Davis announces $1 billion deal with San Diego utility By Jennifer Coleman The Associated Press June 19th, 2001

SACRAMENTO -- San Diego utility customers won’t have to pay the $750 million debt amassed since summer, under a deal announced Monday by Gov. Gray Davis that promises no rate increase to pay off the debts

Davis said the deal with Sempra Energy, the parent company of San Diego Gas & Electric Co., also allows the state to buy the utility’s 1,800 miles of transmission lines for about $1 billion. That portion of the plan requires legislative approval.

The San Diego utility was the first to complete the deregulation process last year and the first to have a price cap on retail rates lifted. Customers there saw their power bills triple over the summer as high wholesale prices were passed on to ratepayers.

In September, the governor signed a bill that set up a rate-averaging plan for San Diego customers, capping rates again, but allowing SDG&E to defer its growing debt. Customers would then pay off the debt over time.

Davis said the under-collected debt would be erased if the Public Utilities Commission approves several different provisions, including having their Office of Ratepayers’ Advocate dismiss a challenge to several San Diego contracts.

The deal will allow SDG&E to "dispose of the under-collection in a prudent matter," said Sempra CEO Stephen Baum.

With the deal, SDG&E customers won’t have to make that balloon payment, which averaged $400 for residential consumers, $1,400 for a small business and $12,000 for a commercial customer, Davis said.

San Diego social worker Laurie Smith said she wasn’t sure if the deal was beneficial for customers, but was confident that SDG&E wouldn’t have come after its customers to pay off the debt.

"I figured Davis was going to do something because it would have cost him politically," she said.

The portion of the deal erasing the balloon payment isn’t dependent on approval of the transmission line sale.

That’s important in case the proposal with Southern California Edison isn’t approved. Davis has come to an agreement with Edison to buy the utility’s transmission system for $2.76 billion -- or 2.3 times its book value.

Legislators have their first hearing on the Edison deal this week, but several lawmakers, including Senate Leader John Burton, D-San Francisco, have called it a sweetheart deal for the utility

The state’s largest private utility, Pacific Gas and Electric Co., filed for Chapter 11 bankruptcy protection in April. Davis has contended that finding a solution outside of bankruptcy for Edison and SDG&E could pave the way for a similar deal for PG&E.

Sen. DedeAlpert, D-San Diego said finalizing the San Diego deal "could help everything fall into place."

Other provisions include:

Sempra will provide cheap electricity from power plants it owns, about 440 megawatts from the San Onofre Nuclear Generating Station, 250 megawatts from contracts with alternative power providers and some smaller contracts.

The state gets first rights to buy 16,000 acres of conservation land along the Colorado River, south of Blythe.

Sempra will drop all legal claims against the state.

-- PHO (owennos@bigfoot.com), June 19, 2001

Answers

Allows the state to buy up to up to 1,800 miles of transmission lines!

I'll bet the state legislature knocks this dead.

-- Chance (fruitloops@hotmail.com), June 19, 2001.