The economy in shock

We all know that San Diego incomes are a good deal higher than the nation's, but the cost of living is far higher. The result is a squeeze. And energy costs are a big part of that squeeze.

The National University System Institute for Policy Research has done an eye-opening study for the California Business Roundtable and the allied Californians for Affordable & Reliable Energy. The bottom line is that the high cost of energy — particularly electricity provided by utilities — is a significant drag on the San Diego economy.

Erik Bruvold, president of the institute and author of the study, points out that according to the California Energy Commission, between 2000 and 2012, residential electricity costs in San Diego County averaged 12 percent more per kilowatt hour for San Diego Gas & Electric residential customers than for customers of Pacific Gas & Electric and Southern California Edison. The former utility serves the highest-income, most manufacturing-intensive area of the state (and perhaps the nation) and the latter also serves an area with a robust economy.

Since 2009, SDG&E's average cost to commercial customers has been 16 to 18 percent higher than PG&E's and SCE's, according to the United States Energy Administration. These PG&E and SCE locations are ones with with which San Diego competes for business.

People who defend the high rates often note that San Diegans use less electricity because of the mild climate. However, Bruvold points out that since 1990, more than 200,000 San Diegans have moved into areas where temperatures reach or exceed 80 degrees more than 180 days of the year. It takes more electricity to cool homes in such areas. Global warming trends put an additional squeeze on electricity usage.

The high costs put pressure on San Diego housing prices — already among the highest in the nation — the overall cost of living, and industries such as manufacturing and certain areas of construction, says Bruvold.

Bruvold does not say, but I will add gratuitously, that the big beneficiary of these high costs is SDG&E and its parent, Sempra Energy.

SDG&E's earnings for 2014 rose to $507 million from $404 million in 2013, despite some closure costs of the now-shuttered San Onofre nuclear plant. Sempra's earnings also zoomed last year.

Boasts Debra Reed, chief executive of Sempra, "We have made great progress toward achieving compound annual growth in earnings per share toward the upper range of our stated growth-rate range of 9 percent to 11 percent from 2014 through 2019."

The Merrill Lynch unit of Bank of America thinks Sempra can achieve the goals. Sempra's stock has risen stoutly even though its dividend yield is significantly lower than that of comparable utilities.