Politicians Are Eager to Gain Glory in a Battle for Public Takeover of SDG

Given the enormous size of the proposal at hand--a possible public takeover of San Diego Gas & Electric Co.--the advice that Assemblyman Steve Peace (D-Chula Vista) offered to the San Diego County Water Authority earlier this month was eminently sound.

“Go forward, but go forward with caution,” Peace told the water board. “Resist that insatiable desire to jump on a white charger and flail at the monster from the north.”

That advice aside, several white steeds--each with a politician in the mount--already have appeared on the horizon. And--to extend Peace’s metaphor--the herd is almost certain to grow larger.

In the 3 1/2 weeks since SDG&E;’s board of directors voted to accept a proposed $2.4-billion merger with Southern California Edison, many local officeholders have stepped forward to voice concern or outright opposition to the deal, as well as to suggest possible alternatives.

Although the issue undeniably merits intense scrutiny and attention, local officeholders’ eagerness to link themselves to it also is understandable from a political perspective. The proposed buyout offer by Edison’s parent company, SCEcorp., has been Page 1 news for the past month and probably will remain so throughout much of 1989. More importantly, many political consultants, civic leaders and the officeholders themselves view the growing battle to stop the merger as being, at this point, tantamount to a no-lose proposition for those involved.

A Noble Fight

If the politicians block Edison’s takeover plan, the thinking goes, they will be heroes who helped preserve local control over the utility. And, even if they fail, they still could say that they waged a noble fight against insurmountable odds.

Or, as consultant David Lewis put it: “If you win, you win. And, if you lose, you still come off looking good.”

Not all elected officials agree with the analysis that the brewing political struggle over the merger is a no-risk operation. Besides seeing several potential long-range pitfalls--notably, being blamed for any future rate increases in the event of a public takeover--they also feel that it is too early to assess the political implications of such a sweeping, volatile issue.

“Right now, it’s like fresh meat has hit the Amazon River and the piranhas are devouring it,” said one San Diego City Council member who has deliberately remained in the background. “This thing can take too many turns down the road. That’s why I have no desire for a lot of ink on it.”

That concern, however, has not deterred many other local officials who already have positioned themselves in the forefront of the battle.

Arguably, no one has been more visible in that effort than San Diego Mayor Maureen O’Connor. Alarmed at the prospect of Rosemead-based Edison controlling a San Diego utility, O’Connor has been active on a number of fronts--urging SDG&E;’s directors to reconsider the merger, playing hardball with Edison’s chairman by refusing to meet with him, musing over the public takeover option and fueling the anti-merger momentum by suggesting that the city underwrite the Water Authority’s $250,000 feasibility study.

Those actions have been complemented--or, in some cases, simply duplicated--by the efforts of a phalanx of other local officials:

* State Sen. Larry Stirling (R-San Diego) has agreed to be the point man in Sacramento in the push for a change in state law needed to authorize the water board, now empowered only to operate as a water utility, to own and operate a gas and electric company.

* Peace, saying he wants to be sure that all options are explored, has introduced legislation that would enable the Water Authority to purchase federally restricted hydroelectric power not available to private utilities.

* La Mesa Mayor Fred Nagel and Chula Vista Mayor Greg Cox have drawn headlines with their concerns over the proposed merger, with the latter being instrumental in the formation of a seven-member task force that, under the aegis of the San Diego Assn. of Governments (Sandag), will study that deal and other options. Other officials, although expressing displeasure with the proposed merger, have voiced equal wariness of a public takeover, noting that it could cost their cities millions of dollars in lost tax revenue.

Politicians figuratively jumping on the bandwagon is hardly a new phenomenon. But this is one time when, as Cox wryly put it, “We may have to build a bigger wagon.”

The scrambling for field generalships in the merger battle reflects its perception as, if not a no-risk issue, at least a very low-risk fight in which potential dividends heavily outweigh liabilities.

“I haven’t found anyone--in government, business or the community--who thinks this merger is a good idea, other than some utility executives and stockholders,” San Diego City Councilman Ron Roberts said. “From that standpoint, it’s difficult to see any downside.”

By opposing or at least questioning the merger, local officials “can push all the right buttons,” political consultant Sara Katz explained. They can invoke the civic pride involved in having a city’s name included in a utility company’s title, while hewing to the virtually unassailable position that San Diego’s interests are better served through a locally controlled utility as opposed to one based in the Los Angeles area.

Disdain and Envy

Similarly, the issue allows politicians to tap into San Diego’s historical anti-Los Angeles bent. For decades, San Diego’s civic leaders have regarded Los Angeles with a mixture of disdain and envy, criticizing its urban sprawl and related problems while grudgingly conceding that Los Angeles nevertheless has the world-class status that San Diego covets.

In a city that often feels overshadowed by Los Angeles, the prospect of a major San Diego corporation being swallowed up by, to use Peace’s words, “the monster from the north” is certain to engender passionate opposition.

Throughout the preliminary skirmishing over the merger, perhaps no one has juggled those various elements more masterfully than O’Connor. By alternately expressing skepticism about the merger and pressing for exploration of alternatives, O’Connor has managed to appear to be asking the tough questions while still leaving herself room to negotiate with all sides.

O’Connor dismisses talk of political motivations and insists that she simply is seeking to protect the city’s interests.

“At this point, the only ones we know will benefit (from a merger) are Edison and people who own SDG&E; stock,” O’Connor said. “What I’m concerned about is what’s best for San Diego and for the customers. Based on what we’ve heard so far, there are some big questions about whether the merger is the best possible deal for us.”

Footing Isn’t Firm

Although most observers see little political danger in opposing the merger, some argue that advocating alternatives to it does pose risk. In that regard, the issue is similar to San Diegans’ attitude toward growth management. Although many polls have shown overwhelming public support for growth controls, specific limits often prove to be less popular, as illustrated most recently by voters’ defeat of four major city and county growth proposals on last month’s ballot.

“Everyone who’s offered an opinion on the merger has been adamantly against it,” Cox noted. “But the solution is a whole different issue. There, the footing isn’t nearly as firm.”

Stirling said that, if he is unable to gain approval of the legislation needed to make the public takeover option legally possible, that failure could be interpreted as a sign of political impotence on the part of the entire San Diego legislative delegation.

Advocacy of municipalization of SDG&E; also could antagonize business leaders and others who might view such a shift as an unwelcome government incursion into the private sector. Roberts, however, notes that the philosophical divisions typically found in any public-versus-private sector debate are blurred, if not obliterated, in this instance.

“A utility is about as far away from the free-enterprise system as you can get,” Roberts said. “It’s really a kind of government-sponsored private monopoly. Given that, I think there would be a lot less discomfort about government moving into an area like that than it if were some normal business.”

Paradoxically, some politicians are concerned not only about failing to block the merger, but also fear any successful effort that leads to a public takeover. Through the kind of logic that perhaps makes sense only in politics, some contend that this is one occasion when success could become a liability.

“What if the critics are right in saying that the government can’t run a utility without it becoming a bureaucratic nightmare?” La Mesa Mayor Nagel asked rhetorically. “Let’s face it, there’s a chance that government could get in there and screw it up.”

Remains Unconvinced

Assemblywoman Carol Bentley (R-San Diego) said that, although she dislikes the proposed Edison merger, she also remains unconvinced that a publicly run utility would be “inherently better.” If there were a public takeover, she added, the politicians who pushed hardest for it likely would be the first ones blamed for any future rate increases or other problems.

“When oil prices went up in the 1970s, people didn’t blame OPEC, they blamed SDG&E;,” Bentley said. “If something like that happened again under a public agency, they’d turn to those of us in office and say, ‘Now look what you’ve gotten us into!’ ”

Consultant Katz added: “Right now, fighting the merger is an uphill battle, and people get so caught up in that against-the-odds atmosphere that they don’t look beyond it. But sometimes dreams come true, and then you say, ‘Holy moly! Now what do we do?’ ”

That winning-is-losing scenario is only one of several ironies evident in the political maneuvering over the proposed merger.

Most strikingly, SDG&E;, which for years has been a target of scorn within political circles, now is being treated practically as a community treasure, with officials who in the past criticized the company now rushing to its defense. Part of the explanation for that turnaround, officials say, is that the utility’s performance--and, as a result, its public perception--has improved in recent years, as typified by last week’s announcement of a rate reduction.

A more significant factor, though, may be that, however people feel about SDG&E;, it still represents a known commodity, whereas the Edison merger would be a foray into the unknown.

“There’s always the fear that the devil you don’t know is worse than the one you do,” Roberts said.

Another peculiarity is that even some conservative legislators have embraced the public takeover option--a plan that, under other circumstances, they might have attacked as socialistic.

“I’m surprised--and a little skeptical--over how many people have jumped on this bandwagon,” San Diego City Councilman Bob Filner said. “This sounds like the kind of thing I’d suggest and they’d all dump on . . . as some kind of Commie plot.”

Humorous and Ironic

And, in an incident as humorous as it is ironic, the city of San Diego and the Water Authority now are squabbling over who will pay for the $250,000 feasibility study at the same time that their respective leaders are contemplating taking over a $2-billion-plus utility. The City Council has agreed to loan the money to the water board for the study, but the water agency regards the funds as a grant that might be repaid. That dispute probably will not be settled until the council returns from its Christmas recess next month.

From Roberts’ perspective, the ironies simply demonstrate how thoroughly conventional political thinking has been turned on its head by the controversy over the proposed merger.

“I don’t know if it’s possible to roll back the clock, but my personal preference would be that Edison had never showed up to make this offer and that SDG&E; would just continue operating as it is now,” Roberts said. “A few years ago, any politician in this town would have been crazy to say that. But now, that looks like the best choice we have. If there’s a way to get the toothpaste back in the tube, I hope we find it.”