Ann de Rouffignac
OGJ Online
Customers of San Diego Gas & Electric Co. will get a refund on November's bill to make up for paying more than 6.5�/kw-hr this past summer. The refund was authorized by state legislation signed into law in September. The refund will be from $70-$140 for residential customers and $250-$450 for small business customers.
The refunds were ordered by the state to compensate consumers who paid as much as 21�/kw-hr because of high wholesale prices for energy. Retail rates were determined by �market� forces for customers of SDG&E starting this summer.
When the shortage of supply of electricity and the increased demand from unusual weather patterns caused prices to spike, SDG&E had to buy most of its power to serve customers who had not switched to other suppliers. The utility was caught in a sellers' market. Also, the utility was buying and scheduling most of its power in the real time daily market which is generally more expensive than power purchased in longer term forward markets.
The money for the refund is being recorded as money owed to SDG&E but still uncollected. Right now, the company is keeping tabs on the revenue losses in a so-called �balancing account� which is the difference between what SDG&E pays for wholesale power and what it actually gets in revenue from its customers. With the new rate cap of 6.5�/kw-hr imposed by the state legislature, SDG&E�s balancing account is growing larger by the day. The utility, a unit of Sempra Energy, expects to be owed $350 million by customers by the end of the year, says Ed Van Herik, spokesman for SDG&E.
When the rate caps officially are lifted in 2002 or 2003, the utility will have racked up a deficit of about $600-$800 million depending on when the cap is removed.
Pacific Gas and Electric Co., another investor-owned utility in California, has a similar problem with a ballooning balancing account. PGE estimates that it has $3 billion in undercollected power costs for electricity.
Worried the California Public Utilities Commission (PUC) might not see fit to allow a timely reimbursement from customers, PGE filed suit in federal court Wednesday seeking to confirm legal rights before the courts to �protect its financial viability.�
The California Public Utility Commission is reviewing SDG&E�s and PGE�s purchases of wholesale power to determine if the money in the balancing account should be repaid by customers and over what term.
Extending regulated rates
Besides the refund and reimbursement of the balancing account, SDG&E filed other proposals with the commission that will extend rate caps to small businesses and residential customers who are currently being served by other power providers.
The proposal would impose the 6.5�/kw-hr price cap on residential and small business customers served by other companies, apparently reimposing regulated uniform rates.
SDG&E also filed a proposal with the PUC that would freeze the rate for its big business customers at 6.5�/kw-hr. The proposed contract would include a provision that the difference between what the customer pays and what SDG&E has to pay for wholesale power will be repaid to the utility at the end of 12 months.
Businesses that have energy contracts with third parties might also be covered by the proposed rate cap and reimbursement scheme. But right now it is only being made available to business customers who buy the commodity from SDG&E, says Van Herik.
�Other businesses with other third party contracts might be offered the deal, but it depends on their particular situation. It�s a case by case situation,� he says.
The proposals are under consideration by the PUC. Calls to the commission were not returned.
�There seems to be a move to create reregulation in the system,� says Steven Kelly, spokesman for California Independent Energy Producers, a trade association of merchant power companies. �It appears that efforts are being made to return to the cost-based guaranteed rate of return regulated system.�
