The semi-independent consumer advocacy branch of the California Public Utilities CommissionThursday asked the energy regulators to deny San Diego Gas and Electric $98 million in revenues as a penalty for the utility’s alleged failure to purchase power supplies on a fixed-price, forward contracts basis between July 1, 1999 and Aug. 31, 2000. Most ofwhat the CPUC’s Office of Ratepayer Advocates (ORA) concludes were missed opportunities occurred last summer when wholesale power prices first skyrocketed in the West.

Under special rate relief state legislation applicable only to SDG&E, the CPUC is reviewing the utility’s power buying for the period to determine whether it was “prudent and acceptable,” and therefore can be recovered in the SDG&E retail electricity rates. ORA argues that $98 million was imprudent.

In contrast, the regulatory consumer unit said the state’s two other major investor-owned utilities, Pacific Gas and Electric and Southern California Edison, “aggressively hedged in the (now-defunct) California Power Exchange (PX) forward market, with Edison claiming to have saved its customers well in excess of $500 million.

“SDG&E had the same opportunity but failed to implement any risk management program or otherwise take advantage of the PX’s forward market,” the ORA stated in a written announcement on its findings in the CPUC proceeding.

The consumer advocates further noted that SDG&E parent company, San Diego-based Sempra Energy, owns another subsidiary, Sempra Trading, that was “very successful hedging in the same market.” ORA did not note that existing CPUC restrictions prevent the utility from having its nonutility affiliate provide direct services as part of rules that were designed to keep a firewall between regulated monopoly operations and the affiliated unregulated companies.

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