Price Gouging By SDG&E – Results of Deregulating a Monopoly7 min read

I recently paid SDG&E $1,599 for a job my plumber would have charged between $400 and $500 to do. The job involved relocating my gas meter approximately nine feet from its location under my bedroom window.

I decided to replace the window with a door and steps as an emergency exit, but couldn’t do this as long as the gas meter was in the way. SDG&E told me that its current safety code prohibits gas meters from being under windows, but my home was “grandfathered” in — and they were under no obligation to move the meter.

I was responsible for digging the 3’ by 3’ trench for SDG&E to access the pipe and an additional 10’ trench to remove the old pipe, plus backfilling the trenches and repairing the patio. My plumber added the new pipe under the house. I also paid $120 for the city permit. Two SDG&E workers spent less than one hour cutting the pipe, adding less than two feet of new pipe and connecting the riser. Another SDG&E employee spent about 40 minutes connecting the gas meter to the riser and new pipes installed by my plumber, plus relighting pilot lights to my appliances.

Ten years ago, both Houses of our State legislature and both political parties unanimously voted to deregulate the Public Utilities industry. We were promised that market competition would lead to lower rates and better service. Instead, rates skyrocketed and we faced manufactured brown-outs and black-outs in a never-ending race to gouge the public.

Recordings of telephone conversations between traders discovered them laughing at traffic accidents caused by non-functioning traffic lights due to brown-outs. For them, after a few accidents, people would pay anything for electricity. People on fixed incomes couldn’t afford heating and air-conditioning. Small businesses, especially Ma and Pa grocery stores, couldn’t afford the electricity for their refrigerators and freezers. Cities were hard-pressed, having to cut services and school funding in order to pay their electric bills. Yet the industry just kept pushing for ever increasing profits. Even potential injuries and deaths from traffic accidents or heat or cold didn’t bother them.

Finally, the State of California partially re-regulated the industry. Rate increases for gas and electricity must be approved by the CPUC (California Public Utilities Commission)–but not other services.

SDG&E maintains a monopoly on services such as the relocation of gas meters (SDG&E Rule 16, section F, subsection b: “Applicant Convenience: Any relocation or rearrangement of Utility’s existing Service Facilities at the request of Applicant (aesthetics, building additions, remodeling, etc.) and agreed upon by utility, shall be performed in accordance with Section D above except that Applicant shall pay utility its total estimated costs.”). The CPUC has no jurisdiction.

Monopolies are anathema to free capitalistic market economies. As any Introduction to Economics textbook shows, monopolies set prices far in excess of what they would be in a competitive market, thus incurring obscene profits. In such situations, government regulations are absolutely necessary to protect the public from predatory pricing.

The original invoice I received from SDG&E simply listed the price as $1,599. With the help of the CPUC I received a partial “breakdown” of the costs, not including number of hours or workers:

We shall install approximately 5-10 feet of gas service pipe, and remove approximately 10-15 feet of gas service pipe, install connections and reset the gas meter under the provision of Rule 16. The applicant shall provide a clear path, the trench, backfill and any concrete/pavement repair from the point of interception to the new meter location. Installation:

Installation:
Material: $39.28
Labor: $546.93
Equip/trans: $89.74
Administration: $164.05
Total $839.99

Removal:
Labor: $542.10
Equip/trans: $68.48
Administration: $148.19
Total $758.77
Note: We did not charge you for the actual pipe removal
Total Amount $1,598.76
 
Though SDG&E stated that they were not charging me for the actual pipe removal, I made sure that my plumber removed the old pipe, fittings, etc.

I had nothing to lose, so I contacted the CPUC. The response was: “I have received your e-mail and consulted with my coworker who looked at their explanation of charge. I was told the charge is legitimate. He states utilities charge for everything including bringing in the trucks and other equipment and also for taking all the equipment back. Basically, they charge for every little thing. I was also told that we don’t have jurisdiction over this issue. I can go ahead and send this complaint over to SDGE for their response but they probably send us a note, letting us know that the complaint is non jurisdictional.”

The installation charge of $840 was double what my plumber would have charged me to do the job. I can’t imagine any plumber trying to also charge for putting his tools back in his truck and driving home. This is what happens when we deregulate a monopoly, they gouge the public on charges that would never be incurred where there was market competition. From my inquiries, I also found out that SDG&E increased their charge for relocating a gas meter a couple of years ago from about $800 and I also found out that another SEMPRA company, Southern California Gas, currently charges about $800.

A recent article listed the CEO of SEMPRA, SDG&E’s parent company receiving over $20 million in compensation. People are up in arms over recent revelations of politicians and some city and county employees receiving exorbitant incomes paid for by the taxpayers, but why is there not any outrage at $20 million also paid out of our pockets to a monopoly? I don’t have the resources, but I believe it would be of public interest to know the following:

1. Total income, in inflation-adjusted dollars, of SEMPRA CEO, SDG&E CEO, and 10 highest paid SDG&E executives for 1998 and 1999 (prior to deregulation) and for 2008 and 2009;
 
2. Dividends, in inflation-adjusted dollars, paid to stockholders for 1998 and 1999 and for 2008 and 2009;
 
3. Percentage of gross revenues devoted to infrastructure, repair and development, for 1998 and 1999 and 2008 and 2009.

Ten years ago, many areas in California experienced rolling brown-outs and black-outs.  But several cities did not.  Among these were Los Angeles and Sacramento–because they own their own electric companies.

In fact, Los Angeles was able to earn money for its taxpayers by selling excess electricity during the crisis. JD Powers several times gave the Sacramento Municipal Utility District its highest score for customer satisfaction. It would be interesting to find out how much the CEOs for the Los Angeles and Sacramento publicly owned utilities receive in compensation and a comparison of electric rates for Los Angeles, Sacramento, and San Diego. While we are paying a monopoly so that SEMPRA’s CEO can make $20 million per year, people in Los Angeles and Sacramento are paying their respective utilities which in turn contributes to their fire and police departments, and other city services.

While I am a strong believer in markets for consumer goods, public utilities are natural monopolies. Regardless of their advantages, many of our citizens would probably be against San Diego city or county governments taking over the utilities and, perhaps, given all the corruption scandals we have experienced in San Diego, they may be right; but given SDG&E is a monopoly, it is TIME TO TOTALLY RE-REGULATE THEM! Monopolies are predatory by nature and need to be regulated.

The moral of the story is that with a predatory monopoly corporation, the only protection the consumer can count on is strong government regulations and enforcement. RE-REGULATE OUR PUBLIC UTILITIES!

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Joel A. Harrison, PhD, MPH, a native San Diegan whose family has been here since 1936, is a retired epidemiologist with a long time interest in social causes.  The opinions expressed in this editorial reflect the views of its author and do not necessarily reflect the views of East County Magazine. If you wish to submit an editorial for consideration, contact editor@eastcountymagazine.org.