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Legislative package only delays pain, critics warn
By Craig D. Rose UNION-TRIBUNE STAFF WRITER September 1, 2000 Consumer and political leaders -- as well as Sempra Energy's chief executive -- said yesterday that the three electricity bills before Gov. Gray Davis do nothing to fix the fundamental cause of soaring bills. The cause, they say, is that power generators can continue to charge what most characterize as exorbitant prices for their electricity -- and consumers ultimately face the daunting task of paying them. No matter if all of the bills are signed, the leaders say California's power market will remain a seller's game that gouges overmatched consumers. And while San Diego Gas and Electric Co.'s hard-pressed customers may pay less now, they will pay back all or nearly all the savings -- plus interest -- beginning in 2003. "The governor's bill postpones the pain, but the pain is still there," said Maureen O'Connor, a former mayor of San Diego who has been active in seeking relief from the soaring bills afflicting SDG&E's 1.2 million electricity customers. The rate bill promoted by Davis and now awaiting his signature will have SDG&E's customers pay about 6.5 cents per kilowatt hour for electricity, or 70 percent more than what they paid as recently as May. Power companies, however, will continue to charge the customers as they have; presently, they're charging about 21 cents per kilowatt hour for SDG&E customers. The difference between 6.5 cents and whatever prices above that level emerge from the state's volatile power market will be recorded as IOUs for each customer in so-called balancing accounts. A second bill before the governor could provide up to $150 million in state money to help pay the balancing accounts, but the bulk of the IOUs will almost certainly be paid by SDG&E customers themselves when they become due in 2003 or 2004. A third bill before the governor would speed the construction of power plants. So while the rate bill lets customers pay less now than they owe, it obligates them to pay the balance with interest later. The situation creates the potential for a troublesome compounding effect: The higher electricity prices grow, the more is set aside in the balancing accounts -- and the greater the wallop to customer wallets when the accounts come due. Based upon prices now paid for future electric deliveries, Sempra Energy estimates customers will owe $664 million by 2003. IOUs of that magnitude, said SDG&E, will require that customers pay a surcharge of $40 monthly for a year on top of whatever they are already paying for their power bills. Keep in mind that typical residential bills at this time last year were about $55; they now stand at about $130. Consumer advocates say it's likely power prices will remain at levels that will lead to huge debts for customers under the Davis proposal. "The generators have shown themselves to be unconscionable in extorting profits," said Nettie Hoge, executive director of TURN, a San Francisco-based consumer group. Hoge said the bills that emerged "seemed the best a corrupt system could spit out." She added that TURN and other groups will shift their focus to pressuring the Federal Energy Regulatory Commission to restrain the electric generating companies and wholesale power markets. FERC, she said, must legally determine if charges from generating companies are reasonable. TURN and other groups will also press for re-regulation of the industry and will begin to explore municipally owned generating plants. Michael Shames of the Utility Consumers' Action Network supports the Davis bill, although he said it won't fix "the almost irreparably broken California energy system." "The problem is that California's electricity customers have been subjected to market prices in a dysfunctional energy market," Shames said. "It's a market controlled by the sellers of power and their cronies." But Shames said the Davis bill provides at least temporary protection against further rate shocks, and he expects taxpayers across the state will ultimately assist SDG&E's customers in paying their electricity bills. But Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, which has called for re-regulation of the industry, opposes the rate-cap legislation. "This keeps ratepayers and taxpayers on the hook for the costs," said Court, who added that the bill also locks in near doubling of power rates compared to last year. Stephen Baum, chief executive officer of Sempra, said the bill puts SDG&E -- a Sempra subsidiary -- in the position of financing the difference between what power companies charge for their power and what it collect from customers over the next three years. The balancing accounts, Baum said, could grow so large that they will challenge Sempra's ability to borrow to cover them. "The problem is with the wholesale markets," said Baum, who today becomes chairman as well as chief executive of Sempra. "This legislation does nothing but postpone a big bill." He added that Sempra believed the bill included ambiguities that could be illegal if not later clarified by the California Public Utilities Commission. "If (the PUC) can't or won't, then I think the legislation is legally flawed and can't stand," Baum said.
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