CPUC Approves Rate Decrease For SDG&E Customers, Spurring Competitive Electric Market

Business Wire, May 28, 1999

SAN DIEGO--(BUSINESS WIRE)--May 28, 1999--

San Diego Gas & Electric (SDG&E) officials today applauded yesterday's decision by the California Public Utilities Commission (CPUC) approving the company's proposal to reduce base electric rates for all customers, effective July 1, 1999.

"We're very pleased with the decision because it will lower all customers' base electric rates over time and result in more than $400 million in benefits to the regional economy by 2002," said Edwin A. Guiles, president of SDG&E. "This is a milestone decision because it is a dramatic step forward in opening California's electric utility industry to real competition and in giving SDG&E customers more choice in the marketplace."

The rate decrease resulting from yesterday's CPUC decision will vary by type of customer and the amount of energy they use, as well as seasonal fluctuations in the cost of the electric commodity. Over the coming year, base electric rates for most residential and small-business customers will drop another 5 percent, in addition to the 10-percent reduction they already have been receiving on their monthly bills since Jan. 1, 1998. Commercial and industrial customers will benefit from a 15-percent drop in their base electric rates in the next year.

Over the year, these rate reductions translate into monthly electric bill savings of about $2 for the average residential customer, $7 for the average small-business customer and $400 for a medium-sized commercial customer.

These reductions are made possible by the elimination of the majority of the "Competition Transition Charge" (CTC) from customer bills -- nearly two-and-a-half years ahead of the schedule set by California state legislators and regulators. The acceleration of the CTC collection was due primarily to the recently completed sales of SDG&E's power plants in Carlsbad and Chula Vista, Calif. Both plants sold for prices above book value, ensuring that the competitive market -- and not SDG&E customers -- subsidized recovery of the utility's deregulation transition costs covering past investments.

SDG&E's base rates are fixed by state and federal regulators and comprised of distribution and transmission charges -- for delivering electricity to homes and businesses, and for maintaining the electric system and facilities. The electricity commodity itself is purchased by the company for customers on the open market through California's Power Exchange and the cost of this electricity is passed along to SDG&E customers with no mark-up. Under electric industry restructuring, California customers have the option to purchase the electricity commodity from an array of energy service providers or remain with SDG&E. The portion of customers' rates devoted to the electricity commodity charge is a function of the competitive market and not controlled by SDG&E.

As a result of yesterday's CPUC decision, SDG&E customer rates no longer will be fixed from month to month. They will fluctuate with the variation in the seasonal, open market price of the electricity itself. Traditionally, electricity prices increase significantly in the summer, when soaring temperatures and air-conditioner usage increase the demand for power. Conversely, electric prices drop in the winter and spring, when electric demand is low.

To protect customers against electricity price spikes this summer, SDG&E is implementing a summer price ceiling that will not allow electric rates during July, August or September to rise more than 12.5 percent above current rates. Costs in excess of the cap would be recovered over the following nine months to smooth the transition.

Additionally, for customers who want to keep their energy costs from fluctuating seasonally, SDG&E is offering an optional "level-pay" plan that will allow them to even out the cost of their electric service over the year. Customers can sign up for the plan by calling 1-800-411-SDGE.

"The bottom line of yesterday's decision is that our customers in San Diego and southern Orange County now will be the first in the state to accrue additional benefits from the state's electric industry restructuring -- lower rates, greater choice and more market competition," Guiles said.

The CPUC's decision yesterday was based on a settlement reached by more than a dozen parties, including SDG&E, the Utility Consumers Action Network, the CPUC's Office of Ratepayer Advocates and energy service providers.

SDG&E is a public utility that provides service to 3 million consumers through 1.2 million electric meters and 720,000 natural gas meters in San Diego and southern Orange County. SDG&E is a subsidiary of Sempra Energy (NYSE:SRE), a Fortune 500 energy services holding company based in San Diego.