Water Board Likely to Fund SDG&E; Study : Move Would End Money Rift With City Over Attempt to Block Merger

In a reversal of their earlier position, County Water Authority officials have informally agreed to pay $250,000 for a feasibility study on a public takeover of San Diego Gas & Electric Co., Mayor Maureen O’Connor announced Tuesday.

The decision, if ratified by the Water Authority’s 35-member board of directors at its Feb. 9 meeting, could end a brief tussle between the Water Authority and the city of San Diego over who would pay for the study and set the research in motion.

The agreement was reached in a meeting between O’Connor and Water Authority Vice Chairman Mike Madigan last Thursday. The session also included Water Authority General Manager Lester Snow and San Diego City Atty. John Witt.

Full Board OK Is Expected

“It’s legal, and we’re going to ask the Water Authority to pick up the tab,” Madigan said in an interview Tuesday, adding, “I think the board will go along with it.”

In a related matter, the San Diego City Council instructed Witt to investigate allegations of improper contacts between SDG&E; and Southern California Edison--whose parent company, SCEcorp., is attempting to buy the local utility for $2.4 billion.

The Utility Consumers Action Network, a San Diego-based consumer group, alleged Monday that SDG&E; is sharing “proprietary information” on power purchases, transmission-related contracts and purchases of goods and services with Edison, which remains an SDG&E; competitor until a merger is approved.

The accusations came in a request to the state Public Utilities Commission for an injunction barring the sharing of information in the belief that Edison would gain a competitive advantage over SDG&E; during the 18 months before the merger either succeeded or fell through, said Michael Shames, UCAN’s executive director.

A published report also indicated that Edison officials have already participated in some decisions made by SDG&E.;

“This alarming development raises serious questions about the legality of such a decision-making process,” said O’Connor, who is leading a high-profile campaign against the merger. “It seems to us that such actions may seriously violate legal restrictions imposed by the city’s franchises” as well as state and federal regulations.

Assistant City Atty. Ron Johnson said San Diego has no evidence of impropriety but was spurred by rumors and allegations to investigate.

Accusations Disputed

SDG&E; Vice President Jack Thomas called the claims “baloney.”

“We are running San Diego Gas & Electric Co. and making decisions,” he said. “We are abiding precisely with the merger agreement we have with Southern California Edison Co.”

A spokeswoman for the Public Utilities Commission said she could not comment on the allegations, which the commission has not formally received. She said SDG&E; and Edison would have 15 days to respond before the commission decides whether to hold a hearing on the matter.

Shames said his allegations stem from telephone calls he is receiving from SDG&E; employees and the terms of the merger agreement, which he believes lacks wording to protect proprietary information.

But Thomas said Shames’ claims are “simply not true. We are not exchanging information with Southern California Edison of a proprietary nature.”

Thomas agreed that other decisions have been made jointly since SDG&E;’s board of directors agreed to Edison’s buyout offer Dec. 1, including a change in the thrust of an advertising campaign and a switch of articles in a company newsletter. But he said the policy shifts were legal.

On some matters, “We are not competing with Edison Co. now,” he said. “We are engaged to be married. We’ve got a wedding here in 18 months.

The spat between San Diego and the Water Authority developed last month after a preliminary legal opinion from Water Authority attorney Paul Engstrand found that the agency could not legally finance the study with its money.

After that opinion, the authority’s Snow and City Manager John Lockwood met and agreed to propose that the city fund a study conducted by the water board. On Dec. 13, the City County voted to lend the Water Authority $250,000 for the study.

Water Authority directors voted to accept the payment the next day, but said they considered it a grant, to be repaid if the agency actually took over SDG&E;, which could take years.

Water Decision Reversed

The impasse over whether the payment would be a loan or grant remained until Engstrand reversed himself Jan. 6, ruling that the Water Authority could spend its money on the feasibility study.

Despite the apparent agreement for the Water Authority to finance the study, the City Council voted in closed session Tuesday to reaffirm that $225,000 of the proposed payment would be a loan not a grant, O’Connor said. Councilman Bob Filner, who opposes having the city finance the study, dissented from the decision.

Assistant City Atty. Johnson said, “We are not going to change it from a loan to a grant, but we are offering a loan.”