City to Fund Water Agency Study on Bid to Acquire SDG

The San Diego City Council, putting some financial muscle behind Mayor Maureen O’Connor’s doubts about San Diego Gas & Electric Co.’s proposed merger with Southern California Edison, voted Tuesday to finance a study of public acquisition of the local utility.

The council voted 8 to 0 to loan $250,000 to the San Diego County Water Authority for a “cost-benefit analysis” of a public takeover. The Water Authority is scheduled to decide today whether to authorize a full analysis of whether it could take over SDG&E.;

The city, which last week began preparing to conduct such a review itself, agreed to defer to the Water Authority after that agency decided Thursday to look into acquisition. The Water Authority serves 97% of the county’s residents and 90% of SDG&E;’s customers. The city, in contrast, is home to about half of SDG&E;’s customers.

‘Most Logical Agency’

“It looks at this point . . . that (the Water Authority) is the most logical agency involved” to explore a government takeover of SDG&E;, O’Connor said.

The council vote added to the momentum building countywide to explore a public takeover of SDG&E; as a method of thwarting its proposed $2.4-billion takeover by Edison’s parent company, SCEcorp. SDG&E;’s board of directors voted for the buyout Dec. 1.

O’Connor, who has made no secret of her “concern” about the proposed merger, Monday won the backing of leaders of 17 San Diego County cities for her bid to have SDG&E;’s board of directors reconsider its decision.

Tuesday, eight of the city’s nine council members agreed to sign that letter, citing the loss of 1,000 top-level jobs in the county, a probable rate increase for SDG&E;’s 1 million customers, and the possibility that county ratepayers will have to pick up the tab if the Public Utilities Commission concludes that Edison overcharged its ratepayers $124 million. A similar letter was sent to the PUC.

City Councilman Bruce Henderson, who owns some Edison stock, has abstained from discussion on the matter. Henderson has said he intends to sell the stock after Jan. 1.

Karen Hutchens, SDG&E;’s director of intergovernmental affairs, told the council Tuesday that a government takeover of the utility is “not a viable alternative, and one that is not in the best interests of the utility or our customers.” She said the utility would oppose the move.

‘Guaranteed to Come True’

Hutchens said in an interview that all of “the council’s concerns--loss of corporate leadership, loss of philanthropy, increased rates and decreased competition--are guaranteed to come true under municipal ownership.”

Hutchens added that answers to the city’s questions about rate increases and other impacts of the merger would become clearer in the next few weeks, as SDG&E; begins to file documents with state and federal regulatory agencies that must approve the merger.

Michael Shames, executive director of the Utility Consumers Action Network, said he hopes the council’s interest in acquisition will not deter it from conducting the costly research needed to participate in PUC hearings on the merger. The council has authorized City Atty. John Witt to spend the money necessary to represent city interests at the hearings.

Jim Melton, director of public information for the Water Authority, declined to respond to the council’s loan offer until the Water Authority decides to authorize a study.

But San Diego City Manager John Lockwood said the offer stemmed from a meeting he held Friday with Lester Snow, the Water Authority’s general manager. Unsure whether the 1944 state legislation that created the Water Authority allowed it to spend money on the study, Snow approached Lockwood for ideas on how the city and Water Authority could jointly explore the issue, Lockwood said.

Rather than wait until the Water Authority determined whether it could finance a study, Lockwood said, he agreed to seek council approval for the loan and to have several city staff members work with the water agency on the study.

“Clearly, we have the authority,” Lockwood said. “Why worry whether they have the authority? We can’t afford to waste time.”

Under the terms of the council resolution approved Tuesday, the loan is contingent on the Water Authority seeking a special act of the Legislature needed to allow it to acquire the utility’s assets, valued at $1.2 billion. An aide to State Sen. Larry Stirling (R-San Diego) said Tuesday that Stirling will lead the drive to change the 1944 legislation that created the agency.