SCEcorp, which in September was thwarted in a $2.16-billion friendly merger bid with San Diego Gas & Electric Co., will soon formally ask state regulators for permission to begin a hostile takeover of the utility, SCE spokesman Lewis Phelps said Friday.
The application is important because it could allow the state Public Utilities Commission to hold hearings to consider the merger’s benefits to power users. That process could run concurrently with public hearings the PUC is conducting to review SDG&E;'s previously announced merger with Tucson Electric Power of Arizona.
Rosemead-based SCE, the parent company of Southern California Edison, informally advised the PUC of its intent to file the application in a letter this week from SCE Chairman Howard Allen. Phelps refused to say when the merger application will be filed. A merger of the two companies would create the nation’s largest utility.
SDG&E; Welcomes Move
William L. Reed, SDG&E;'s director of regulatory affairs, said the application by SCE will eventually work out well for SDG&E; because it will force SCE to “fully disclose and support what they see as the benefits of a merger . . . in the context of the already-existing proposal of the SDG&E; and Tucson Electric merger.”
In a related development Friday, the PUC agreed to hold hearings on the legality of SCE’s recent acquisition of 1,000 shares of SDG&E; common stock. SDG&E; had petitioned the PUC for a declaration that the stock purchase was illegal, maintaining that it violated a statute prohibiting a California utility from acquiring another regulated utility’s stock.
SCE, which has argued that the statute does not apply to holding companies that own utility subsidiaries, has asked the commission to dismiss SDG&E;'s petition. A Superior Court judge in San Diego will hear arguments Monday. SCE has asked the judge to order SDG&E; to turn over its shareholder lists.
According to recent SCE court filings in San Diego Superior Court, SCE acquired the shares in order to obtain SDG&E;'s shareholder list, which SCE may use to initiate a proxy fight, a special shareholder meeting or a stock-swap offer.
“We were disappointed the PUC did not rule today on this case, because procedural delays could lengthen the time until SDG&E; shareholders are able to receive information directly from us about our proposal,” Phelps said.
“If this will bring details of the SCE merger proposal out on the table and into writing so that we and others can see what in fact it will do, that’s great,” said Michael Shames, executive director of Utility Consumers Action Network (UCAN), a San Diego-based utility watchdog organization. In early September, SDG&E;'s directors unanimously rejected SCE’s $2.16-billion stock swap offer. SCE in recent weeks has used full-page newspaper advertisements to persuade SDG&E; shareholders that its proposed merger promises a better financial return than SDG&E;'s proposed merger with Tucson Electric.
San Diego County Business Editor Chris Kraul contributed to this report.