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Performance-Based Rates Approved for SDG&E

Performance-Based Rates Approved for SDG&E

With the advent of ending its electricity rate freeze this summer and moving to a more volatile pricing environment, San Diego Gas and Electric Co. was given a new incentive rate mechanism to determine its future utility revenue needs by California regulators last week. Current rates will not change because of the new "performance-based ratemaking" (PBR) system, but the system will be used the next time the regulators review SDG&E's performance.

The PBR mechanism provides potential rewards for SDG&E if it meets or exceeds pre-determined goals for service, safety and reliability, according to the California Public Utilities Commission, which approved the new system. All of the other major utilities in the state currently operate under some form of PBR or are proposing to do so.

The CPUC noted that in two months SDG&E will begin providing "service guarantees" to customers. "Credits," ranging from free installations or dollar rewards, will be given to customers who do not receive service within a four-hour bloc of time requested. The PBR includes an indexing mechanism in which rates are adjusted annually based on inflation, productivity and other factors. SDG&E's productivity factor will increase over time and vary between gas and electric service. For gas, it will be 1.08% in the year 2000 and 1.38% in 2002; for electricity, it will be 1.32% in 2000 and 1.62% in 2002.

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