New law bypasses PUC rate review; Change in process alarms consumers

Published on

The San Diego Union-Tribune

SDG&E customers begin treading a path today to two rate increases likely to raise their bills 35 percent, or about $1.7 billion, during the next year.

As if that were not irritation enough, consumer advocates and others familiar with the process say it violates long-standing principles of public disclosure and oversight.

Public hearings today in San Diego and El Cajon and tomorrow in Escondido and San Clemente will focus on a proposed increase of about 19 percent sought by the California Department of Water Resources.

This is unrelated to a request by San Diego Gas & Electric for a rate increase of about 16 percent, which will be considered later this year.

The state water agency says it needs an increase to cover the cost of procuring power. The department began buying power earlier this year when utilities ran into financial trouble.

Until now, proposals for electricity rate increases have come before the California Public Utilities Commission, a state constitutional body charged with reviewing the proposals, taking public input, and setting rates at a level that is just and reasonable.

Not this time.

The same law that authorized the Department of Water Resources to buy power also empowered the department to judge the merits of its own rate increase proposals. The department has determined its request for what amounts to $915 million is reasonable.

The water department also has informed the utilities commission that it will not provide the contracts under which it is purchasing electricity. The state needs the increases to cover its costs under the contracts.

Gov. Gray Davis insists keeping these agreements secret is essential to protect the state’s position in bargaining for additional electricity supplies.

The state utilities commission, meanwhile, is left to determine only how to disperse the department rate increase among SDG&E customers, not how much of an increase is appropriate. The commission calculates that the Department of Water Resources’ increase will add an average of 2.8 cents to the existing rate of 14.4 cents per kilowatt-hour. That total includes a 6.5-cent charge for power purchases plus fees for distribution and other costs.

Consumer advocates and critics say this a perversion of the commission’s purpose. The PUC was created to protect utility customers.

SDG&E customers will be paying higher rates without any member of the public knowing the basis for the increase and without anyone allowed to see the costs that we are paying for or the terms of the deal,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights. “There is supposed to be an identifiable, calculable basis for any rate increase.”

Attorney Michael Aguirre, who is representing Lt. Gov. Cruz Bustamante in a lawsuit against power suppliers, said the process raises serious legal questions.

“The governor has denigrated the PUC‘s function to that of a rate launderer,” said Aguirre, a former federal prosecutor. “The legislature has passed a law that interferes with the constitutional function of the PUC.”

Carl Wood, a member of the PUC who will attend the sessions today, agreed that the process surrounding the department’s rate increase is unusual. But he said there is still opportunity for the public to comment on how to allocate the increase.

Wood noted that the commission sought to shield low- and middle-income customers from the brunt of similar increases recently imposed in areas served by Pacific Gas and Electric and Southern California Edison. He said the hikes in those areas are also “steeply tiered” to hit hardest those who use the most power.

But Wood, a former utility workers union official who opposed deregulation, conceded discomfort with the role that has fallen to the PUC.

“I would rather be in a more orderly, regulated world where the PUC had sufficient authority to ensure reasonable rates,” Wood said.

Jim Bell, a member of the Coalition for Affordable Power, a San Diego-based citizens group, also blasted the process.

“Every newspaper in the country is saying these rates are rip-offs and the energy companies are crooks,” Bell said. “Then to have a non-transparent process that shoves the rate hikes down our throats is outrageous.”

Later this year, the PUC will consider a separate rate increase proposal from SDG&E. The utility is seeking a surcharge of about 2.3 cents per kilowatt-hour — about $800 million — to cover losses it says it incurred purchasing power on behalf of its customers before the Department of Water Resources took over.

The two increases could exceed the amount spent for power by SDG&E customers last year, when the cost reached $1.6 billion as deregulation dissolved into crisis. SDG&E spent less than $500 million for power in 1999.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases