Advanced Meter Initiative or Advanced "Profit" Initiative?

SDG&E has a burning desire to make more money, but it is you, the ratepayer who will feel the burn from SDG&E’s tricky financing plan for advanced electric meters!

At the root of this plan is a calculation that will likely confuse you – as it has us.
Calculate the sum of 1.4 million electric meters and 900,000 natural gas meters. It isn’t a trick question as much as a tricky one. The answer: $1.2 billion dollars – according to SDG&E. SDG&E has proposed an “Advanced Meter Initiative” (AMI) that it claimed would cost only $450 million. But when we dug deeper, we found the cost to be far greater – close to $1 billion when SDG&E’s 34-year investment plan is fully scrutinized.

UCAN’s watchdogs spent four months sniffing through SDG&E’s maze of numbers and projections. What we found was that the sweet-smelling profits behind SDG&E’s rosy projections stink worse than the acrid fumes from a coal-fired powerplant.

The project doesn’t even pay for itself until 2031 – some 25 years from the program’s start, and 20 years after the initial deployment is completed. To give a little perspective, in 2031, the current CEO of Sempra Energy will be 83 years old and the current Group President of Sempra Energy Utilities will be 81. UCAN’s executive director will be 74 – although he insists to us that he’ll still look ten years younger.

The numbers got even worse after we picked out the various exaggerations and errors in SDG&E’s predictions. When we finally calculated the quality of the investment, we found that ratepayers would be in the red for some $298-328 million. In other words, SDG&E’s rates must be increased almost one-third of $1 billion to pay for this project.

While it is a terrible investment for SDG&E customers, it is a splendid deal for SDG&E. It, and Sempra reap a healthy share of a guaranteed 10.7% profit margin on almost $750 million of assets invested in the AMI project over the same 34-year life of the project. During that 34 year period, SDG&E will be raking in almost $1 billion in profit! That’s utility economics at its finest!

If the only problem with SDG&E’s proposal was its porkish profit margin, that would be bad enough. But it gets worse! SDG&E’s proposal also contains a deeply flawed incentive program designed to “encourage” consumers to reduce their energy consumption during peak summer afternoon periods when electricity costs are at their highest. Nice idea, but SDG&E’s proposal is so weak as to be laughable.

UCAN’s experts found that in exchange for turning off air conditioners, fans and even refrigerators, the typical SDG&E customer would receive an incentive of about 41 cents per month. Customers who live in the hotter inland valleys might get as much as $1.44 per month – for only the four summer months. So the burning question is whether SDG&E customers would make the effort and sacrifices necessary to save electricity during the summer for a $2 to $6 credit on their SDG&E bill per year. Our conclusion: This deal deserves to go down in flames.

Hearings on this dog of a proposal are scheduled for late September, and UCAN plans to fight it aggressively. See UCAN's complaint to the court here.