SDG&E; Abandons Plan to Create Holding Company

Fearful that regulatory restrictions would severely inhibit diversification into non-utility ventures, San Diego Gas & Electric has abandoned its much-touted plan to create a holding company, sources at the utility and the state Public Utilities Commission said Wednesday.

During a special four-hour board meeting on April 3, SDG&E; directors reached a unanimous consensus that a handful of the 20 regulatory restrictions mandated by the PUC were “economically unsound,” according to several SDG&E; directors, who requested anonymity.

The PUC approved SDG&E;’s planned holding company last month but imposed a lengthy list of restrictions designed to protect SDG&E; customers from financial downturns in the company’s non-utility ventures.

SDG&E; is expected to officially announce that it is dropping the holding company plan today.

The PUC has not yet been informed of the utility’s decision, but “the inference is that they’re not going to pursue the holding company,” according to Terry Murray, an adviser to PUC Commissioner Victor Calvo. “We’ve heard informally that they had problems with a few of our conditions.”

Those restrictions would force SDG&E; to inform the PUC before selling any of its assets and would require the holding company to seek PUC approval before investing more than 15% of its assets in non-utility subsidiaries.

SDG&E; board members also were opposed to a PUC restriction that required the holding company to pay “imputed royalties” to reimburse utility customers for the “intangible assets” that eventually would be transferred to the holding company.

Despite dropping the holding company concept, SDG&E; will continue to expand its non-utility businesses by expanding Pacific Diversified Capital Co., its recently created subsidiary that boasts a landholding division, a computer services business and an energy technology company.