FYI-  


                                                                              
                            
 National Desk; Section A 
 Why San Diego, Where Rates First Rose, No Longer Conserves Energy
 By LAURA M. HOLSON
   
 01/30/2001 
 The New York Times 
 Page 20, Column 1 
 c. 2001 New York Times Company 

 SAN DIEGO, Jan. 25 -- It was here, in the heat of last summer, that 
consumers got their initial lesson in how painful California's
 experiment with deregulation could be.

 With electricity supplies short and the state's power grid on the brink of 
collapse, wholesale electricity costs nearly tripled, and the San
 Diego Gas and Electric Company, the first utility in the state freed by 
deregulation, passed those costs on to its customers. Homeowners
 took to the streets, and businesses threatened to leave the city, 
California's second largest.

 Logic would suggest that San Diego consumers, having felt the price shock 
that the rest of the state so far had been shielded from, would
 be wiser about using electricity than other Californians. But the price 
shock was too short.

 In September, California legislators called off the experiment, capping 
retail electrical rates at 6.5 cents a kilowatt hour, the average market
 price paid in the month before the summer crisis.

 Now, six months later, San Diegans are back to their old ways.

 Electricity use, which dropped 9 percent in August, is back up to precrisis 
levels, according to San Diego Gas and Electric. Rather than
 investing in insulation or energy-efficient air-conditioners, consumers here 
seem to be hovering between denial and defiance.

 ''I feel I do all that I can to conserve,'' said Vicki Barber, an escrow 
coordinator for a real estate broker in San Diego. ''But I'm not going
 to spend all this money upgrading my house when it doesn't matter anyway.''

 As a test laboratory of consumer behavior when the cost of a necessity 
skyrockets, San Diego seems confused by how politicians reacted
 when consumers here revolted last summer, demanding relief.

 In September, when California legislators restored the lower rates, 
residential and small-business rate payers received credits on their utility
 bills -- even though the credits are really a postponed debt that is 
expected to come due as soon as 2002. And it is true that the utility's
 largest customers are already paying market rates.

 Still, Jeannie Thompson's reaction was typical. In August, Ms. Thompson, the 
branch manager of a Coldwell Banker real estate office in
 the Pacific Beach district, made it her business to turn off office lights 
and computers every night. ''When the news first came out, you
 wanted to do your part,'' she said.

 Then, in October, the office got its credit, and ''we started to go back to 
the way things were before.''

 Economists look at San Diegans' behavior and draw this lesson: Consumers 
must suffer a lot before they willingly give up comfort and
 conveniences they have grown used to.

 ''Summer should have been a wake-up call,'' said Peter Navarro, associate 
professor of economics and public policy at the University of
 California at Irvine. ''You can't blame San Diego consumers for not doing 
anything, because legislators stepped in and lowered prices. If
 the discomfort isn't of a lengthy duration, the adjustments to behavior that 
need to take place won't.''

 Indeed, in a recent paper, a group of energy experts and economists, 
including two Nobel Prize winners, made the same point, saying that
 if consumers knew the true cost of electricity, they would conserve more.

 Even Gov. Gray Davis seems to be backing away from his promise that rates 
would not rise.

 But San Diego consumers, once again insulated from rate increases, have 
shrugged off the crisis, in part because they have taken to heart
 the governor's oft-repeated claim that the problems are the fault of 
out-of-state power generators that need to be reined in.

 ''Ask these people if they feel safe at night,'' Pete Phelps said wryly of 
those generators. Mr. Phelps, an airline pilot, was, with his wife, Pat,
 loading a 50-gallon water heater into the back of his pickup truck at a Home 
Depot near the San Diego Sports Arena.

 Mrs. Phelps added, ''You don't know what is legitimate, who to believe.''

 So the Phelpses have done little in recent months to conserve, except 
turning off lights, as their monthly electricity bill has climbed to $130,
 from about $85, in the past two years. Their new water heater was billed as 
''energy efficient,'' and while it should save them $150 a year,
 they did not buy it with conservation in mind. ''I spill that in beer 
money,'' Mr. Phelps said.

 High prices alone cannot change consumer behavior, Mr. Navarro, the 
economist, said. If consumers, for instance, believe that turning off
 lights benefits someone other than themselves, they will feel no incentive 
to conserve. That, he said, is the situation in the Pacific Northwest,
 where many residents believe that any power they save will simply be 
diverted to hot tubs in the San Francisco suburbs.

 But in San Diego, people have gotten a particularly mixed message. To begin 
with, high rates did not last long enough to make an impact.
 Rather, the lingering impression was that legislators would step in to 
protect consumers at any cost.

 The math, said Severin Borenstein, director of the University of California 
Energy Institute, was simple.

 ''If you go from 6 cents to 22 cents to 6 cents, then the response will be 
to weather the storm,'' Mr. Borenstein said, referring to the price
 of a kilowatt hour. ''But if it stays at 22 cents, then it makes sense for 
people to go out and invest in ways to save energy.''

 Mr. Borenstein drew a parallel to the gasoline shortages of the 1970's. At 
first, he said, motorists demonized Middle East oil producers, as
 lines of cars snaked around gasoline stations, waiting for rationed 
supplies. Only after high prices persisted did consumers begin to change
 their habits, buying more fuel-efficient cars, he said.

 Still, some San Diegans insist that they are pitching in.

 ''I have not put the heat on,'' said Ms. Thompson, the real estate agent. 
''I close my doors and put on a sweater.''

 But she has not had an energy audit of her home, a service provided by San 
Diego Gas and Electric, or bought energy-saving appliances.

 During last summer's price spike, surveys by San Diego Gas and Electric 
found that 91 percent of its 1.2 million users did not think the
 utility was being wholly honest with them about the crisis, said Stephen L. 
Baum, chairman of Sempra Energy, the utility's parent company.
 And there is bound to be more anger, now that the utility has requested a 
surcharge of about 16 percent in March, to pay off $450 million it
 owes its power suppliers.

 Higher rates will also make life harder for people who are just getting by. 
At a recent outdoor farmer's market in El Cajon, a working-class
 town 15 miles east of San Diego, Heidi Van Horn, a massage therapist, and 
her fiance, Bernie Herloss, a handyman, were supplementing
 their $1,200 monthly income by selling grilled bratwurst and hamburgers to 
hungry shoppers.

 For the two-bedroom apartment they share, the couple have $200 in past-due 
energy bills. Those bills hover at about $100 a month, up
 from $55 two years ago. ''We aren't one of these high-rollers who make $9 an 
hour,'' Ms. Van Horn said. ''We either pay the electricity or
 have the phone shut off.''

 Even so, she said, they do what they can to conserve, turning down the 
thermostat or turning off the occasional light. But their apartment
 building is poorly insulated. Cold wind seeps in through closed windows, and 
the heating vents are near the ceiling, where the warmth is
 wasted. Their only energy-efficient light bulb is the one that came in the 
mail from San Diego Gas and Electric.

 And the two birds and the iguana they keep, Ms. Van Horn said, would die if 
she turned off any of the three heat lamps that run
 continuously in the apartment.

 She would never consider getting rid of the pets. Ms. Van Horn said. ''They 
are family.''



 Photo: Jeannie Thompson, who manages a Coldwell Banker office in San Diego, 
said energy-conservation efforts had fallen by the
 wayside. (Robert Burroughs for The New York Times) 

                                                          

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