SDG&E Seeking 7% Rate Increase

By August 11, 2010Prices


San Diego Gas & Electric Co. has asked regulators for its largest increase in revenue in at least 30 years as part of an initial filing to raise rates for electric and gas. In a draft application submitted Friday, the utility said it needs $310 million additional dollars, a 7 percent increase from 2010 revenue, to cover the cost of insurance premiums and anticipated growth in the number of customers. The application includes a formula based on inflation and productivity for how rates would continue to rise in 2013, 2014 and 2015. Ratepayer advocacy groups said the requested increases were too high, particularly given the poor state of the economy. If the amount is approved by the California Public Utilities Commission, the electricity bill of the average residential customer would rise $3.34 a month, and a gas customer using 33 therms a month would pay an additional $3.21, the application said.

The filing, called a “notice of intent,” is the opening stage in an 18-month regulatory process in which the PUC will gather input from ratepayer advocates and the public to determine how much electricity and natural gas rates will change for the four-year period starting in 2012. Southern California Gas Co., a utility owned by SDG&E parent company Sempra Energy, also filed a notice of intent on Friday with a request for a $310 million increase in revenue, a 7.3 percent increase from 2010. On July 19, Southern California Edison asked for $903 million in additional revenue in 2012, a 7.9 percent increase compared with 2010 income, the company said. Lee Schavrien, the Sempra executive responsible for both the SDG&E and SoCal Gas filings, said the San Diego utility needs the additional money for operations and to cover insurance costs. “The fact that we’ve had substantial increases in liability and medical insurance premiums are reflected in this case,” Schavrien said. Of the requested increase, $62 million is allocated to liability insurance for wildfires. SEC filings by Sempra Energy have said costs from lawsuits related to the 2003 and 2007 wildfires may exceed the utility’s insurance coverage, and thus the company needed to purchase more coverage. Schavrien also said $16 million was needed for increased medical insurance premiums for employees and $21 million because of inflation.

Those reasons didn’t persuade members of consumer advocacy groups, who were briefed on the applications but have not completed their analyses of the official filings. The Utility Reform Network, an advocacy group in San Francisco, said the utilities could save money by reducing the pay and perks of top executives. “They should be looking for ways to lower rates, not to raise them,” said Mindy Spatt, a TURN spokeswoman. Michael Shames, executive director of the San Diego-based Utility Consumers’ Action Network, said his analysts will pore over the application to figure out why the utility hasn’t been able to lower expenses the way so many other businesses have. “I figured there would be greater sensitivity,” Shames said. “In the midst of the Great Recession, this is not the time to be asking for more Christmas gifts from Santa Claus.” Shames, Spatt and members of the public will have plenty of time to offer input. The notice of intent starts an 18-month process in which the utilities, advocacy groups and the PUC’s Division of Ratepayer Advocates will negotiate and litigate revenue and how that revenue is collected. There will also be meetings for public input in the utilities’ service areas.

November’s gubernatorial election also could complicate the decision. The governor appoints the five members of the commission, subject to confirmation by the state Senate. The terms of two commission members will expire in early 2011, and the temporary appointment of Commissioner Nancy Ryan could expire before the Senate confirms her. “The commission that’s going to be judging this next rate case decision may be entirely new,” Shames said. “The governor will have a rather strong impact on how the utilities are regulated.”

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