SDG&E seeking revenue increase

Proposal would add $138 million

The settlement, if approved, will allow SDG&E to collect an additional $138
million in basic rates from its residential and business customers this year,
compared with the $1.211 billion the state Public Utilities Commission
authorized for 2007.

The utility had been seeking a revenue increase of $224 million annually over
six years when it filed an initial application in December 2006. The settlement only
covers revenue for 2008; revenue for subsequent years is the subject of other,
preliminary settlement proposals between SDG&E and the Division of Ratepayer
Advocates, a unit of the PUC.

“The settlement represents a favorable outcome for ratepayers, as it will
result in a rate decrease for all SDG&E electric customer classes as
compared to 2007 rates, and only a minor rate increase for SDG&E gas
customers,” according to a motion filed by SDG&E and the DRA.

Yet the end result is likely to mean a higher utility bill. If the settlement
is adopted, the typical residential customer living in the inland area who uses
500 kilowatt-hours of electricity and 40 therms of natural gas would see their
monthly combined energy bill increase to $122.43 from $121.20, when compared
with January 2008 rates, the company said.

Actual costs to consumers will vary with usage, season and location.

One consumer watchdog group, San Diego's Utility Consumers' Action Network,
said it will challenge the agreement.

“We will be opposing the settlement as far too generous and will be filing
the basis for our opposition at the end of the month,” said Michael Shames,
UCAN's executive director. “The settlement doesn't result in a rate decrease in
2008, as SDG&E asserts in their motion.”

SDG&E Senior Vice President Lee Schavrien said California consumers paid
an average 13.73 cents per kilowatt-hour under the 2004 agreement with state
regulators. That average rate for electricity is expected to be about the same
in 2008, he said.

The average electricity rate stabilized in part because of the expected
increase in electricity demand this year, which spreads the cost over a greater
number of kilowatt-hours, Schavrien said.

But the actual rate customers will pay remains elusive, since additional
costs imposed by federal and state regulators have not been determined.
Schavrien said the final average rate consumers see on their bill could rise as
much as 10 percent.

A PUC administrative judge is expected to rule on the settlement in the next
few months. The PUC can choose to adopt the judge's recommendation to approve or
not approve the settlement, or can scratch it and come up with its own revenue
numbers.

The settlement agreement is part of a laborious process for establishing
utility rates. The settlement covers the first phase of determining what money
SDG&E can collect from ratepayers to cover its costs and provide a return on
investment for shareholders.

A second phase – to determine how costs will be allocated across its customer
groups, including residential users, and what rate each group will ultimately
pay – is pending.

In 2004, SDG&E went through similar hearings to establish rates. The
utility has been in negotiations since late 2006 to establish this year's base
rate, as well as potential rates for each year up to 2012.

In a separate, preliminary settlement covering 2009 through 2012, SDG&E
would receive the $138 million increase allotted in 2008 during each year, plus
a little more than $50 million in additional revenue in each year.

The cumulative increase in revenue over 2007 for the five-year period agreed
upon in both settlements is $896 million. In its initial 2006 application, the
utility had been seeking an additional $1.691 billion over six years.

The second settlement is still in discussion, SDG&E officials said.

Penni
Crabtree: (619) 293-1237; penni.crabtree [at] uniontrib [dot] com