Consumer groups oppose SDG&E rate hike

By: ANN PERRY - Staff Writer,
North County Times  July 6, 2007

NORTH COUNTY ---- Two consumer organizations are challenging San Diego Gas & Electric Co.'s proposed 5.9 percent rate increase for 2008, calling it excessive.

One, the consumer division of the state Public Utilities Commission, recommended sharply reducing the proposed rate hike in a report filed Thursday. The other, the watchdog group Utility Consumers' Action Network, plans to urge the utility to cut its rates instead, in a report it expects to file today.

The utility has proposed an annual increase of $188 million starting Jan. 1. That would raise the typical customer's monthly bill for both natural gas and electricity by 5.9 percent, from $91.88 to $97.30, according to figures supplied by the utility.

Any rate increase must be approved by the Public Utilities Commission that regulates the industry. The commission is receiving comments now, and will begin hearings on the proposed increases Aug. 6 at its headquarters in San Francisco.

The Division of Ratepayer Advocates, an independent arm of the state Public Utilities Commission that represents consumers, issued a report Thursday criticizing SDG&E for inflating a variety of costs, from executive compensation to maintenance.

The division recommended an increase of only 2.2 percent, which would bring a typical monthly bill to $93.90, according to Aaron Johnson, deputy director of the division of ratepayer advocates.

After reviewing comparable compensation for utility executives, the division concluded that SDG&E was trying to charge customers for excessive pay, bonuses and stock options for executives ---- or 32 percent above the industry average. The division recommended the industry average.

An SDG&E spokesman, however, disputed the division's conclusion.

"That is an area that has been litigated (in) every single rate case," said Lee Schavrien, senior vice president of regulatory affairs for SDG&E, in an interview Thursday. "We're at or below market. It is, for lack of better word, a red herring."

The division claimed that in addition to requesting high executive compensation, the utility inflated a number of other costs to support its rate hike, Johnson said in an interview Thursday.

"There's not one thing I can point to," he said. "This is a rate increase that is analogous to a death by a million little cuts. The commission needs to step back and look at the big picture."

Schavrien acknowledged that the utility and the division came to different conclusions about the rate increase.

"This is a normal process," he said. Thousands of pieces of paper will be filed on the rate proposal before Aug. 6, he said. "The gap that exists between their numbers and our numbers will significantly close. We'll identify where we disagree."

The other consumer organization, San Diego-based Utility Consumers' Action Network, said that it concurs with the reductions proposed by the division of ratepayer advocates ---- and actually wants SDG&E to reduce its rates next year.

Michael Shames, UCAN executive director, accused the utility of "gaming" the rate-increase process.

"They spread little increases in thousands of accounts, knowing the auditors can't catch everything," he said.

"The bottom line is, now the utility has as much of a pro-utility set of regulators than they've had in years," Shames said. "SDG&E is lining up with its wish list, hoping they'll get some goodies, too."

The Division of Ratepayer Advocates is an independent department of the utilities commission created by the Legislature to represent the interest of all residential and business customers. The intent is to obtain the lowest possible rates while providing sale and reliable service, according to the commission.

It said that the utility has inflated costs in the following areas:

- employee benefits, medical expenses and pensions, by $50 million;

- distribution and maintenance of its electric operations, by $23 million;

- payments to its parent company, Sempra Energy, by $16 million;

- forecasts of working capital funds and capital expenditures by more than $100 million over five years;

- depreciation expenses, by $21 million;

- customer service operations and information expenses, by $10.6 million.

The division proposes that ratepayers not be liable for future rate increases, as proposed by the utility, when its earnings fall below authorized levels. In addition, the division says the term for the new rates should be for five years rather than six, as the company proposed.

The division also made rate recommendations for another Sempra division, Southern California Gas Co., which supplies natural gas to Riverside, Orange and Los Angeles counties. The gas company has proposed a rate increase, while the division has recommended a rate decrease.