After Stormy Debate, South Gate Council Delays Action on Buying Utility

Dorothy Agee was among the hundreds who filled the South Gate Park Auditorium on Monday for the debate on whether the city should form a public utility by buying Southern California Edison Co.’s system here.

Like many of the more than 800 residents, Agee is elderly and living on a fixed income. She came to listen to the council and officials of Edison, which is trying to prevent the city from taking over the company’s business in South Gate.

Then she had her say.

“This is a real dumb idea. I’m opposed to the city council taking on any other business. It cannot take care of those it already has,” said Agee, 72, who lives with her husband, Ted, 75, in the Hollydale section.

Agee said she and her husband pay about $32 a month in electric bills and cannot afford any more.

“I’m not convinced the rates wouldn’t go up if the city takes over. I don’t think the city has the experience to run a utility,” Agee said in an interview.

Lillie J. Guastavino, 75, had a warning for the council: “If you fail to do what the people wish (put the issue on the ballot) the only thing is to start a recall against you.”

Edison outflanked the city by sending mailers last week to all of its 23,000 residential, industrial and commercial customers--days before the city could make its arguments.

The majority of the audience at the council meeting shouted disapproval during a 30-minute slide show by City Atty. Bruce Boogaard, who presented the city’s plan to become a utility.

By going into the electric business, South Gate would raise money to replace about $1.2 million in lost federal revenue-sharing funds. The money would pay for such city services as police protection and recreational activities. Officials contend that the city could run the system more cheaply and pass some savings to the customers.

But despite those arguments, many expressed doubts that the city could efficiently run a power company or handle a crisis during a disaster. Most agreed with Guastavino when she said the city should place the issue on the ballot. And only one of 30 speakers at the hearing favored the city plan to take over Edison operations by Jan. 1, 1988.

After listening to more than two hours of argument and conceding that Edison had done a better job of getting its side of the story to the people, the council postponed for 30 days its vote on beginning condemnation proceedings against Edison Co.

Mayor Henry C. Gonzalez and Councilmen Bill DeWitt and Herb Cranton--who favor the plan--voted for the continuation. Councilmen Del Snavely and John F. Sheehy, while never opposing the plan, have abstained from voting on it.

“We will try and explain the proposal to the people during the 30 days,” Gonzalez said in an interview. “We might do it in the city newsletter.”

Gonzalez said that the council might take up an Edison offer to finance a new feasibility study. The city already has paid for one such study, which favors its plan.

He added that if the council “would get further input from the people and if it was determined they didn’t want this, I probably would support dropping it. I listen to the people. The other members also listen,” the mayor said.

Speaking before an applauding audience, Charles B. McCarthy Jr., Edison vice president for customer services, attacked the feasibility study on which the city bases its arguments as “seriously incomplete and inaccurate.”

The city’s feasibility study, done by Ivanhoe Energy Services & Development Inc., underestimates the costs of acquiring Edison’s distribution system and 50 miles of transmission lines that run through the city of seven square miles, McCarthy said.

The study, for example, suggests the system is worth $15 million and Edison says it will cost at least $58 million, McCarthy said.

“This is ludicrously low,” McCarthy told the council.

“We question the study’s contention that South Gate can operate its entire utility, 7 days a week, 24 hours a day, with only 32 people. It just can’t be done,” McCarthy said.

Reacting to the free-study offer, Councilman DeWitt asked: “If we went ahead with the study and it was determined to be in the best interest of the city to have its own public utility, would Edison support it?”

McCarthy would make no commitment.

“I was surprised and disappointed at the council’s action,” McCarthy said.

In a related development, Edison filed a civil suit last week in Los Angeles Superior Court to block the city from using South Gate Redevelopment Agency funds in its effort to become a publicly owned company. A hearing is set for Sept. 11 in Norwalk before Superior Court Judge Robert W. Parkin.

There are 10 publicly owned utilities in Southern California, and more than 30 statewide.

Most cities that operate their own facilities started their systems around the turn of the century and did not buy from Edison, as South Gate is attempting.

“It is always difficult to start such a system. It has been a long time since a city has done it,” said Jerry Jordan, executive director of the California Municipal Utility Assn., a lobby for publicly owned facilities.

“There have been numerous studies in the past 15 years but they never went beyond the preliminary stages. The cost of purchasing the (transmission) system and buying the electricity was not economically favorable,” Jordan said.

Franchise Granted in 1942

The city granted a franchise to Edison in 1942 and legally can take the franchise back.

The two can voluntarily agree on a price for the Edison property or the city can condemn it and let the courts determine the purchase price.

Edison revenues from South Gate customers total $30 million annually. The city believes that it can reduce costs by buying the distribution system and purchasing power wholesale, from Edison or other suppliers, according to Boogaard. The federal government regulates the wholesale price of electricity.

City officials estimate savings at anywhere from $600,000 to $4.3 million in the first year of operation.

McCarthy said the city’s figures are inaccurate. The city is also inaccurately portraying the Edison system as antiquated as a way of lowering the possible purchase price, he said.

“I react against that anti-business posture of the city but I am gratified at the number of people that showed up to support us,” McCarthy said.

The Edison company spent about $25,000, mostly in postage, to alert customers to the city’s attempted takeover, McCarthy said.

Said Gonzalez: “If there is one regret I have, we allowed Edison to get information to the people first. We should have been first to explain our position. But we don’t have the money Edison has.”

Monday’s council hearing was scheduled for City Hall but was moved to the larger South Gate Park auditorium to handle the crowd.