Agency Wants Controls : PUC, SDG&E; Split on Diversification Plan

San Diego Gas & Electric, which is seeking state Public Utilities Commission approval to create a utility holding company, remains at odds with the PUC over suggestions that would give the agency a direct hand in the utility’s diversification.

SDG&E; opposes recommendations that would give the commission power to limit the proposed holding company’s capital allocations and order the divestiture of any subsidiary in order to “protect the interest of the utility ratepayers.”

The proposals “intrude on an area that has been traditionally a management and board prerogative,” according to Steve Edwards, SDG&E;’s manager of special projects, who responded to the proposals during hearings last week in San Francisco. “We cannot agree to a position that gives the commission authority to override” the board of directors, he said.

The PUC staff report, written by financial examiner Kenneth K. Chew, suggests that the proposed holding company limit its non-utility capital investments to 15% of the holding company’s assets. The 15% limit will “impose a reasonable limit on (SDG&E;’s future) diversification,” Chew suggested.

SDG&E;, however, is arguing that holding company officers are responsible for “the degree of non-utility investment and the scope and pace of it,” Edwards said.

Chew also suggested that the PUC approve any divestitures planned by the proposed holding company, as well as maintain the authority to order divestiture of any holding company subsidiary.

Requiring SDG&E;’s holding company to seek “prior written commission authorization” would keep the holding company from using utility capital to fund non-utility ventures and eventually spin off a “financially weak utility,” Chew said at the hearings.

Chew also suggested that the PUC protect customers from “unsuccessful diversification” by establishing the power to order divestiture of any subsidiaries.

SDG&E; officials are steadfast in opposition to giving the PUC that kind of control, said Edwards, who added that “the ability to compel divestiture is ultimately a decision that only a board of directors can make.”

SDG&E; and the PUC staff did hammer out agreements on several other staff suggestions, however. SDG&E; has agreed to give PUC personnel complete access to the holding company’s books, Edwards said. He added that “we’ve committed to a greater level of (PUC) access than any other utility . . . as far as unregulated affiliates” are concerned.

SDG&E; also has “committed in black and white (that) we will not raid (the) utility’s staff (to run) non-utility operations. We will go elsewhere for management talent in the specific industries that we enter,” Edwards said.

The utility also agreed to let utility officers determine utility dividends. SDG&E;’s initial plan called for the holding company to determine how the utility’s dividends would be handled. Last week the commission set Dec. 9 as the deadline for receiving briefs from the utility and three interested parties--the City of San Diego, San Diego-based Utility Consumer’s Action Network and Sacramento-based Independent Energy Producers. The commission will hear oral arguments Dec. 13, but has not said when it will rule on the holding company request.