Attacking the Rapid Increase in Energy Rates

DATE: July 25, 2000
TO: Board of Supervisors
SUBJECT: ATTACKING THE RAPID INCREASE IN ENERGY RATES

SUMMARY:
Approval of this Board letter would result in a Board of Supervisors conference, open to the public, to address the rapid increase in energy rates. It would also call on the California Public Utilities Commission, the Governor and State Legislature to retroactively reinstate the electricity rate freeze that was eliminated in San Diego in July, 1999.

Recommendation: 
Chairwoman Jacob:

1. Direct the Chief Administrative Officer to coordinate a Board conference including energy providers and distributors, State energy regulators, State Legislators, local elected officials, and local and national energy experts to develop a plan to reduce electricity rates.

2. Direct the Chief Administrative Officer to draft a letter for the Chairwoman's signature to The California Public Utilities Commission, the members of the California State Legislature and the Governor asking them to retroactively reinstate the electricity rate freeze that was eliminated in the San Diego region in July, 1999 until a permanent solution to the rapid rise in energy rates can be developed and implemented.

Fiscal Impact: 
These actions can be performed within the existing budget.

BACKGROUND: 
Under the 1996 deregulation of the California energy industry, a State-wide freeze on electricity rates was put in place until 2001. However, electricity providers could remove this rate freeze in their respective regions earlier than 2001 if they were able to recover their uneconomic or "stranded" generation costs. In July, 1999, the electricity rate freeze was eliminated in San Diego, making this region the first and only region in California to pay market price for electricity. As a result, San Diego consumers have experienced significant increases in their electric bills. Since May, the price of electricity for residential consumers quadrupled from 3.2 cents per kilowatt hour to 13.48 cents per kilowatt hour. Many customers have seen their bills double under these new rates. On top of these increases, natural gas prices have risen 115 percent over the last year. These increases have hit seniors and others on fixed incomes especially hard.

Not only are San Diego residents seeing significant increases in their home energy bills, but as higher energy prices are passed on to them by businesses, they could suffer a second blow to their wallets.

On July 6, 2000, the California Independent System Operator's governing board voted against a $250 per megawatt hour cap on prices. But even with the passage of the proposed $250 per megawatt hour cap, prices could still have risen to a level of 25 cents per kilowatt hour, almost doubling the current high rates.

Several suggestions have been made to deal with this situation, including purchasing future power at fixed rates, investigating the potential manipulation of the power market, using "time-of-use" meters which allow bills to be based on real-time power prices, increasing State funding to support energy efficiency programs in the San Diego region, and using emergency measures to expedite the construction of new power plants and transmission lines in California.

I urge you to support my proposal which would convene a Board conference, open to the public, to investigate these suggestions to develop a plan to attack the rapid increase in San Diego energy rates and call on the California Public Utilities Commission, the Governor and State Legislature to retroactively reinstate the electricity rate freeze which was eliminated in San Diego in July, 1999.

Respectfully Submitted,

DIANNE JACOB
Chairwoman