SAN DIEGO GAS & ELECTRIC COMPANY

UNBUNDLING UTILITY SERVICES -
TIMING AND COSTING CONSIDERATIONS

This position paper is submitted to the Unbundling Working Group in accordance with guidelines established at the May 9 Working Group meeting. Its purpose is to provide San Diego Gas & Electric Companys (SDG&E) rationale for its proposed timing and costing methodology for the unbundling of utility services. SDG&E asserts that potentially competitive electric distribution services should be unbundled, in addition to functional unbundling, by January 1, 1998, the Commissions target date for electric industry restructuring implementation.

The purpose of rate and product unbundling is to facilitate customer choice. Unless customers wish to pay twice for the same service, they will not have choices in relation to utility distribution services until such time as their default service provider--the local utility company--offers to identify charges for those services which lend themselves to competitive alternatives. Completely fulfilling the Commissions goal of achieving competition by the electric restructuring implementation date will not be accomplished unless this unbundling process is initiated soon.

SDG&E provided examples of distribution services that could potentially be unbundled to promote competition in its May 15 Issues Statement (page 8) submitted in preparation for the Scoping Workshop held on May 20. For the convenience of the parties, these examples are reiterated as follows:

  1. Billing

  2. Metering

  3. Customer Service

  4. Service Orders

  5. Distribution O&M

  6. Distribution Capital

We envision two categories of distribution service unbundling:
  1. Utility As Default Service Provider
    This category includes those services for which the utility would be obligated to continue as the default provider and retailers may compete for business. If retailers are successful, the utility would possibly exit the role of default service provider in a gradual, transitionary manner. The cost analysis for this category of unbundling would examine the utilitys variable cost savings through a marginal costing methodology.

  2. The Market As Service Provider
    This includes those services which require significant fixed investment and which do not lend themselves well to a gradual transition by the utility. For such services, it may make more sense for the utility to abandon the function altogether rather than investing in perhaps new technology in order to compete. In this instance, the utility would be relieved of its obligation to serve and would cease to be the default service provider. The service would be entirely subsumed by the competitive market. Of course, achieving customer choice for this category of unbundling is dependent upon the existance of retailers with sufficient capital for investment and a willingness to make the necessary investment to overcome the barrier to entry. Both the fixed and variable cost savings of the utility must be identified and made available to potential service providers.
In summary, SDG&E believes that both functional unbundling and competitive distribution services unbundling should proceed on Track 1 in order to facilitate customer choice by January 1, 1998. We strongly recommend that this debate be concluded soon so the parties can focus their attention and energies on the real work at hand which includes (1) identifying those services for which customers desire choices; (2) quantifying utility costs for such services; and (3) developing pricing proposals.

C.R. Swanson
May 24, 1996