PUC office accuses SDG&E of padding bills

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San Diego Union Tribune

San Diego Gas and Electric, which has steadfastly insisted it merely passes along high power prices without markup, is being accused of padding electricity bills in a scheme that has cost area ratepayers at least $170 million in recent months.

The Office of Ratepayer Advocates, a consumer advocacy office within the state Public Utilities Commission, said SDG&E has been ”fleecing” customers by charging them more than it pays for power that it receives under two long-term contracts.

”The commission must not allow SDG&E to continue gouging its ratepayers,” said the ratepayer office in a filing with the commission.

The 5-year-old contracts with Louisville Gas & Electric and Pacificorp locked electricity prices at below recent market rates.

”They are charging consumers market prices and keeping the profits for shareholders,” said Robert Kinosian, formerly a senior analyst for the ratepayer advocate who recently became an adviser to PUC Chairwoman Loretta Lynch.

California’s deregulated power market was designed to remove utilities from the business of profiting from sales in order to encourage new suppliers to enter the business. Utilities were to be limited to making money only from delivering power.

Under the deregulation law, SDG&E claims it has lost more than $681 million on the power purchases it has made for consumers since last September, when a rate deferral plan took effect that temporarily capped consumer payments.

SDG&E says its losses have occurred from paying more for power than it has been allowed to collect from customers.

The local utility was assured by the Legislature that it would recover the so-called undercollections as early as 2003. For their part, local consumers faced the prospect of paying the debt to SDG&E at that time. The utility has asked the PUC to approve an increase of 2.3 cents per kilowatt-hour to help cover that debt.

But Kinosian said the Office of Ratepayer Advocate calculates that more than 25 percent of the $681 million represents inappropriate charges to ratepayers because of SDG&E‘s profits on power sales.

The ratepayer office is asking for a refund of the profits.

SDG&E acknowledges these contracts have recently yielded profits and cost its customers money, but the utility says the sum is closer to $9 million. SDG&E says its profit-taking was reviewed and approved by the utilities commission.

Debra Reed, president of SDG&E, said the long-term contracts were signed in 1996 to hedge risks associated with deregulation.

”Shareholders have the risks of these contracts, and in recent months they have had the gains,” Reed said. ”Now that the market has changed, (the regulators) are flip-flopping a position affirmed numerous times through audits and agreements.”

Reed said SDG&E has ”absolutely not” been misleading consumers about the cost of power, despite the profits the company has made from the two long-term contracts since last July when the energy crisis flared.

Kinosian said state law in effect since last September specifically bars profit-taking by utilities from power sales. SDG&E, he said, has sought exemptions to the bar on profits but the prohibition stands.

”Just because they weren’t caught with their hands in the cookie jar doesn’t mean it was fine for them to steal the cookies,” Kinosian said.

A prominent consumer advocate said the allegations against SDG&E provide more evidence that the state’s major utilities have misrepresented their plight under deregulation. Southern California Edison, and Pacific Gas and Electric claim they are facing $13 billion in debts.

”Here we have the utilities again profiting from the crisis they claim to be victimized by,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Rosenfield and other consumer advocates maintain that Sempra Energy SDG&E‘s parent company and other utility parent companies have made billions from deregulation.

Michael Shames, executive director of the Utility Consumers’ Action Network, said the allegations continue a bad week for SDG&E.

Shames noted the recently disclosed $7 million compensation package to Sempra chairman Stephen Baum, as well as the San Diego company’s decision to hold its annual meeting in New York City’s Waldorf-Astoria Hotel.

”My recommendation to SDG&E is to take out one of their full-page ads to apologize for ripping us off and having been greedy in awarding bonuses to their top executives,” Shames said.

”Their bonuses have been dependent on the suffering of their customers.”

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