Power prices hit the state ceiling By Craig D. Rose UNION-TRIBUNE STAFF WRITER July 20, 2000

A summer heat spell across the region yesterday pushed power prices to the California state limit, threatening further increases in consumer electric bills.

Wholesale power prices during several hours of day trading yesterday hit the controversial state cap of $500 per megawatt-hour. The day's average price settled at $205, translating to 20.5 cents per kilowatt-hour, or more than 50 percent higher than what San Diego Gas & Electric Co. now bills customers.

As the weather warmed, efforts to restrain or roll back power prices heated up as well:

A draft recommendation from a key member of the state's utility commission suggests rejection of a plan to cap customer power bills and instead called for a mandatory level bill-payment plan, which would spread out the payments for high summer power costs over the entire year.

The Utility Consumers' Action Network -- which is pressing for the rate cap -- said it will hold a "bill-burning" rally in downtown San Diego on Wednesday and added that it would help consumers who refuse to pay recent price hikes and face utility cutoffs.

Former Mayor Maureen O'Connor said she would hold a news conference this morning to discuss the electricity crisis.

In a draft report to fellow members of the California Public Utilities Commission, Commissioner Henry Duque recommended rejection of UCAN's proposal to freeze customer payments. Duque found fault with UCAN's plan to let consumers withhold $300 million or more in payments to energy companies pending an investigation into recent price hikes. He said withholding payments would "obscure" problems in the power market that the government must fix.

Duque, who was assigned by the PUC to prepare a draft report of proposals suggesting solutions for San Diego's high power bills, called for implementation of SDG&E's plan to accelerate the $100 million rebate owed to customers in July and August. The plan would reduce bills by $17 monthly for typical customers. He also called for mandatory implementation of SDG&E's level-pay plan.

The matters are set for discussion at the PUC's Aug. 3 meeting in San Francisco, after pressure to get San Diego on the agenda of today's regular commission meeting failed. But Nettie Hoge, executive director of TURN, a Bay Area-based consumer group, said the PUC should call an emergency meeting.

"This is like fiddling while Rome burns," Hoge said. She added that on the current schedule, consumers will likely face higher bills for weeks.

SDG&E said it was pleased that the commissioner reacted positively to its plan to return the $100 million due customers -- which the utility said it discovered only last week -- but took issue with Duque's suggestion regarding a mandatory level-payment plan.

"Based on our focus groups, many customers don't want to be in a level-pay plan," said Ed Van Herik, an SDG&E spokesman. He added that many additional customers are expressing interest in the plan, but said SDG&E preferred to keep it optional.

Harvey Rosenfield, leader of a failed ballot initiative to roll back deregulation two years ago, said level-pay plans fail to address the key issue: an unregulated market that is ripping off consumers.

"They've got the consumer over the barrel and say, 'We'll rob you, but we'll rob you over an extended period of time,' " Rosenfield said.

The consumer advocate, who led a successful statewide effort to lower auto insurance costs, is scheduled to join O'Connor's news conference this morning. O'Connor could not be reached.

UCAN is hoping its rally Wednesday will demonstrate support for its rate-cap plan and its proposal to withhold $300 million or more from power companies pending an investigation into the recent price spikes.

"The basic principle is that San Diego should not pay the full cost of a screw-up by regulators and possible inappropriate action by energy companies," said Michael Shames, executive director of UCAN.

Left unchecked, the power market unleashed on SDG&E customers could cost them $500 million more this summer than last year, Shames said.

Wholesale power prices are of growing interest in San Diego, where SDG&E customers became the first in the nation to pay daily market prices for power. The experiment has already driven monthly power costs to about $101 for the average consumer, up from $55 just two months ago.

A spokesman for the California Power Exchange said power prices today are expected to remain in excess of $200 per megawatt-hour, or about 20 cents per kilowatt-hour.

SDG&E and the Power Exchange continue to consider proposals to buy electricity on a long-term basis from major power companies. SDG&E has reportedly received proposals from eight or nine power companies but has declined to divulge details.

State Sen. Steve Peace, D-El Cajon, key architect of electrical deregulation in the state; U.S. Sen. Slade Gorton, R-Wash.; and the PUC have called for an investigation into possible misconduct by power companies.

What deregulation champions call a "market solution" to San Diego's power problems is expected to involve so-called hedge buying, or placing bets on future electric prices by committing to prices in fixed future contracts.

While some consumer advocates say limited "block forward" buying is appropriate for a utility company, they said proposals that consumers buy power at fixed price ahead of time -- an idea suggested by some in the power industry -- were inappropriate.

"Who thinks that homeowners have the ability to guess if 5 cents a kilowatt in the future is a good deal, especially when these guys have a record of gouging the consumer?" said Harry Snyder, a critic of deregulation and senior advocate for Consumers Union.

Consumers, meanwhile, are seeking immediate solutions to the problem of heat and high power costs.

Althea Horne, 88, said the temperature in her Jacumba back yard hit 104 degrees yesterday. She's using a swamp cooler to keep her house cool.

"It's too expensive to have air conditioning," she said. "You'd go broke."

A high-pressure system parked over New Mexico is heating up San Diego County and is expected to last well into next week.

"I think you can just expect the hot weather to continue right into September," said Mark Moede, a meteorologist for the National Weather Service.

http://www.uniontrib.com/news/metro/20000720-0010_1n20power.html

-- Martin Thompson (mthom1927@aol.com), July 21, 2000

Answers

These youngsters will learn that mandatory price caps eventually become price floors.

They mentioned $.20 kwh. Last year, in Northern Virginia, the residential and commercial rates I had to deal with averaged $.08 kwh.

If the monthly bill @ .08 kwh is $15,000, what would it be at .20 or .50?

What does that do to a residential monthly bill of $200 @ .08 in an all electric three bedroom home?

Will this impact the residential and commercial real estate markets?

Coming soon, to a town near you.

-- Tom Beckner (becknert@xout.erols.com), July 21, 2000.