Business 

Rate cap in S.D. stopgap solution PUC action not seen as cure-all for surging 
electric bills 
VANESSA HUA 

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09/08/2000 
San Francisco Examiner 




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The price cap on San Diego's skyrocketing electricity rates mandated by state 
regulators Thursday is only a stopgap solution to underlying flaws in energy 
deregulation - problems that could plague PG&E customers in the future, 
consumer groups and industry watchers say. 
The California Public Utilities Commission voted 5-0 to cap electric rates at 
6.5 cents per kilowatt hour. They had soared as high as 21 cents per kilowatt 
hour this summer. 
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The commission also agreed to investigate whether San Diego Gas & Electric 
has been paying too much for the power it supplies to its customers. 
The actions, affirming legislation signed Wednesday by Gov. Davis, will 
reduce the average customer's electric bill to $68 a month from the current 
$120. 
SDG&E, which serves San Diego County and southern Orange County, was the 
first utility in the state to buy power on the open market - and the first to 
pass soaring wholesale power costs to consumers. 
Now, SDG&E will be able to charge customers far less than it pays for energy 
in high-use months. The company projects that the shortfall between what it 
has to pay for power and what it 
can charge rate payers could reach $839 million by 2004. Area rate payers may 
be asked to make up the difference, but just how that might be done has yet 
to be determined, pending the outcome of the PUC investigation. 
Likewise, PG&E - which said it has run about $2 billion in fuel expenses - 
wants to pass it on to consumers with an extra charge in future power bills. 
The San Francisco-based utility said that if SDG&E is allowed to pass its 
increased costs to consumers, then it plans to seek the same treatment from 
the PUC. 
But for now, because of the state's electric restructuring law, PG&E's rates 
will remain frozen until no later than March 2002. 
San Diego's energy woes stem in part from the high demand for electricity in 
a booming economy. The new energy suppliers and generators that were supposed 
to foster competition and lower prices just haven't materialized under 
deregulation, analysts said. 
Now, the price cap on retail prices - lower than wholesale prices on the 
power exchange - will further discourage new entrants. 
"It's a question of who would be crazy enough to come. The marketplace is too 
risky," said George Spencer, editor of Restructuring 
Today, a Washington, D.C.-based newsletter about deregulation. "Putting on a 
cap is a Band-Aid, not getting (to) the root of the problem." 
The rate cap defers payments to the utilities, creating further market 
uncertainty. 
"Any kind of rate cap means that in the future SDG&E has to get it back. It's 
like a big IOU. But I'm not quite sure how it's going to work out," said 
Jamey Gessaman, marketing program manager for Wattage Monitor which assists 
consumers in finding alternative electricity suppliers. 
Truckee-based TenderLand Power Company, which aims to generate and sell 
electricity from renewable resources, differentiates itself from SDG&E, 
making clear that its prices - 8 cents per kilowatt hour - is not a deferred 
payment plan. Their customers won't have to pay more, later, to make up for 
the shortfall, a spokeswoman said. 
Assemblywoman Susan Davis, D-San Diego, who authored the price cap 
legislation, said that measures were a necessary first action in solving 
electricity crisis over the long term. 
"The most important thing to do was to stop bleeding in San Diego," she said. 
Consumer advocates slammed 
electricity deregulation as a legislative failure now punishing consumers. 
"This is botched legislation. There have been so many screw-ups, in the way 
it was set up and administered," said Michael Shames, executive director of 
the Utility Consumers' Action Network in San Diego. 
Gov. Davis defended deregulation Thursday by calling it "an experiment that 
will work if everybody acts responsibly. 
"The electrical generators that have bought up the facilities that exist in 
California are now selling power back to us at between five and eight times 
what it used to cost us," he said. "Utilities, who are now out of the 
generation business are basically just in the distribution business, and 
consumers - everybody has to accept their role and accept their share of the 
short-term pain to make this program work." 
In addition to the rate cap, Davis also signed a bill Wednesday that would 
speed up the approval process for new power plants. That could ease the 
soaring demand for electricity. 
However, the governor put off action on a third bill - also passed with much 
fanfare by the Legislature - that could provide up to $150 million in state 
money to cov 
er any future San Diego power debts. 
While Gov. Davis said his decision on that measure could wait until later 
this month, the timing increased speculation that he may veto the plan. Some 
critics have argued that pledging public money to cover private power costs 
could set a precedent leading to a far greater drain on taxpayers in the 
future. 
The PUC was scheduled to hold a hearing in San Diego on Friday to explore the 
cause of high summer wholesale prices. 
Examiner news services contributed to this report.