By the end of last week with rising temperatures, peak demandand political heat, San Diego Gas and Electric Co. and theCalifornia Power Exchange (Cal-PX) worked out a proposal for theutility to purchase fixed price electricity through forward marketsalready in place at the Cal-PX over a longer term five- tonine-month period into next spring. SDG&E has asked stateregulators 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 andprotection against electricity price spikes which are inevitablewhen temperatures rise because of California’s clearly constrainedpower generation and transmission infrastructure.

“We hope the California Public Utilities Commission will allowus to implement the program as soon as possible because ourcustomers need help today,” said Ed Guiles, SDG&E president,noting that the proposal is a market-based approach to easing pricevolatility for customers.

This concluded a flurry of activity last week among regulators,legislators and consumers, and inevitably there is now a statelegislative hearing being called to examine whether the state’songoing electric industry restructuring should be halted, revisedor otherwise altered to shield retail customers from the dailyvolatility of electricity prices.

At its meeting last Thursday, the CPUC postponed until its Aug.3 meeting addressing the growing concerns of consumers and consumergroups over rate shock in the greater San Diego area. Competingproposals for rate relief have been made by consumer groups andSDG&E, and one CPUC member issued a draft order last weeksupporting the San Diego utility’s approach, rejecting the consumergroups’ call for a rate freeze. San Francisco-based TURN (TheUtility Reform Network), a long-time utility consumer watchdoggroup, blasted the draft decision in a letter to the CPUC onWednesday, saying it would “assign the burden of the market’sfailure entirely and exclusively to consumers.”

Citing legal requirements for public notice and “fair, equitabletreatment,” CPUC Commissioner Henry Duque, sponsor of the draftdecision, said it was impossible for the regulators to act thisweek.

At the same time the regulators were meeting last week, anotherpart of the state government, the nonprofit independent electrictransmission grid operator, Cal-ISO, issued a Stage One electricalemergency urging consumers to voluntarily cutback on electrical usethrough Thursday evening due (again) to a combination of hotweather and “lack of available generation” in Southern California.Cal-ISO described the problem as a combination of heat throughoutthe Southwest and infrastructure limitations within California’sgrid system.

“The major reason reserves (of electricity) are low isunavailable generation within Southern California and limitedimports from the Southwest which is also experiencing extremehear,” the Cal-ISO Stage One announcement stated. “Electricity fromNorthern California and the Pacific Northwest is available buttransmission limitations will not allow the transport of all of theenergy needed to the south end of the state.”

Consumer groups and some former and existing elected officialsare blaming the situation on the state’s 1996 electric industryrestructuring law, under which there are still almost two years oftransition before all California consumers of the three majorinvestor-owned utilities are subjected to the price volatility thatSan Diegans have experienced. A rollback of the deregulation orre-imposing a rate freeze in San Diego are being debated.

CPUC Commissioner Carl Wood who held a press conference lastweek on electric issues in San Diego said there is a “sense ofurgency and desperation” among San Diego consumers right now,facing bills “that are nearly twice what they encountered only ayear ago” (see related story this issue).

Ironically, most of the proposals for longer term curbing ofprice volatility are coming at a time when San Diego electriccustomers are set to receive a $500 million rate give-back windfallin August and September. Almost $400 million comes from electricrestructuring overcharges that will provide an average of $260 toeach residential customer, and another $100 million SDG&E hasasked the CPUC on an emergency basis to give back to utilityratepayers from excess revenues the utility gained in the recentpeak-load period from its continuing ownership of part of aCalifornia-based nuclear plant (20%) and some purchased powercontracts.

Since rolling blackouts were called one day in the San FranciscoBay Area during an unusually long heat spell in the northern halfof the state in mid-June, political pressure has heightened,spawning almost continuous activity throughout the state. Theactions and pending actions include: