?
AMITA SHARMA (KPBS News): Well, SDG&E says its insurance rates shot up dramatically in 2009 for a couple of different reasons. One, the contraction of the insurance market because of the global economic downturn. Two, in recent years wild fires in California have been far more frequent and they’ve been more devastating, more intense. Three, so far SDG&E has paid out more than $900 million to settle civil lawsuits filed against it because of the 2007 wildfires. State investigators found that SDG&E lines caused three of those fires, and the company expects to shell out several hundred million dollars more to settle pending lawsuits. So the company says, look, you take all these factors, you mix them together, this is why our insurance rated went up.
FARYON: So you say “shot up,” by how much? How much have they gone up?
SHARMA: Forty-seven million dollars. You said they’re going to customers to cover $29 million. They expect the difference to come from other pots of money.
FARYON: So who is objecting to this increase?
SHARMA: Well lawyers representing customers are challenging this increase, but as is the division of ratepayers within the public utilities commission. Some of these folks are arguing that SDG&E could have done a better job of negotiating lower insurance rates for itself. Others are saying, look, SDG&E lines caused three of these fires. State investigators came in and found that the company violated certain safety rules and bore some responsibility for these fires. Therefore SDG&E, its parent company Sempra Energy – i.e. its shareholders – should eat the cost of these increased insurance rates.
FARYON: Now, you spoke with County Supervisor Dianne Jacob about this. What did she say?
SHARMA: Well she takes the latter view. She pointed to what she called were record profits by Sempra Energy in recent years. And she said that the cost for these increased insurance rates should come from profits, not from customers. Here’s more of what she had to say.
DIANNE JACOB (Supervisor, 2nd District, County of S.D.): They could easily, easily afford to absorb these increased costs. Plus these increased insurance costs are not the fault of ratepayers. They're the fault of SDG&E. It was in the after action report of the 2007 fires that SDG&E was negligent in not maintaining their infrastructure. In fact the Witch Fire was caused because of SDG&E lines. And the two other fires were caused because of SDG&E's negligence. It's their negligence that has caused the insurance rates to go up. So because of their negligence, they should pay. It is so, so wrong for them to even consider let alone go to the PUC and ask for a rate increase. That is the ultimate slap in the face to San Diegans.
FARYON: Why can't a utility just pass on their own increases to the customers? Isn’t that the way business works?
SHARMA: Well it can, but SDG&E has to meet a list of seven criterions in order for that to happen. One of those criteria is that San Diego Gas and Electric has to show that its insurance rates went up because of an event exogenous to the company, or external to the company. Ratepayers say the company cannot prove that. The company says it can. There are some other factors, one of them is it just has to show – I mean, some of them sort of sound similar – but one of them is that they have to show that it’s outside management’s control. And again, ratepayers object to that. The company is expected to make strong arguments for itself.
FARYON: If in the end they get approval and they raise the extra $29 million, what does it mean for the ratepayer at home in terms of their own bill?
SHARMA: It doesn’t mean that much. I mean, I think that the rate hike is somewhat negligible. It’s about seventy cents more per ratepayer.
FARYON: And when does this decision get made?
SHARMA: In early April.
FARYON: So you are going to continue reporting on this, so what can we look forward to seeing in terms of this story?
SHARMA: Well I'm doing a longer version feature for radio next week on this very issue. What ratepayers say, what the company says.
FARYON: Great, we look forward to hearing it. Thanks Amita Sharma.
SHARMA: Thank you.