UCAN INVESTIGATION FINDS SDG&E GUILTY OF GREED

From East County Magazine

Public urged to testify at hearings in San Diego area Oct. 10-13

September 27, 2011 (San Diego)-- UCAN, the Utility Consumers' Action Network, announced on September 22 the results of a one-year probe into SDG&E's rate-setting activities.  “UCAN's intensive audit shows that in the last three years, SDG&E’s rates have skyrocketed, its profits have soared, and its executives have reaped enormous bonuses even as its customers have suffered through the worst recession since 1929,” a UCAN press release states.

For 2012, SDG&E is seeking a "general rate" increase of $168 million.  Residents can make their voices heard at eight public hearings that the California Public Utilities Commission (CPUC) will be holding on the proposed rate hikes Oct. 10-13 in San Diego County, including two in East County, as ECM previously reported:  http://www.eastcountymagazine.org/node/7304 . 

SDG&E claims its costs of doing business is higher and it needs more money from its customers.  UCAN's team of experts -- 11 of them, pored through SDG&E's books and found that SDG&E should be lowering rates, not raising them.  This means a rate reduction could be in the offing, the consumer watchdog group concluded.

UCAN was able to document $142 million in inflated costs.  UCAN's audit shows that SDG&E's rate increase should be pared back to $26 million. What’s more, the regulatory staff at the California Public Utilities Commission (CPUC)  found an even larger potential for saving as much as $200 million in reductions.  Between UCAN's work and that of the CPUC staff, there's a good chance  for a rate reduction.

"This case comes down to a question of fairness." says UCAN's Executive Director, Michael Shames, "In the middle  of the worst recession in many of our lifetimes, SDG&E’s rate request is lavish, extravagant, and unnecessary."

UCAN says its experts have shown a tremendous amount of waste and deceit in SDG&E's request for more money. 

Similary, the regulators' own staff has found that SDG&E padded costs.  The CPUC's Division of Ratepayer Advocates (DRA) also recommended a rate decrease for SDG&E customers. DRA's 10-month audit found the magnitude of SDG&E's reuest for additional revenues to cover costs associated with its operations, maintenance and capital investments to be unwarrented. DRA forecasted lower levels of expenses than SDG&E in several categories.

In San Diego's East County, some ratepayers have also questioned why they should be forced to pay increased costs incurred by SDG&E for problems related to pilot error and mechanical failures (which resulted in dropped/damaged loads during Powerlink construction) or fires that SDG&E has admitted were caused by its lines. Disgruntled ratepayers have suggested that such costs should be paid by SDG&E stockholders instead.   

“We’ve done our work,” said Michael Shames, UCAN executive director. “The regulatory staff has done theirs.  Now it is time for SDG&E customers to express their opinion.  If you can afford a 5-7% rate increase locked in for the next four years, then you needn't do anything but sit on a couch and wave goodbye to your money. But if you feel that you simply can't afford higher gas and electric prices at the moment, you need to make these facts known at the upcoming public hearings.”

Here are just some of the disturbing facts uncovered by UCAN's experts. 

• Deceptive Budgeting Gambits:   Two of UCAN's analysis teams found that SDG&E management slashed spending at the company during 2009 and 2010.  However, the increased net profits caused by the under spending was paid out in executive bonuses and inflating shareholder returns. Not a dime of it went to lower rates.  And now, SDG&E is asking for double-digit increases above the rate of inflation, including the same operations/expenses that its management cut in 2010. SDG&E  is demanding those increases across the organization, rather than in specific identified accounts to distract and confuse regulators from focusing on any one aspect of its operation.
• Highest Electric Rates in the Nation: Since 2008, SDG&E’s system average rates have leapfrogged to the highest in the continental United States and the highest in California, b -- 15% -- higher than any other utility. Just five years ago SDG&E's rates were about the same as the other California utilities, but now, rates have increases by double-digits in the midst of a full-blown recession.  As of 2011, SDG&E's residential average rates are 18.4 cents per kWhr. 
• SDG&E's customers are currently paying 13% more than SCE customers and almost 15% more than PG&E customers. Notably, at the last rate case in 2008, the residential rates for all three utilities were just about the same (15.6 for SDG&E, 15.0 for both SCE and PG&E).  
• Bonus Happy Managers: In almost every single operational department, SDG&E's bonus-happy managers have found reasons to increase their annual budgets. The only department with a substantial decrease:  meter reading. That's only because there are no more meter readers due to the $578 million spent on installing smart meters. SDG&E then inflated costs in almost every operating account, after reducing costs the previous year, through use of a five-year average. 
• Failure to Answer Questions SDG&E only offered cursory justifications for most increases, thus requiring an extensive and time-consuming discovery process for every account.  UCAN had to pose 72 sets of data requests containing over 5000 questions and, in many cases, never secured complete answers.  One glaring example was its failure to detail its over $6 million in public affairs expenses, despite the CPUC requiring SDG&E to provide “a more detailed justification for all public affairs and outreach expense to demonstrate genuine customer benefit that outweighs any incidental corporate image enhancement." 
• Pork barrel Spending: SDG&E wants $83 million to “help” customers who buy electric cars and for burdens caused by customers who use solar to generate their own power. UCAN's experts have found that electric car customers do not need SDG&E's help and that solar panels help SDG&E's system, they don't cause additional costs to the system.
• Unnecessary Undergrounding: SDG&E seeks $13 million to place power lines underground so as to make them less susceptible to fires. A number of the proposed undergrounding projects however are not located in fire-prone areas.
• Unneeded Construction: SDG&E proposes to spending  $14 million to "fire proof" a transmission line to Mount Laguna.  Mount Laguna has 32 households suggesting SDG&E wants to “fire proof” that transmission line at a  cost of $437,500 per house.
• Bad Solar Investments: SDG&E wants $6.9 million to place solar panel installations on its SDG&E properties.  But SDG&E's version of solar PV is so expensive that it will take 53 years to pay it back.

Hearings will be held at 2pm and 7pm at each of the four locations:

• San Diego: October 10, 2011 (Al Bahr Shriners Center, 5440 Kearny Mesa Road, San Diego 92111)

• Chula Vista: October 11, 2011 (Comfort Inn & Suites, 632 E. St., Chula Vista 91910)

• El Cajon: October 12, 2011 (El Cajon City Hall Council Chambers, 200 E. Main St, El Cajon 92020)

• Oceanside: October 13, 2011 (Civic Center Library, 330 N. Coast Highway, Oceanside 92054)

More information about UCAN's experts' findings can be found at:

http://www.ucan.org/energy/electricity/general_rate_case_2012/ucan_testimony_sdge_grc_2012