SDG&E Rate Increase Challenged in Court

By Published On: January 6, 2012

A disgruntled San Diego Gas & Electric customer in a petition to a state court is seeking an investigation into a California Public Utilities Commission decision allowing the utility to recoup the cost of increased fire insurance premiums via rate increases. The CPUC on Dec. 15, 2011, authorized SDG&E to increase customer rates by $63.29 million to make up for liability insurance and deductible increases arising from the destruction caused by wildfires in the fall of 2007, which were partially caused by malfunctioning utility equipment. Ruth Henricks’ states in her Dec. 29 petition that the CPUC’s rate recovery decision was faulty because SDG&E failed to prove a need to recoup the money from ratepayers. She alleged the commission failed to apply a legal standard to determine if there was an insurance market failure as SDG&E claimed. “It was not enough for SDG&E’s staff to simply proclaim one existed,” she claimed. Utility spokesperson Stephanie Donovan said the company believed regulators’ decision was sound and would be upheld. “We feel very confident that the commission made the right decision when they voted 4-1 to approve our rate recovery at the end of last year,” she said. The utility maintains that its fire insurance costs rose significantly in the wake of a series of wildfires in October, 2007, during which two people were killed and about 198,000 acres of land burned. Two subsequent investigations determined that downed SDG&E power lines were at least partially responsible for the origin or spread of the three fires. Henricks’ attorney, Michael Aguirre, said the utility’s trouble in obtaining insurance wasn’t, as SDG&E says, a consequence of dramatic changes in the insurance market. “It wasn’t a market failure, it was a market reaction to the fact that SDG&E had maintained their power lines in an unsafe way,” he said. Aguirre, who was the San Diego city attorney from 2004 to 2008, added, “If you cause the fire, then why should the ratepayers pay for your bad management?” He said that shareholders should bear the costs. “SDG&E has never been found to be liable or negligent or quote-unquote to blame in the fires,” countered Donavan The utility has settled hundreds of lawsuits that were brought against it after the fires, and a small handful could go to trial within the year. Henricks’ petition asks the court to set aside the CPUC’s decision. The CPUC approved a two-year, phased in rate recovery plan, which kicked in this month. The impact on customers’ bills is expected to be between five and 10 cents per month for those using 500 kWh per month and 35 to 40 cents a month for those using, 1,000 kWh, Donovan said.

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