The utility estimates a typical residential customer using 500 kilowatt-hours of electricity each month would see an increase of $6.13 and a typical customer using 25 therms of natural gas would spend $7.57 more on a monthly bill.
If granted in full, the proposal represents a $218 million increase over 2018 rates.
The request — called a general rate case — occurs every three years by the three investor-owned utilities governed by the California Public Utilities Commission (CPUC) and triggers a review that will include public hearings, legal filings, submissions of thousands of documents and scrutiny from consumer watchdogs.
Ultimately, the CPUC’s five commissioners will determine how much SDG&E will be able to collect during that three-year period. The CPUC is scheduled to reach a decision by the end of 2018 but sometimes the commission takes longer.
“We have a society today that expects the energy to be there when we flip the switch and for the gas to flow when they turn on their pilot light,” said Lee Schavrien, SDG&E’s chief regulatory officer. “And that’s what this is intended to do — to operate our business, operate it with technological advances and the additional risks (that come) from operating our business.”
The last time SDG&E filed its three-year rate request came in November 2014, when it asked for a 7.48 percent increase.
By the time the CPUC ruled, instead of a $133 million increase over its prior authorization SDG&E actually received a $3 million decrease.
Friday’s double-digit request is the largest SDG&E has proposed to the CPUC since 2012 when the utility asked for a 16 percent increase, according to SDG&E officials.
More than half the request is attributed to what the utility called “modernization efforts” that include:
- upgrading electrical equipment
- improving the safety of its underground and overhead power lines, and
- ensuring the safety of more than 14,000 miles of natural gas pipelines
SDG&E also cited costs associated with modernizing the company’s substations — half of which are more than 50 years old — as well as beefing up cybersecurity and installing grid-sensing technologies designed to help integrate clean-energy choices.
Solar power from rooftop and industrial sources have grown in recent years and SDG&E has also made significant investments in battery storage and charging stations and financial incentives for electric vehicles.
The most recent iteration of California’s Renewable Portfolio Standard calls for the state to derive 50 percent of its electricity from clean energy sources by 2030. SDG&E last year announced it delivered 43 percent renewable resources to the 3.6 million people it servicesin San Diego County and the southern tip of Orange County.
“It’s the hardening of the system,” Schavrien said. “In the back-country, we are replacing thousands of wood poles with steel poles that are more fire-resistant. We’re inspecting gas pipelines more frequently than required by previous standards.”
The general rate case comes at a time when SDG&E is being criticized on a number of fronts.
The utility is asking the CPUC to allow SDG&E recover $379 million in expenses related to deadly October 2007 wildfires that killed two and destroyed more than 1,300 homes. If approved, the wildfire expenses are estimated to cost the average ratepayer $1.67 more per month over the space of six years.
“In regards to the wildfires, that’s a separate proceeding that the commission is dealing with now,” Schavrien said.
At the same time, supporters of community choice aggregation, or CCA, are appealing to the San Diego City Council to adopt CCAs as an alternative to SDG&E. Under the CCA model, local governments, instead of utilities, make the decisions where residents get their sources of electricity.
SDG&E’s parent, Sempra Energy, recently formed a separate company ,not funded by ratepayers, questioning whether implementing a CCA in the San Diego area would be cost-effective and lead to greater greenhouse gas reductions.
“CCA is only dealing with the commodity,” Schavrien said. “We are still the deliverer of that electricity. So the distribution system will be there with CCAs or not.”
In addition, a report released in May by the CPUC showed SDG&E has the highest system average rate of the three investor-owned utilities under the CPUC’s purview — 20.54 cents per kilowatt-hour, compared to 18.23 cents for Pacific Gas & Electric and 14.90 for Southern California Edison.
Schavrien cited two reasons for SDG&E’s higher rates.
First, it’s more expensive for utilities to make repairs to equipment that is underground and SDG&E has about 60 percent of its circuits and wires below ground, compared to the national industry average of about 40 percent.
Second, Schavrien said Southern California Edison and PG&E have more industrial and commercial load in their territories while SDG&E has a higher percentage of residential customers.
“So you’re spreading similar type costs over fewer kilowatt-hours,” Schavrien said. “It’s a pure mathematical impact … Our rates will be on the higher end, just on a pure usage calculation, but our bills will be on the lower end of the national average.”
From a cost standpoint, electricity for California consumers is a mixed bag.
The average monthly bill in California is almost $20 a month lower than the national average, largely due to the state’s mild climate as well as energy efficiency measures.
But, according to 2015 numbers compiled by the federal government, Californians paid an average retail price of 15.42 cents per kilowatt hour, fifth-highest in the continental U.S.