Takeover of SDG&E; by Water Authority Would Need Legislature’s OK

Even if most San Diegans favored the move, it would still take a special act of the Legislature to permit the San Diego County Water Authority to acquire San Diego Gas & Electric Co. and retain local control over the giant utility, a water authority spokesman said.

Jim Melton, the authority’s public information director, said Friday that the legislative intervention would be necessary to change the 1943 Water Authority Act, under which the countywide agency was established.

“We have rather broad powers and authorities, including the importation of water,” Melton said. “We could build dams or operate various kinds of facilities, treatment facilities to provide water. We also have hydroelectric generation.”

‘It Just Wasn’t Included’

“But that doesn’t give us the authority to operate a utility such as SDG&E.; We’d have to go to the Legislature to seek a change in our act to get that authority. It just wasn’t included.”

On Thursday, the water authority directed its general manager to undertake a preliminary feasibility study of whether the little-known agency could use its powers of condemnation and the issuance of bonds to act as a “vehicle” in taking over SDG&E; before it merges with SCEcorp, the parent company of Southern California Edison.

The study, which will be discussed at the authority’s board meeting Wednesday, comes a week after the SDG&E; board voted to accept a $2.4-billion merger offer from the Rosemead-based sister utility--a move that has San Diego officials lamenting the loss of local control over one of the area’s largest companies.

Melton said Friday that, although many questions remain about a suggested takeover of SDG&E; by the water authority, officials of the agency believe it has enough financial power to condemn and pay for the utility’s power stations, buildings and lines--estimated last year to be worth $1.2 billion in book value, or what the utility’s assets would probably fetch if they were broken up and sold.

However, the water authority can issue bonds against a tax base worth $14 billion in assessed value, Melton said. The agency’s outstanding debt is $34 million, he said.

Although special legislation would be required to allow the takeover, Melton also said there is “ample precedent” for a special district water provider to take over an electric utility, although none of those involved approaches the size of SDG&E.;

Desire for Local Control

The largest is the Sacramento Municipal Utility District (SMUD), which was formed in 1923 for water conservation purposes. The desire for local control of the electric utility led SMUD to condemn Pacific Gas & Electric Co. facilities for an $11.6-million takeover that was consummated in January, 1947.

Since then, SMUD’s service base has grown to include 425,000 customers, with 2,900 employees and total revenues of $513 million. SDG&E; has 990,400 customers, 4,612 employees and total revenues of $1.9 billion.

Known for its low rates, SMUD nevertheless became mired in controversy this summer over the use of its Rancho Seco nuclear power plant, which is the utility’s largest source of electricity. The plant had been idle for years, soaking up millions of dollars in repairs, and the publicly owned utility came under criticism for bad management, said Anne Rudin, mayor of Sacramento.

“I don’t think there would be so many problems if it weren’t for that complicated piece of machinery that kept breaking down,” she said.

About a year and a half ago, PG&E; offered to buy back SMUD, but the offer never received any serious consideration, Rudin said. PG&E; withdrew the offer and the problems continued. Finally, Sacramento residents put a measure on the ballot last June calling for the nuclear plant to be put in mothballs.

The measure lost, however, in part because SMUD was able to fire up the plant right before the June vote, Rudin said. Now the plant is running at about 92.5% capacity, a SMUD spokesman said.

Not as Stormy Elsewhere

Business hasn’t been as stormy at the state’s three other water districts that also distribute electricity, in Imperial County, Modesto and Turlock.

The Imperial Irrigation District (IID), created under the California Irrigation District Act, began serving Imperial County in 1911. But it entered the electricity business in 1936 to help pay for its share of construction costs of the All-American Canal.

The district installed hydroelectric power plants along the canal, which are run by water flowing downhill into Imperial. The district generates 43% of the electricity its customers need; the rest is purchased from other power companies.

The IID now has 60,000 electrical power customers in Imperial County, as well as a handful of cities in Riverside County. With about 1,000 employees, its revenues are $105 million from electricity and $25 million from water.

The Modesto Irrigation District, which was formed in 1904, got into the electricity business in 1923 and now has 80,000 customers. With 352 employees, it has annual revenues of about $82 million and generates enough power to supply its customers with about half their electricity needs.

The nearby Turlock Irrigation District was founded in 1887 for water purposes and became an electric utility in 1924. Its 415 employees serve 51,141 electric customers, and the district’s annual gross revenues are $62 million.

Meets Half the Demand

The district is able to generate enough power to meet about half the demand of its customers, with the rest purchased from other suppliers. Its major hydroelectric plant is on the Tuolumne River, about 30 miles east of the city of Turlock.

Another local provider of both water and energy is the Los Angeles Department of Water and Power, which now has 1.3 million customers. The DWP built its first electrical generating plants in conjunction with aqueducts it was building to transport water from the Owens Valley to Los Angeles. The first plants were installed to drive pumps needed to keep water moving. However, the department soon began building more power plants that harnessed the hydro power created by the 230-mile, downhill aqueduct. The first power was sold to people in the Owens Valley.

The first power for Los Angeles was generated in 1917. That’s when the city entered the municipal electrical utility business. The fledgling utility slowly began to buy out privately owned electrical companies, including then-Los Angeles-based Edison Co. and the Los Angeles Gas & Electric Corp.

The system now serves all of the areas incorporated by Los Angeles.