Utility Diversification Opposed by PUC Staff
Arguing that customers rarely benefit from utility diversification, the state Public Utilities Commission’s staff has recommended that the commission deny future diversification requests and reverse diversification that already has taken place.
The recommendation could most immediately affect San Diego Gas & Electric, whose shareholders are scheduled to vote Nov. 1 on whether the utility should form a separate holding company in order to diversify into non-utility ventures. The PUC must also approve such a change.
However, many of the state’s utilities also could be affected if the recommendation from the public staff division were adopted by the PUC. Most already operate as holding companies with related subsidiaries. For example, Pacific Lighting, the parent company of Southern California Gas, has about 30 other subsidiaries, including ones in financial services, real estate development, alternative energy and liquid natural gas.
Increased diversification, “especially within a holding company structure, presents myriad opportunities and temptations to . . . milk the resources of the utility,” said William R. Ahern, director of the PUC’s public staff division, in a statement that is scheduled to be submitted at a public hearing Oct. 28-29 in San Francisco.
Ahern’s testimony, summarized in a report released last week by the PUC, specifically targeted utility holding companies and suggested that the commission “deal harshly with abuses resulting from transactions between utilities and affiliates.” His statement said utilities that want to diversify beyond their core businesses are in fact trying to avoid PUC regulation.
SDG&E; officials said Monday that they were “disappointed” by the testimony but believe that the PUC will not implement the staff recommendation in its entirety.
“It is shortsighted and will do a disservice to the industry . . . and ratepayers,” said Steve Edwards, SDG&E;’s manager of special projects. He said a PUC decision on SDG&E;’s petition is expected in early 1986.
