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Sempra Energy, SDG&E Welcome Federal Action to Investigate California Electricity Market

SAN DIEGOà‚–Officials of Sempra Energy, and its subsidiary, San Diego Gas & Electric (SDG&E), endorse the decision of federal regulators to formally investigate the structure of California’s electricity market and the cause of high electricity prices charged to Californians. The companies also applauded President Clinton’s decision to release $2.6 million in federal funds to help low-income San Diego residents with their energy bills.

In response to a complaint filed by SDG&E Aug. 2, 2000, the Federal Energy Regulatory Commission (FERC) announced it would launch a formal investigation into the structure of the California Independent System Operator (Cal-ISO), which manages reliability of the state’s electric transmission grid, and the California Power Exchange (Cal-PX), the state’s trading hub for electricity. The FERC, which regulates both agencies and California’s wholesale electricity market, said it will examine the workings of the Cal-ISO and Cal-PX to see if market rules need to be modified to ensure an efficient, affordable and reliable power market.

“We are pleased that the FERC is taking swift action to address the problems with California’s deregulated energy marketplace,” said Stephen Baum, Sempra Energy president and CEO. “We strongly believe the FERC’s investigation opens the door for substantial reform of the state’s wholesale electricity market, which is not workably competitive, and will eliminate the extreme wholesale price spikes that we have experienced this summer.”

The FERC also said yesterday that it will examine the significant increase in wholesale electricity prices in California. If the prices are deemed unreasonable, generators could face paying refunds to California electric customers.

“Our 1.2 million customers in San Diego and southern Orange County desperately need relief from high electric prices at the California Power Exchange,” said Edwin Guiles, SDG&E chairman. “We believe the FERC investigation will attack the problem at its root-California’s wholesale electricity market.”

As part of its investigation, the FERC plans to hold at least one hearing in San Diego.

In its order issued Aug. 23, 2000, the FERC demonstrated its commitment to examine serious market problems in California by stating, “The Commission does have jurisdiction over wholesale electric prices and a role in determining whether and to what extent factors related to wholesale electric markets might have contributed to the increase in retail electric rates in San Diego. We take seriously volatile price increases during high load periods in California and allegations that the markets are not functioning properly.”

Under state law, SDG&E is required to purchase power from the Cal-PX on behalf of customers who have not chosen an alternate energy service provider and pass the price of that power onto customers with no mark-up. SDG&E customers now pay two primary charges on their bill: one for the regulated delivery service SDG&E provides and the other for the wholesale market price of electricity from the Cal-PX. The regulated delivery charge for SDG&E’s services actually is 6 percent lower today for residential customers than it was before deregulation, but the wholesale electricity price-the pass-through charge to customers from the Cal-PX-has more than quadrupled in the past two months.

Southern California residents received additional aid from the federal government when President Clinton directed the Department of Health and Human Services to release $2.6 million in Low Income Home Energy Assistance Program (LIHEAP) emergency funds for low-income households in Southern California. This doubles the funds that the region currently receives under the LIHEAP program. The program is administered by the California Department of Community Services and Development.

SDG&E delivers electricity and natural gas to more than 3 million people in San Diego and southern Orange Counties, through 1.2 million electricity meters and 740,000 natural gas meters.

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