SDG&E proposes new hedging authority

Hard-hit San Diego Gas & Electric Co.(SDG&E) could bid for power into the spring of 2001 under a proposal pending before the California Public Utilities Commission. Under existing authority, SDG&E can bid for power 1-3 months at a time.


Hard-hit San Diego Gas & Electric Co.(SDG&E) could bid for power into the spring of 2001 under a proposal pending before the California Public Utilities Commission. Under existing authority, SDG&E can bid for power 1-3 months at a time.

In California's newly created competitive energy marketplace, SDG&E is a delivery-service provider and owns no electric generation. For those customers who have not chosen another energy service provider, SDG&E buys electricity from the California Power Exchange and passes that cost directly onto its customers, with no markup.

The price of power is now a function of supply and demand in the open market.

Over the last several weeks, SDG&E customers' electric bills nearly doubled, enraging customers, as commodity costs rose in response to a heat wave and higher demand. Varying parts of the state have been under power alerts since May as temperatures climbed over 100� F. and demand threatened to outstrip supply.

With generation short in the state, the California power company has come under harsh criticism for failing to use its existing authority to buy forward and hedge against price spikes this summer.

The new plan, developed in conjunction with the exchange, would effectively even out prices to below current levels for August and September, which are three or four times those for fall or winter months, according to the filing. Customers would have lower bills this summer but higher bills in the fall and winter.

"This is a market-based tool that could help reduce the volatility in electric prices for our residential and small-business customers during the high-demand summer months," said Edwin A. Guiles, SDG&E president.

SDG&E and the exchange are asking the California PUC to approve the proposal at its Aug. 3 meeting. The new bidding program for SDG&E will be routed through the existing block forward market.

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