Fund Dispute May Scuttle Water Panel’s SDG&E; Study

A $250,000 difference of opinion between the city of San Diego and the County Water Authority appears likely to at least briefly delay a study of public acquisition of the San Diego Gas & Electric Co.--and could even scuttle the review in its present form, city officials said Thursday.

The disagreement concerns whether the $250,000 that the City Council agreed on Tuesday to provide to the water board to study the feasibility of acquiring SDG&E; is a loan to be repaid--which is the city’s current position--or a grant that, from the water agency’s perspective, might be repaid.

“Saying, ‘Loan me $100 and I’ll pay you back next month’ is a lot different than saying, ‘Give me $100,’ ” City Manager John Lockwood said. “It’s not just semantics. It’s a major difference that means we can’t go forward at this point. That’s clear.”

What is equally clear is that, in order for the study to proceed under the aegis of the Water Authority, a compromise or change of position by one side will be necessary. And principals on both sides suggested Thursday that, if one side is to yield, it more likely will be the city--which in turn could mean that the council may end up spending money originally envisioned as a loan.

‘Shooting for the Same Thing’

Lockwood, however, said he believes that the differences can be settled through more negotiations between the city and Water Authority, “because we’re both shooting for the same thing”--exploring alternatives to SDG&E;’s proposed merger with Southern California Edison. Before proceeding, though, it will be necessary for the council to reconsider the matter next month, Lockwood added.

Similarly, Lester Snow, the Water Authority’s general manager, characterized the loan-versus-grant issue as “a little problem of different language from two different groups . . . that we’ll work through.”

But City Councilman Bob Filner suggested that the dispute might prove to be a more difficult hurdle to overcome. If the water board maintains its position that the money is a loan, Filner added, he and other council members might press for reconsideration of the $250,000 award.

“I was beginning to have second thoughts about whether (the water board) is the proper agency to do the study anyway, and this just reinforces those doubts,” Filner said. “The conditions they’re talking about now weren’t there when we agreed to put up the money. Otherwise, we might have had a different vote. If that’s the deal they’re offering, maybe we should look at other ways of doing the study.”

According to Lockwood, at the time of Tuesday’s unanimous council vote, the $250,000 was viewed by council members as “a loan of front money” to be repaid during the current fiscal year, assuming that the Water Authority secured state legislation enabling it to acquire and operate SDG&E.; The water board is now empowered only to operate as a water utility, but state Sen. Larry Stirling (R-San Diego) plans to introduce legislation authorizing the board to own a gas and electric company.

Based on Earlier Talks

The understanding that the money would be repaid, Lockwood and Snow agreed, was based on earlier discussions between city and water board staff.

However, when the Water Authority’s board of directors voted unanimously Wednesday to conduct a “cost-benefit analysis” of a possible public takeover, they pointedly described the money as a grant that would be repaid only if the agency takes over SDG&E.; If, on the other hand, SDG&E;’s proposed $2.4-billion takeover by Edison’s parent company, SCEcorp., is approved, or if the water board, for any reason, does not assume control of the utility, the $250,000 would not be paid back to the city, the water board emphasized.

Mayor Maureen O’Connor conceded that “details changed from Tuesday to Wednesday,” but said Thursday that she expects the disagreement over the specifics of the $250,000 to be worked out so that the study can go forward--even though that may transform the “loan” to an expenditure.

‘Under No Illusions’

“It was described to us as a loan, but I thought all along that, if we got our money back, we’d be lucky,” O’Connor said. “I was under no illusions that it was a slam-dunk guaranteeing we’d get back 100% of our money. We knew there was some risk.”

The critical issue, however, concerns the extent of that risk and the point at which the city could expect to get back any of its money.

O’Connor and council members said they were aware that the $250,000 would not be repaid if the state legislation needed for the Water Authority to spend its own money on the feasibility study was not approved. But, if the legislation did pass, they added, the city expected to be repaid.

Water board members, however, are insistent about not using water funds for the study--even if legislation permitting them to do so passes--although they have agreed to solicit funds from the county and its 17 other incorporated cities in an effort to relieve San Diego of the full financial burden of the study. Only if public acquisition of SDG&E; becomes a reality would the city be repaid, and even then, the repayment would come from the bonds used to finance the transaction, not water funds, they stressed.

In short, the city has offered to loan money, but the Water Authority has not offered to repay it--at least not from its own funds.

“The loan was never conditioned on consummation of a public takeover,” Filner said. “It sounds like they’re pushing back the payback date--or saying they might not pay it back at all if they decide not to go through with it. I don’t see how that’s a good deal for the city. If that’s what they’re saying, I think we need to rethink this.”

That, indeed, is what the water board members are saying, Snow said, and, as a result, the city will have to reexamine the deal, Lockwood said. Water Authority administrators had hoped to proceed with hiring a consultant as early as next week, but those plans will have to be postponed until the disagreement is resolved.

“The council action doesn’t give me the authority to ‘gift’ the $250,000,” Lockwood explained. “So, where we’re at is, where’s Plan B, because Plan A didn’t fly. I need additional council direction before moving ahead.”

That presumably cannot occur until at least Jan. 9, when the council reconvenes from its Christmas recess. Water Authority General Manager Snow, however, said he plans to meet with Lockwood in the interim to try to find ways to minimize the delay by, for example, screening potential consultants.

Councilman Ed Struiksma said that he expects the council to follow O’Connor’s lead in searching for a solution to the problem, even if that means spending rather than loaning the $250,000--a scenario that does not seem to seriously trouble the mayor. If the city’s financial obligation grows, Struiksma said, an appropriate trade-off would be for it to also gain greater control over the Water Authority study.

“It might be a case where we give a little here and gain a little there,” he said.

O’Connor added: “We were going to spend that money anyway, whether we did it or the (water board) did it.