SDG&E;’s Tom Page Looks at Future

Question: Could you briefly explain how the energy scenario in this part of the country differs now from before the merger, and what the impact of that is on your strategic planning.

Answer: There are really two things. One results from the vagaries of the economy. We identified in the early ‘80s a surplus of generating capacity in the Southwest. We strategically positioned ourselves to benefit from that. It worked, and it’s one of the major reasons that our rates decreased so much.

We (also) identified that the surplus was going to go away. It will go away. But it’s going to take longer to go away than we thought, because the economies of New Mexico and Arizona have not recovered from the recession, (which) went deeper than really anybody thought. And in fact, now California is slowing down.

. . . We’re not clairvoyant. We do the best that we can and look at this, frankly, as a short-term positive. It does not solve the long-term issue. The long-term is that SDG&E; will have to find about 1,000 megawatts, by the year 2000--100 megawatts a year. And we will be able to take advantage of this surplus for another couple or three years, longer than we thought. It does not change the year 2000 target.

. . . The second thing is that, as a result of the merger decision, there was a message given by the Public Utilities Commission that, from a regulatory perspective, the whole game has changed and that they are going to encourage a greater number of players to be in the generation and transmission business. That is a very, very substantial and very strong message.

And actually there’s a third thing. (Under a recently passed state law), it appears that the method of determining economics has changed, from one of least cost--that has been the traditional method--to least environmental impact, which is a dramatic shift. . . . The degree of environmental impact, it appears, will cause the price (of energy) to be ever higher.

. . . I’m not arguing what’s right and what’s wrong, I’m just saying that’s what it is, and it appears that the base is going to be zero emissions, which in fact is conservation, or something like solar or wind (power), that have traditionally been the more expensive units of generation. Interestingly enough, nuclear power can fit into that category.

Q: Before the merger, maybe a few years back, you were the company that everybody was kicking around, your rates were too high. Then the merger cropped up, and you were our utility, we don’t want you to go. What does the next phase bring, particularly if rates go up, as you say they will when the surplus ends.

Do you then go back to becoming the company that the politicians and the public are going to stomp on again?

A: Well, I would certainly hope not. And we’re going to do everything to avoid that. . . .

You’re going to see increasing concentration on our demand-side management activities. That’s the new word for conservation. The programs are much better. We can make money doing it. Our customers can save a lot of money. And it’s going to decrease that need for added capacity.

One of my objectives is, to decrease that thousand megawatts that I need by 2000. I’ve got to make that 900 or 800 or 700 or 500 . . . . Unfortunately, that thousand megawatts embodies a good bit of demand-side management already. We’re going to double or triple our activity.

Q: When you joined this industry five, 10 years ago, it was a relatively gray industry, where things moved slowly and didn’t change. But now you’ve described demand-side management, the new technologies, more players rather than fewer. You’re in essence describing deregulation of an industry. What is utility deregulation going to mean for the average person?

A: I think the model for it is going to be (the) telephone (industry). . . . I don’t believe that, for the residential customer, that you’re going to see as many options as you do on telephone long-distance versus short-distance and so forth. But . . . more efficient use of the transmission system . . . should reduce costs, and competition at the power-supply level, . . . if it works in the traditional capitalist way, should reduce costs. I mean that has to be the objective. The objective can’t be just having a whole bunch of players, just for the hell of it. I mean it has to produce, you know, a more efficient and hence lower-cost product, properly considering all the environmental issues.

But as to deregulation and more choices at the meter . . . (for) the customer, I don’t think we’ll see that, other than through greater control over consumption and greater pricing opportunities, much like telephone. You can make a telephone call, for 50 cents or 75 cents or a dollar, depending when you do it, I think you will see meters going into homes that give people . . . a readily identifiable economic choice. They can decide if they want to buy electricity for 10 cents or 8 cents or 6 cents.

Q:. Do your dishes at night rather than in the day, that sort of thing?

A: Yeah. But done in a way like demand-side management as contrasted to conservation. Conservation in the ‘70s and early ‘80s was a real 2-by-4 kind of a deal. You know, put on a sweater, be cold, . . . . Demand-side management and economic choices that are going to come along, are going to be cast very differently. They’re going to be wise purchase decisions. The decision to . . . buy a refrigerator that for $10 more . . . uses . . . that much less (electricity). It’s going to be the decision to buy an electric car for urban transportation, to be environmentally more benign, to . . . charge it at night, for 3 or 4 cents a kilowatt hour, or 5 cents. Doing those things in the middle of the day, at peak time, that you want to do. But it’s by choice. And it’s an economic choice. Now our economic relationship with the individual customer is really very vague, just kind of a two-block rate, and . . . so it’s just kind of gross consumption . . . . So people don’t have the feeling of control, so they feel somewhat frustrated. . . .

Q: In much the same way that people are learning to vary their habits with the use of water.

A: Sure. And water, I think, is kind of where we were in the early ‘80s. Right now, it’s the 2-by-4 approach: Use less. Don’t use less.

I’m amazed . . . that . . . water districts are now saying to people who are using less, . . . we have to raise our rates, because they’re using less. And everybody’s saying, what do you mean? I went through the very same thing. I mean, there I go 10 years later.

Q: In the area of new technologies, if environmental costs are embedded in the cost of the new plant construction, will that give photovoltaic, solar, wind, waves, all these new technologies, equal footing?

A: It will certainly give them a boost, and I guess equal footing, or maybe better than equal footing. And what I hope happens, is that . . . research and development money goes into these technologies. . . . (But) I guess I can’t be all that optimistic about that, because the United States, in the past decade, has backed away from R&D;, in most all areas as a percent of gross national product. . . . It’s done at some universities and just a couple of companies, and most of the enterprises have been sold to the Germans or the Japanese. Here we come again. . . . a lot of it is going to be foreign technology. I was very pleased to see Southern California Edison announce . . . their effort on a lower-cost photovoltaic conversion.

Q: In the future are we going to be seeing smaller, different kinds of power plants, in neighborhoods and that sort of thing?

A: I doubt it. . . . One of the problems with photovoltaics is they take an enormous amount of space. . . . Yes, you could put it up for a phone system on the interstate or . . . on Mt. Palomar for a radio transmitter, but it’s a very different thing to be talking about running refrigeration and motors . . .

(And wind) . . . is a technology that has proven to be much more difficult than anybody ever thought. . . . The move from a farm water pump, that had been around for a zillion years, (to) the technology (of) wind turbines has proven to be very, very difficult. But I think they have made some advances.

. . . The one that we’ve got to really rely upon is direct conversion of solar into electricity. And I think that what we’re being told is that we just have to reassess our nuclear option.

Q: You’ve been vocal on that, on the second-generation nuclear plant, but it seems highly unlikely that anyone would get permission to build one, under the current scenario.

A: A utility company would be a fool to take it on by themselves. It’s going to have to be a collaborative process, much like demand-side management. Everybody’s going to have to be on board and satisfied with the technology and do it right, this time.

And I hope we don’t have to get to some sort of either a price or availability crisis to cause us to lurch forward. It’s an unfortunate characteristic of this country that we have to get to a crisis to blow aside all the disparate single-interest groups, so you can advance the ball a little bit.

It’s interesting that in the new national energy strategy, which . . . I guess I’m disappointed (in), they really have not suggested any increase in automobile mileage. There are some independent pieces of legislation, but the auto industry didn’t make the same mistake that it did in 1978, where they said they couldn’t do it, and gee whiz, . . . it’s gonna raise the price. . . They now have converted it into a safety issue. And very successfully. . . . They’re talking about small cars that are statistically less safe than big cars.

. . . That whole process is unfortunate, because the automobile manufacturers would not be financially alive today, in my opinion, had those (mileage) standards not been imposed. They would have still been making 5,000-pound cars, and selling 42 of them a year.

And, as it is, they have made some wonderful advances.

I think they’re being shortsighted, I don’t believe that the standards should go up to 40 miles a gallon by the year 2000. I think that there should be a half a mile a year, a steady progress. It will cause them to stop making the Lincoln Town Car that weighs 4,500 pounds. And nobody’s going to miss it.

I think that we should impose a 5-cent-a-gallon gasoline tax, each year. Monies not going into the federal treasury. But going into a trust fund to finance alternative technologies, to finance energy infrastructure, to finance photovoltaic research, to finance battery research for electric vehicles, to finance R&D; on environmental and pollution-control technology. To get off of OPEC oil.