Rate-hike request called too high


SDG&E overstated its costs, panel contends 

An independent consumer group within the state utilities commission said yesterday that San Diego Gas & Electric's proposed $1.4 billion rate-hike request should be slashed by nearly 70 percent.

The Division of Ratepayer Advocates said SDG&E's rate-increase proposal, which would increase average utility bills by $7 to $9 a month, had exaggerated expected cost increases to the utility in a host of areas, including pensions, maintenance and equipment.

The ratepayer group took particular issue with the utility's plans for executive-bonus and stock-option programs.

"It is patently unfair for consumers to be asked to pay for excessive executive and management bonuses, compensation and stock-option programs," said Dana Appling, director of the division.

The ratepayer group is a unit of the California Public Utilities Commission charged with obtaining the lowest possible rates for consumers, consistent with safe and reliable service.

SDG&E has requested an increase in revenue - largely from rate increases - that would total $230 million annually for six years, or a total of about $1.4 billion.

However, the ratepayer unit said the utility couldn't justify an increase of more than $86 million annually over a five-year period, or a total of $430 million.

Aaron Johnson, deputy director of the ratepayer unit, said a shorter time frame was appropriate because an internal SDG&E memo has identified possibly significant cost-cutting measures that the utility could undertake within the next few years.

If those measures are successful, SDG&E would need less revenue from its customers.

"And normally we just do rate cases only every three years," Johnson said.

A spokesman for SDG&E said the utility was still studying the ratepayer unit's filing. But Lee Schavrien, SDG&E's senior vice president of regulatory affairs, said the findings contradicted those of the utility in the matter of compensation.

"We hired an independent national firm, Towers Perrin, and they looked at all the utilities and reported that overall we were at or below market rates," Schavrien said.

He also said that the internal cost-cutting memo - called the Utility of the Future study - was still under consideration by SDG&E.

"We have not implemented any of those findings, and that study only includes estimates of possible savings," Schavrien said.

He added that should proposals from the study be adopted and lead to savings, they would be shared with utility customers under an existing mechanism for sharing benefits of cost reductions. But Schavrien added that the net savings projected by the study would not come until after the period covered by the proposed six-year rate increase.

SDG&E said it needs additional revenue to pay for increases in the costs of complying with new federal laws and tighter environmental regulation, and to offset higher material costs, along with increases in employee costs such as medical benefits.

SDG&E plans to file a rebuttal to the ratepayer division by July 20.

Additionally, the Utility Consumers' Action Network, a local watchdog group, said it would file its own testimony today rebutting the need for any rate increases from SDG&E and instead calling for annual rate reductions of at least $20 million.

"And it's possible there could be much larger reductions," said Michael Shames, the group's executive director.

He said his group had identified "hundreds of accounts" in which SDG&E had inflated costs to justify the need for rate increases. And he said SDG&E's Utility of the Future memo might have suggestions for significant cost reductions in existing programs.

Hearings on SDG&E's proposed rate increase are scheduled for Aug. 6 in San Francisco, with a tentative decision on the proposal set for later this year or early in 2008. The rate increases proposed by SDG&E would begin next year.