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Great Debate: CA Power Firms Vs. Consumers

September 4, 2000
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Great Debate: CA Power Firms Vs. Consumers

To borrow a little from Shakespeare, the Summer of 2000 in San Diego has been the season of consumers' extreme discontent. Consumers burn their bills in protest, others just are burning. State officials, led by Gov. Gray Davis, claim profit-hungry non-utility power plant owners have taken advantage of severe supply shortages to gouge consumers. But what's the real story?

To that end, federal and state investigations met laate last month to figure out how to ease the pain, so the speak. Are the bad guys really the generators, wholesale power marketers and transmission grid operators? Have they just been wrongly accused?

State officials, lead by Gov. Davis, say the generators are manipulators who are reaping excessive profits at the expense of San Diego Gas & Electric Co.'s 1.2 million electric customers. There is no doubt SDG&E and its suppliers have profited this summer. But has the profit been excessive?

Public records of the California Independent System Operator (Cal-ISO) and Power Exchange (Cal-PX) show that even in off-peak times, such as Sundays, generators have been charging prices five times higher than comparable Sundays a year ago.

On average, state records show considerably fewer megawatts (up to about 700 MW daily) are not bid into the Cal-PX day-of and day-ahead markets. The assumption by critics is that supplies were intentionally kept off the market to allow Cal-ISO to dip into higher-priced emergency real-time supplies.

However, generators counter that supplies are tied up in long-term bilateral or hedging deals. And merchant generators argue that significantly higher natural gas costs, higher air emission credit costs, increased operating and maintenance costs for plants operating full time, and hedging and bilateral contracts have distorted the picture.

As for consumrs before summer ends, SDG&E's smallest customers will have received more than $500 million in relief in the form of cash rebates or bill credits, not even counting the total value of the capped rates retroactive to June 1.

Most San Diego customers pay electric bills of $68 monthly for their first 500 kWh of use (70% on average each month), or 13.6 cents/kW, which is higher than the average cost/kilowatt in all but two states (New Hampshire and Hawaii) as of last year. It's also higher than the 11.4 cents/kW rate currently paid by customers of the two other major investor-owned utilities in California, which had rates frozen at 1996 levels.

By factoring in rebates and credits, the consumer will gain even more. An average $400 rebate for a typical residential customer will buy another six months worth of electricity at the 500-kwh/month volume and 13.6 cents/kW rate.

Consumers in other parts of the country who pay $200-plus electric bills every summer also question why San Diegans are complaining about bills "doubling to $150."

But it's not just the monthly bill. California consumer groups counter that most regions pay rates-per-kilowatt that are considerably cheaper, on average, than the typical California electric bill.

Nationally, only a handful of states average less electricity-per-customer than California, which last year used an annual average of 6,670 kWh. Virginia electric customers by comparison averaged 12,971 kWh; Tennessee power consumers averaged 15,253 kWh annually.

Richard Nemec, Los Angeles

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