SDG&E; to Raise Severance Pay If Merger Goes Ahead

San Diego Gas & Electric’s board of directors, apparently trying to make an unwanted takeover bid more expensive, Monday approved a modified severance plan that, under certain circumstances, would double severance pay for employees who lose their jobs after an unsolicited takeover of SDG&E.;

SDG&E; officials Tuesday declined to comment on what it would cost to implement the amended severance plan. But the board evidently was responding to SCEcorp’s recent merger offer.

SCEcorp in late July surprised SDG&E;’s board with a $2-billion stock-swap merger offer that, if completed, would blend SDG&E; in with SCEcorp’s Southern California Edison subsidiary. SDG&E;’s board was asked to respond to the offer by Sept. 1.

1,000 Jobs Could Be Lost

The proposed merger could cause the loss of 1,000 jobs at SDG&E; and Edison, according to SCEcorp Chairman Howard Allen. An Edison spokesman was unavailable for comment Tuesday night.

The amended severance plan would kick in if SDG&E; were absorbed by another utility, or if a shareholder gained control of 30% or more of SDG&E;’s outstanding shares. The plan would not become effective, however, after a merger or acquisition initiated by SDG&E.; The utility has about 4,600 full-time employees.

The severance package that SDG&E;’s board approved two years ago offered “little protection or stability to employees in the event of an unsolicited ‘change-in-control,’ ” according to a letter sent to SDG&E; employees Tuesday by Chairman Thomas Page. “This amended package does.”

The new package requires a minimum of four weeks’ severance pay--or double the usual amount--for employees with less than two years’ service.

Employees with 30 or more years of service would receive 78 weeks of severance pay. Under normal conditions, an SDG&E; employee with 30 or more years of service would receive 26 weeks of severance pay, according to the company.

Insurance Coverage

The modified plan also provides continued health and basic life-insurance coverage for a like period of time.

The amended package would apply only to employees who are terminated “for other than cause, death or disability within two years after a change in control,” according to documents provided by SDG&E.;

The plan would not benefit SDG&E;’s top officers.

However, it does guarantee a minimum of 39 weeks of severance pay to employees who participate in SDG&E;’s “senior management incentive compensation plan.” Severance pay for those managers would be based upon salaries and cash bonuses.

The amended package is “aimed at creating additional security, stability and protection for employees,” according to Page’s letter.