Taking its cue from the governor and state legislature, California regulators Thursday began implementing rate relief for San Diego electricity consumers, retroactive to June 1. It became effective immediately. An investigation of San Diego Gas and Electric Co.’s actions leading up to this summer’s price spikes was also approved as part of the action.

Acting unanimously, the five-member California Public Utilities Commission, still operating with a majority of appointees from the previous governor, followed through on Gov. Gray Davis’ promise Wednesday to provide “immediate” relief to San Diego consumers, most of whom had already received rate rebates and credits that have taken some of the sting out of the summer’s electricity rate shock. The capped rate ceiling at 6.5 cents/kWh remains in effect through 2002 and can be extended for another year by the regulatory commission.

Residential, small business and lighting customers get the rate rollback, and the CPUC agreed it would develop a program for large commercial, agricultural and industrial customers who may elect to have the cap on electricity rates, with an adjustment after a year, in lieu of bilateral direct power purchases from nonutility suppliers.

The regulators’ action implements AB 265, which also requires a CPUC investigation into “the prudence and reasonableness of SDG&E’s procurement of wholesale electric energy beginning on June 1, 2000.” Critics of SDG&E in hindsight contend the utility could have used authority it had last spring to use the futures market to hedge against extreme wholesale price spikes, and, thus, lessen the retail rate shock on its customers, but it had no financial incentive to do so. And the CPUC action Thursday notes that if it finds SDG&E failed to act prudently, the regulators can order further refunds to electric customers.

The new state law also prompted the CPUC to expand its electric market investigation ordered Aug. 3 to add issues raised in a joint resolution by state lawmakers (AJR 77), specifically asking for a review of “options for correcting the electricity market, methods to eliminate price volatility for consumers, and methods of cost recovery and cost allocation (for utilities).”

A second electricity relief item — to give SDG&E the same authority the state’s other two investor-owned utilities have to enter into bilateral power deals outside the California Power Exchange — was held until the next CPUC meeting later this month.

The CPUC also sent back to its staff for further work an emergency request by Southern California Edison Co. related to its earlier attempt to modify the current payment formula for small, qualifying facilities (QFs) so they are encouraged to provide extra power to grid in peak-demand times.

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