Public utility enjoying prosperity under deregulation

Seven hundred miles to the south, some 1.2 million San Diego Gas and Electric Co. customers suffered a doubling and tripling of their electric bills. The utility, its rate freeze removed as it completed the transition to deregulation under a 1996 law, passed on the sharp increases in wholesale energy costs to its customers.

Pacific Gas and Electric Co. and Southern California Edison Co, with nine million customers between them, still operate under a rate freeze.

Unlike SDG&E, they can't pass those losses, perhaps $4.5 billion, onto their customers - at least not yet. But both investor-owned utilities want the state's permission to require their ratepayers to cover those costs over time.

In Redding, the story is different.

Skeptical of deregulation and seeking self reliance, local officials a few years ago authorized $300 million for capital improvements that included new power generation. Electric bills of some 40,000 businesses and homes were boosted 23 percent to pay off the debt.

The $70 million-a-year utility, strategically ensconced near Shasta and Kesswick dams and straddling the north-south power links running from Oregon through California, also has long-term power contracts with several entities across the West.

The bottom line: Redding, at least for now, has more electrical power than it uses.

It's peak usage, measured in megawatt hours, is about 215. The utility has 300, so it has power to sell. And it does, fetching premium prices at a time when supplies in California are tight. At midyear, it had sold about $8 million dollars worth to customers in California, Arizona, Washington and Nevada.

Compared with the gigantic amount of power that flows through California's strapped power grid on a hot summer day, more than 42,000 megawatts, the electrical energy consumed in Redding, pop. 80,000, is small.

But the modest-sized utility, one of more than two-dozen publicly owned electrical utilities in California, is relatively tranquil and solvent at a time when the huge investor-owned utilities struggle.

Local economic development leaders have begun using the stable energy rates as a carrot to woo businesses to Redding. One, Texas-based Chatsworth Products, Inc., is already coming, and more are likely. "That's a very key issue when we sit down to talk to people," said Patrick Keener, Feider's assistant.

But Feider notes the current rosy situation did not come without difficulty.

"We have more than adequate resources to meet our load, but that investment didn't come cheap. It was a significant risk. The surcharge enacted in 1997 raised the customer's cost from 8 cents per kilowatt hour to about 10 cents per kilowatt hour, or 23 percent," he said.

"But our customers haven't been exposed to a 200 percent rate increase, like they had in San Diego," he added.

The utility can sell it's excess power for the going wholesale rate, up to 25 cents per kilowatt hour, although usually the sales price is in the range of 16 cents to 21 cents. The proceeds, like the surcharge, are used to pay down the debt.

Ironically, the Redding utility's customers have included Sempra, the parent company of SDG&E.

Indeed, the favorable market for Redding - the same market that is bedeviling PG&E, SoCal Edison and SDG&E - will allow the local utility to eliminate its surcharge two years early, in 2002 instead of 2004.

Under California's deregulation law, investor-owned monopoly utilities were required to divest themselves of assets and buy power on the open market by March 2002. The first to complete this transition was SDG&E.

But municipal utilities - utilities that are publicly owned - have the choice of whether to deregulate or not.

That means they don't have to sell off any generating facilities, and can produce and usestressed, investor-owned utilities, seems to like the munis.