California: SDG&E says it is owed profits

The San Diego Union Tribune ^ | June 28, 2002 | Craig D. Rose

[Ernest_at_the_Beach]

As California's electricity crisis erupted in 2000, SDG&E assured customers that it wasn't profiting from selling them power. Its profits came only from delivering electricity, the utility said.

Then in 2001, SDG&E said it had in fact earned about $245 million from power sales. Now the company says it's entitled to $560 million in electricity sale profits during the crisis.

The new claim – which amounts to nearly $500 from every local utility customer – was disclosed this week in sworn testimony by a top SDG&E official before the California Public Utilities Commission.

The $560 million claim includes $200 million that SDG&E has already pocketed from electricity sales, plus $360 million that the utility says it was blocked from earning by the PUC.

The commission early last year halted SDG&E's profits from power sales and ordered a return of previous profits to local customers. Commission rulings and California's deregulation law essentially barred utilities from profiting on the sale of power to customers.

SDG&E and other utilities were instead restricted to earning profits from the delivery of electricity to homes and businesses along the company-owned power grid. Indeed, SDG&E told customers in advertisements two years ago that it was selling them power at cost.

But the utility was buying electricity for about 2 cents per kilowatt hour under a trio of contracts and reselling it for 10 times as much or more as prices soared during the electricity crisis. Under the deregulation plan, SDG&E sold that inexpensive electricity to the state Power Exchange for a profit – and then bought power from the same exchange for its customers.

In some months, reselling the cheap contracted power allowed SDG&E to reap gains of 800 percent or more, said Michael Shames, executive director of the Utility Consumers' Action Network.

SDG&E is suing in state and federal courts to overturn the PUC's order that it return past profits from the power contracts.

Lee Schavrien, vice president of regulatory affairs for Sempra Energy, the parent company of SDG&E, insisted yesterday that the utility had not misled the public.

"When we bought power out of the Power Exchange for our customers, we literally passed along the cost," said Schavrien. "But these contracts were never part of that."

The Sempra official said the low-priced electricity deals were for the company's shareholders and Sempra used the gains to compensate itself for investments it made before deregulation.

Schavrien added that this dispute could have been settled long ago if the PUC had accepted a proposal negotiated between the utility and Gov. Gray Davis. That deal would have allowed SDG&E about $200 million in profits from electricity sales to customers.

Now Schavrien says the dispute could be settled if the PUC would accept a new plan under which SDG&E would keep about $175 million in profits from the deals. He emphasized that SDG&E had not pocketed $560 million from power sales during the crisis but would do so if its claims in court were upheld.

Many in the city supported a settlement, said Schavrien, noting that the San Diego-Imperial Counties Labor Council and County Supervisor Dianne Jacob supported the governor's plan when it was offered last year.

But reached yesterday, Jacob said she no longer supported any compromise in this matter.

"SDG&E lied to me, and they lied to the people and businesses of San Diego," said Jacob. "We need to know the truth about how much they made from those contracts. And that money belongs to the people of San Diego. SDG&E should not pocket one penny."

A spokeswoman for Jerry Butkiewicz, secretary-treasurer of the labor council, said he now needed further study of the matter before offering a position.

Shames, who has long insisted consumers owe SDG&E far less than the utility claims and may in fact be owed money by the company, said SDG&E's profit claim is even higher than he expected.

"It's now hard to distinguish SDG&E from Enron or Reliant or Dynegy or the other companies that gouged California during the crisis," said Shames.

---

Craig Rose: (619) 293-1814;

[Ernest_at_the_Beach]

Oh, this is rich:

"It's now hard to distinguish SDG&E from Enron or Reliant or Dynegy or the other companies that gouged California during the crisis," said Shames.

Guess we can now say all utilities do it!

[Ernest_at_the_Beach]

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[lewislynn]

Guess we can now say all utilities do it! .... But only if they're in a "deregulated" market. (is screwing utility customers something you cheer about?)

Commission rulings and California's deregulation law essentially barred utilities from profiting on the sale of power to customers....Makes sense. Under "deregulation" there was NEW regulation saying they couldn't make a profit.

Thanks for yet another example of how fu%*ed up phony "deregulation" can be is..

[okie01]

But the utility was buying electricity for about 2 cents per kilowatt hour under a trio of contracts and reselling it for 10 times as much or more as prices soared during the electricity crisis. Under the deregulation plan, SDG&E sold that inexpensive electricity to the state Power Exchange for a profit – and then bought power from the same exchange for its customers.

If I were a corporate executive, I would have taken full advantage of this very opportunity. If I were an investor, I would've called for the head of any corporate executive who did not capitalize on this opportunity.

And, if I were a California voter, I would be calling for the head of anybody and everybody who had anything to do with such a moronic "market" design.

Let dumb politicians design markets...and whaddya get?

Dumb markets.

Elect dumb politicians...and whaddya get?

Screwed.

[lewislynn]

Guess we can now say all utilities do it!

Not for long.

Duke Energy Corporation Stock Purchasers Represented By Schatz & Nobel In Class Action Lawsuit

[lewislynn]

OOPS, here's another:

Wolf Haldenstein Adler Freeman and Herz LLP Commences Duke Energy Corporation Class Action

[Robert357]

If I were a SDG&E stockholder or utility offical I might complain also. However, I think SDG&E should just quitely shuffle off into a corner and count its blessings that it was not pushed to the brink of bankruptcy like SCE and into bankruptcy like PG&E.

Sort of depends on whether you view you glass as half full or half empty!