Sparks Fly as Utilities Vie for South County Area

South Laguna residents such as Marie Sheets speak bitterly of being “hoodwinked” by San Diego Gas & Electric.

Sheets, who last month paid $219 to heat her 1,200-square-foot condominium, called her electric bills “outrageous. . . . If I had my choice, I’d certainly switch to another utility.”

Many of her neighbors agree. In a blunt, hand-scrawled note to Laguna Beach City Hall, R.B. Short asked the City Council to intercede. “‘Hon. Mayor,” he wrote, “Please get rid of the arrogant, thieving SDG&E.;”

Since December, Laguna Beach officials have received more than 500 letters, postcards and telephone calls with the same request.

For 70 years, SDG&E; has provided electricity to South Laguna and much of south Orange County. And by many accounts, it has been a good neighbor--building a new service center in San Clemente, investing millions of dollars in new power lines and transformers and recently contributing $25,000 to South Coast Medical Center in South Laguna.

Unprecedented Turf Battle

But good will and capital improvements haven’t offset widespread bitterness over the company’s rates. The result: a battle over utility turf that state officials describe as unprecedented.

In the last 10 years, SDG&E; has charged some of highest residential electricity rates in the nation. Only Consolidated Edison in New York and Kauai Electric Co. in Hawaii are higher. SDG&E;’s rates are nearly 30% above those of a neighboring utility, Southern California Edison. (SDG&E; customers in South Laguna pay an average of 10.7 cents per kilowatt hour or about $52.78 a month. A few miles north in Laguna Beach, Edison customers pay just 8.5 cents per kilowatt hour or about $39.81 a month.)

So in December, when South Laguna was annexed by Laguna Beach, residents and city leaders saw an opportunity to drop SDG&E; and switch South Laguna’s service to Edison.

Edison Holds Franchise

Since 1923, Edison has held a franchise to serve the entire city of Laguna Beach, Edison and city officials note. A switch--which would require approval from the Public Utilities Commission--would simply continue the franchise agreement and reduce expenses for Laguna’s newest residents, they said.

Besides, City Manager Kenneth C. Frank added, he would prefer to deal with one utility rather than two.

Laguna’s City Council is scheduled to consider the issue March 1, but the stakes could be higher than SDG&E;’s 2,000 South Laguna customers.

For if Laguna Beach tries to drop high-priced SDG&E;, some south county leaders predict the move could create a domino effect, with much of the region following suit.

Already, several nearby areas are interested.

Today, directors of Laguna Niguel’s community service district will consider hiring a consultant to research changing utilities. The district is served by both utilities, but Paul Christiansan, a district director, said he would rather deal only with Edison.

“I look at it as a cost savings for the taxpayer,” he said.

In southeast Orange County, two large developers with undeveloped property in SDG&E; territory and developed property in Edison’s recently have hired attorneys to investigate changing utility boundaries.

At the moment, Santa Margarita Co. spokeswoman Diane Gaynor said, Edison “seems to offer better rates.” And Greg Sanders, a lawyer for the Coto de Caza development company, said he expects to make a recommendation on switching utilities in several weeks.

And in Dana Point, which expects to incorporate next year with Capistrano Beach, some leaders are intrigued by a possible franchise with Edison. Dana Point is served by SDG&E; but “people would like to do whatever’s possible to get their utility bills lowered,” Dana Point Civic Assn. president Harold Kaufman said.

But SDG&E; is determined to fight for its turf.

Its 67,000 customers in south Orange County make up the fastest-growing segment of its market, SDG&E; governmental affairs representative Karen D. Hutchens said, so SDG&E; is not about to yield the area to the competition.

Hutchens predicted years of litigation if South Laguna attempted a switch and added: “This is a case of one company trying to increase its market at the expense of another. . . . It’s not right for another company to come in after one company has made the investment and just take over the cream.”

Mike Eggers, a Dana Point leader who is watching the South Laguna effort with interest, predicted: “It will be a utility war. . . . You have the Korean conflict and you have World War II. . . . It will be a major fight.”

Edison district manager Donald Stavert said his firm is merely responding to residents’ interest: “We’re not looking for a takeover. . . . We’re looking for a franchise to serve the area that we already serve.”

But if communities besides South Laguna are interested in Edison’s service, he said, “we are ready and willing and able to serve all of Orange County.”

Another Edison executive added a qualifier, “That’s if we are requested and if it’s a good business decision . . . and if the Public Utilities Commission would approve,” regional affairs manager Roger S. Faubel said.

The PUC is the arbiter for any territory change. Its officials in Los Angeles and San Francisco called the situation in South Laguna unprecedented.

PUC Has Granted Changes

From time to time, the PUC has granted changes in areas served by utilities, spokeswoman Carole Kretzer said, sometimes because a city wished to provide its own service or because both utilities said a change would be more convenient--but never before because consumers wanted lower rates.

“If both utilities would agree, the PUC wouldn’t have a hard time with it,” deputy general counsel Michael B. Day said. “But if they don’t . . . it could be quite a complex proceeding that could easily take more than one year. It could take a very long time.”

Also watching the dispute with interest has been Michael Shames, executive director of a San Diego consumers group, Utility Consumers Action Network. “I can’t recommend that South Laguna switch or not--but from our evidence we don’t see SDG&E;’s rates going down a great deal,” he said.

He recommended that Laguna Beach hire an energy expert, negotiate with both utilities and “get a guaranteed decrease. . . . Strike as good a deal as possible.”

So far, the utilities aren’t even close to agreement. Even if SDG&E; agreed to stop servicing the area, Edison would have to buy its equipment. Edison has said it would like to do that and has offered $2 million for SDG&E;’s South Laguna lines. SDG&E; has rejected the offer.

Both Lobbying South Laguna

Meanwhile, both utilities have been aggressively lobbying South Laguna.

SDG&E; has been the most active--hiring a Costa Mesa public relations firm, Nelson/Robb/Ralston, visiting local newspaper offices and sending letters and mailgrams to South Laguna residents.

In December, the utility invited South Laguna Civic Assn. leaders Rich Jeffries and Hugh Wilkins to be its guests at a stockholders’ lunch at the elegant Ritz-Carlton. And one Saturday before Christmas, 70 SDG&E; representatives descended on South Laguna, walking door to door to explain their case.

For its part, Edison has made presentations to homeowners’ associations and conducted a letter-writing campaign, urging South Laguna residents to mail post cards of support to the Laguna Beach City Hall. On Feb. 2, executives from each utility got equal time to present their side at the annual meeting of the South Laguna Civic Assn.

“Let’s keep it friendly,” association president Jeffries warned a standing-room-only crowd of 200 residents before Stavert and Hutchens began.

The evening quickly took on the flavor of a political forum, with both representatives promising good service and a commitment to lower rates.

SDG&E; Rates Lowered

Hutchens produced a chart showing that SDG&E; had lowered its rates more than 17% since 1985 and predicted that by 1990, the company’s rates would be lower than Edison’s.

In the 1970s and early ‘80s, SDG&E; locked itself into unfavorable oil contracts and “our rates skyrocketed,” Hutchens admitted.

In that period, SDG&E; was vilified by its San Diego customers. At one point, the utility had to take its logo off company cars to prevent them from being vandalized.

But since then, SDG&E; has built a southwestern transmission line and diversified its fuel mix, lining up cheap geothermal and hydroelectric power in the Pacific Northwest.

“Our No. 1 corporate goal is to bring your rates down,” she vowed.

(However, she added later that the company’s commitment to lowering rates was not a promise: “There are no guarantees in this business. There are no promises.”)

Stavert, meanwhile, produced numbers disputing Hutchens’ forecast and predicting that SDG&E;’s rates might be 10% higher than Edison’s through the 1990s.

As a much larger company, Edison has greater energy resources than SDG&E; and can maintain lower costs, Stavert said. Though earlier this month Edison asked the PUC for an 11.6% increase--a boost of about $5 per customer--Edison’s rates will still be cheaper, Stavert said.

Energy Panel Backs Edison

In an interview several days later, Stavert also produced a forecast from the California Energy Commission that bolstered his case: By 1992, the commission projected, electricity from Edison would cost 10.14 cents per kilowatt hour, but electricity from SDG&E; would be higher still--11.70 cents per kilowatt hour.

Besides rates, one issue that concerns South Laguna residents is the future of a project to place utility lines underground. Before annexation, Orange County had set aside $1.2 million to remove 52 poles along Coast Highway in South Laguna and bury 54 customer service lines. Since the annexation, the county has agreed to pay for just half the project.

Stavert, meanwhile, has offered to advance Laguna Beach $600,000 and immediately finish the undergrounding. SDG&E;’s Hutchens promised that her company will finish the project too--but only if Laguna grants it the franchise for South Laguna.

If not, Hutchens warned, there will be litigation over ownership of the lines and “(Edison) could not work on our lines for many years.”

South Laguna residents had mixed reaction to the presentations. Jeffries worried that maybe the residents should stick with SDG&E;, if only to see the undergrounding project through. “If we’re tied up in a legal battle, we may not see it for a while,” he said. “We’d hate to be the losers.”

Go for the Rates

But Stiles Burke, a past president of the civic association, said if the choice is between low rates or underground lines, he will go for the rates. “I’d be willing to forgo the undergrounding,” Burke said. “I’d rather save a few bucks and look through the wires.”

Laguna Beach City Manager Frank admitted that he has been putting off making a recommendation to the City Council. He had heard arguments from both sides, he said, and “I’ve been stalling, hoping something would happen to make a decision easier.”

Still, at the moment, Frank said, he is leaning toward Edison because it would be easier for the city to deal with the single utility that holds the city’s electricity franchise--Edison.

Also, Frank said, he is impressed with Edison’s history of lower rates.

Leaning back in his office chair, Frank worked out the math aloud: If 2,000 South Laguna customers each pay $50 a month for electricity, they will pay $1.2 million a year, he estimated. But if they switched to Edison for a 30% cut, they might pay just $800,000.

“Let’s say it costs us $75,000 to go to the Public Utilities Commission, but our residents save $200,000 to $400,000--a year,” Frank said. “A gambler would say that’s a pretty good deal.”