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Why does SDG&E have high rates? SDG&E responds to customer's concerns

SDG&E
Posted at 5:24 PM, Mar 24, 2022
and last updated 2022-03-24 21:44:26-04

SAN DIEGO (KGTV) — For months, SDG&E customers have shared their frustrations and concerns with their rising energy bills. ABC10 News has heard every question from, "Why is mine higher than what it was this time last year? Who let's this happen? Will it stop?"

"I think this is going to be the new standard," shares SDG&E customer Jim Wolff. "We are all going to be stuck with this 40% increase and it won't matter how much less we use."

Is the new standard paying more for the same utilities?

Is that the case when it comes to San Diego Gas and Electricity?

Wolff, a Vista resident, certainly thinks so. ABC10 News first spoke to Jim back in February when his utility bill jumped 74 dollars.

In March, it was still significantly higher than the year before. "Are they doing this to appease CPUC, are they doing this to penalize people who are not efficient as they should be, but they are efficient enough to be under SDG&E's limit," asks Jim. "Or is this actually to appease stockholders who don't want to be invested in something they don't think is as profitable."

ABC10 News took those questions and concerns to SDG&E's Senior Vice President of Customer Service and External Affairs, Scott Crider.

"The primary cause of these recent high bills is actually the cost of natural gas," shares Crider.

According to Crider, the cost of natural gas skyrocketed by 25 percent in the last year.

Additionally, the utility executive points out other contributing factors to the higher rates, which are that electricity prices jumped more than seven percent and that the region experienced a colder than normal winter.

Even with the contributing factors, it's hard for customers to ignore SDG&E's history of questionable high rates.

ABC10 News reporter Sophia Hernandez, asked Crider: "I know you talk about those contributing factors, but why are we seeing rates like we have never seen before?"

Crider responds: "You know it's interesting Sophia, we've always acknowledged that SDG&E has higher rates."

But Crider pushed back on the overall rise in costs to customers, claiming that SDG&E has one of the lowest customer bills out of California's energy utilities.

That is proven in the CPUC's May 2021 evaluation, where it states that nationwide, SDG&E's rates are among the top 20 in the nation. Yet, the bill that the customer pays ranks 142 out of 200, with 200 being the least expensive, number one being the most.

That ranking is compared to Southern California Edison which ranks 122nd most expensive, and Pacific Gas and Electric ranks in the 70th spot.

To understand how this all works, let's take a look at how rates are created, calculated, and adjusted.

The complicated process starts with the California Public Utilities Commission. The state regulator determines the rates for each utility, and that process is broken down into three parts.

The first is determining how much a utility like SDG&E will need to make in order to operate. SDG&E told ABC10 News that this year's revenue requirement was around $4.2 billion dollars.

The second part of the process, SDG&E will submit an application to the CPUC to determine how much should be collected from the different classes of customers.

SDG&E's customer base is divided between three groups, 89% residential customers, 9% small business, and 2% medium/large businesses.

The final piece is the SDG&E proposing how much each class of customers must pay in order for them to be able to meet their revenue requirement. This is where the rate structure is created, determining how many cents per kWh the customer will pay.

"People think that SDG&E makes money off selling more electricity, but they don't," explains Scott Anders. "The primary way that they make money is getting a regulated rate of return off their rate base."

Anders is the Director of the Energy Policy Initiative Center at UCSD. The energy expert believes that three factors could play into SDG&E's higher rates: our milder climate, mainly residential customer base, and smaller company size.

"There are costs involved in building out the system," explains Andres. "And we [SDG&E] just have fewer customers to spread the cost over, or fewer units of energy to spread the cost over."

According to the CPUC's May 2021 evaluation, it reads that since 2013, rates have increased by 6% for Southern California Edison, 37% for Pacific Gas and Electric, and 48% for San Diego Gas and Electric.

And the frustration over higher utility bills may continue for SDG&E customers. While higher rates do not necessarily mean higher customer bills, rates for CARE and Non-CARE customer will increase as of January of this year. According to a January 2022 Rate Change Advisory, rates will be increasing 11.4%.

According to the document, the company says that the increase will help them meet their close to 300 million dollar increase in revenue, rising gas prices, and electric generation costs.

Anders explains why SDG&E is not immune to global and national impacts. "It's not like the utility is walled off from the rest of the world, they have to buy natural gas from somewhere, and if those natural gas prices are up, for whatever reason, then those inputs are higher, prices are higher."

But when will enough be enough?

Crider tells ABC10 News that he is hoping costs go down, but it is hard to predict.

"It's always difficult to forecast what rates are going to do," explains Crider. "And I will say as I said earlier, we are going to have to continue investing in the grid so that we are ready for this clean energy transition. But again, what our responsibility is to our region and our customers is that we are...tightening our belts as much as we can, and if we are advocating for our customers to get more state and federal dollars to help offset some of these costs, we think in the long run that's really going to be a net benefit for our customers."

Some of the costs that have been passed along to consumers include investments in wildfire mitigation, clean energy resources, and ensuring the electric grid stays online 24/7.

About two weeks ago the CPUC met for workshops, and there, Crider did bring up to the commission that some of the programs we the customer are currently helping to pay for, should be paid by the state. However, no action has been taken at this time.