Lawmaker Hearing Ponders Utility-Merger Legislation

State legislators, fearful that existing regulations won’t properly protect utility customers against “merger mania,” are considering legislation that would give state regulators added power to control utility-industry consolidation in California.

Legislators might force utilities to specify the long-term benefits that a merger would generate for Californians, according to State Sen. Herschel Rosenthal (D-Los Angeles), who Monday chaired a daylong hearing in San Diego sponsored by the Senate Committee on Energy and Public Utilities.

The hearings were spurred by two recent merger proposals involving San Diego Gas & Electric. The San Diego utility hopes to merge with Tucson Electric Power. Rosemead-based SCEcorp, the parent company of Southern California Edison, has informally informed the state Public Utilities Commission that it intends to commence a hostile takeover bid for SDG&E.;

In-Depth Hearings

The state Public Utilities Commission has promised to hold in-depth hearings on the two mergers, but state legislators questioned Monday whether the PUC has enough power to properly police a complicated utility merger.

“We need some way to quantify how (two merger proposals involving SDG&E;) will impact ratepayers, shareholders, employees and other groups,” Rosenthal said after Monday’s hearings at the county administration building. “I’d say there is some need for additional legislation.”

However, state Public Utilities Commission member G. Mitchell Wilk told legislators Monday that existing regulations are “more than adequate” to protect customers during and after a merger.

“Ratepayer impacts of these proposed mergers will be (the) first and foremost “ concern of the PUC, according to Wilk, who is leading the PUC review of two mergers that involve SDG&E.;

Wilk promised legislators that the PUC will hold lengthy hearings in San Diego on both the SCEcorp and Tucson Electric mergers.

But Michael Shames, executive director of San Diego-based Utility Consumers Action Network, questioned whether existing regulations protect California consumers if SDG&E; completes its deal with TEP.

“Commissioner Wilk’s confidence is somewhat misplaced,” Shames said. “There are limits on the PUC’s authority over interstate deals.”

And Shames suggested that legislators and regulators oppose any proposal that does not produce a “net benefit” for ratepayers. “If it’s a wash, we shouldn’t allow it,” Shames said.

Similarly, PUC General Counsel Peter Arth promised that regulators must “deal with two major questions . . . . Is (a merger) in the best long-term interest of shareholders, and second, how do we assure that the benefits offered are benefits which are actually realized?”

Monday’s hearings did not include utility-company testimony because SDG&E;, Tucson Electric and SCEcorp refused to take part. The utilities said that Securities and Exchange Commission regulations prohibit them from appearing.

The utilities “will appear at a future hearing, either willingly or unwillingly,” according to Rosenthal, who last week considered the issuance of subpoenas to force SDG&E;, SCEcorp and Tucson Electric to testify.

The Senate hearing underscored just how complex a utility merger would be.

Besides the effect on electric rates, speakers discussed how a merger would affect competition, high-voltage transmission rights, regulatory control and long-term independent power producers.

Shames predicted that a merger of SCEcorp and SDG&E; would “produce auditing problems that are unlike any of the auditing concerns we’ve ever seen in the past.”

While legislators heard testimony in a hearing room at the county administration building, several dozen disgruntled Southern California Edison employees paraded outside with signs that questioned the management ability of SCEcorp Chairman Howard Allen.