Special Forward-Market Purchases Proposed for SDG&E on Cal-PX
By the end of last week with rising temperatures, peak demand
and political heat, San Diego Gas and Electric Co. and the
California Power Exchange (Cal-PX) worked out a proposal for the
utility to purchase fixed price electricity through forward markets
already in place at the Cal-PX over a longer term five- to
nine-month period into next spring. SDG&E has asked state
regulators to okay the purchases at their Aug. 3 meeting.
The move is a direct outgrowth of the push by state officials,
consumer groups and SDG&E to provide some immediate relief and
protection against electricity price spikes which are inevitable
when temperatures rise because of California's clearly constrained
power generation and transmission infrastructure.
"We hope the California Public Utilities Commission will allow
us to implement the program as soon as possible because our
customers need help today," said Ed Guiles, SDG&E president,
noting that the proposal is a market-based approach to easing price
volatility for customers.
This concluded a flurry of activity last week among regulators,
legislators and consumers, and inevitably there is now a state
legislative hearing being called to examine whether the state's
ongoing electric industry restructuring should be halted, revised
or otherwise altered to shield retail customers from the daily
volatility of electricity prices.
At its meeting last Thursday, the CPUC postponed until its Aug.
3 meeting addressing the growing concerns of consumers and consumer
groups over rate shock in the greater San Diego area. Competing
proposals for rate relief have been made by consumer groups and
SDG&E, and one CPUC member issued a draft order last week
supporting the San Diego utility's approach, rejecting the consumer
groups' call for a rate freeze. San Francisco-based TURN (The
Utility Reform Network), a long-time utility consumer watchdog
group, blasted the draft decision in a letter to the CPUC on
Wednesday, saying it would "assign the burden of the market's
failure entirely and exclusively to consumers."
Citing legal requirements for public notice and "fair, equitable
treatment," CPUC Commissioner Henry Duque, sponsor of the draft
decision, said it was impossible for the regulators to act this
At the same time the regulators were meeting last week, another
part of the state government, the nonprofit independent electric
transmission grid operator, Cal-ISO, issued a Stage One electrical
emergency urging consumers to voluntarily cutback on electrical use
through Thursday evening due (again) to a combination of hot
weather and "lack of available generation" in Southern California.
Cal-ISO described the problem as a combination of heat throughout
the Southwest and infrastructure limitations within California's
"The major reason reserves (of electricity) are low is
unavailable generation within Southern California and limited
imports from the Southwest which is also experiencing extreme
hear," the Cal-ISO Stage One announcement stated. "Electricity from
Northern California and the Pacific Northwest is available but
transmission limitations will not allow the transport of all of the
energy needed to the south end of the state."
Consumer groups and some former and existing elected officials
are blaming the situation on the state's 1996 electric industry
restructuring law, under which there are still almost two years of
transition before all California consumers of the three major
investor-owned utilities are subjected to the price volatility that
San Diegans have experienced. A rollback of the deregulation or
re-imposing a rate freeze in San Diego are being debated.
CPUC Commissioner Carl Wood who held a press conference last
week on electric issues in San Diego said there is a "sense of
urgency and desperation" among San Diego consumers right now,
facing bills "that are nearly twice what they encountered only a
year ago" (see related story this issue).
Ironically, most of the proposals for longer term curbing of
price volatility are coming at a time when San Diego electric
customers are set to receive a $500 million rate give-back windfall
in August and September. Almost $400 million comes from electric
restructuring overcharges that will provide an average of $260 to
each residential customer, and another $100 million SDG&E has
asked the CPUC on an emergency basis to give back to utility
ratepayers from excess revenues the utility gained in the recent
peak-load period from its continuing ownership of part of a
California-based nuclear plant (20%) and some purchased power
Since rolling blackouts were called one day in the San Francisco
Bay Area during an unusually long heat spell in the northern half
of the state in mid-June, political pressure has heightened,
spawning almost continuous activity throughout the state. The
actions and pending actions include: