With the advent of ending its electricity rate freeze thissummer and moving to a more volatile pricing environment, San DiegoGas and Electric Co. was given a new incentive rate mechanism todetermine its future utility revenue needs by California regulatorslast week. Current rates will not change because of the new”performance-based ratemaking” (PBR) system, but the system will beused the next time the regulators review SDG&E’s performance.

The PBR mechanism provides potential rewards for SDG&E if itmeets or exceeds pre-determined goals for service, safety andreliability, according to the California Public UtilitiesCommission, which approved the new system. All of the other majorutilities in the state currently operate under some form of PBR orare proposing to do so.

The CPUC noted that in two months SDG&E will begin providing”service guarantees” to customers. “Credits,” ranging from freeinstallations or dollar rewards, will be given to customers who donot receive service within a four-hour bloc of time requested. ThePBR includes an indexing mechanism in which rates are adjustedannually based on inflation, productivity and other factors.SDG&E’s productivity factor will increase over time and varybetween gas and electric service. For gas, it will be 1.08% in theyear 2000 and 1.38% in 2002; for electricity, it will be 1.32% in2000 and 1.62% in 2002.

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