Ruling Bars Buyout Study of SDG&E; by Water Agency

A Superior Court referee Tuesday temporarily blocked the County Water Authority’s plans to study a municipal takeover of San Diego Gas & Electric Co., granting the utility’s request for a restraining order until a fuller hearing can be held March 14.

Ruling that the month’s delay will do no harm to the Water Authority’s bid to conduct a feasibility study, Superior Court Referee Harold F. Wolters wrote that the outcome of the court case hinges on the Water Authority’s efforts to win passage of state legislation allowing a takeover.

State Sen. Larry Stirling (R-San Diego) is sponsoring legislation that would change the 45-year-old law that created the Water Authority to give it the power to acquire the utility.

“Until legislative action authorizes (the Water Authority) to own and operate the SDG&E; system, it cannot legally do so,” Wolters wrote in his decision. “ . . . Should that proposed legislation fail, there is good reason to believe that (SDG&E;) could prevail ultimately in this action, as the facts are presented to the referee at this time.”

Water Authority officials expressed surprise at the decision, but promised to continue with lobbying and other activities related to the legislative effort.

“It is a setback,” said Jim Melton, director of public information for the Water Authority. “We are very surprised and very disappointed.”

Money for Study Frozen

Melton agreed that Wolters’ decision freezes expenditure of the $100,000 budgeted for R.W. Beck & Associates, a Seattle-based consultant that is under contract to conduct the feasibility study. Melton said that Water Authority lawyers would study the decision to determine whether any more of the $940,000 budgeted for takeover activities is frozen by the decision.

Utility officials, who hailed Wolters’ ruling, claimed that the restraining order prevents the Water Authority from spending any money except the funds devoted to its legislative effort. Steven Wall, SDG&E;’s attorney, declined to specify the amount of money he believes is frozen.

Paul Downey, spokesman for San Diego Mayor Maureen O’Connor, who has led a high-profile campaign against the merger, also expressed disappointment with Wolters’ ruling.

SDG&E; officials “keep contending that once the facts are out, people will see that this is the most wonderful thing ever,” Downey said. “The question is, what are they afraid of? Let’s have a study.”

SDG&E; filed suit in Superior Court last week to prevent the Water Authority from spending taxpayers’ funds to conduct a study of the takeover. The agency wants to explore the takeover as an alternative to SDG&E;’s planned $2.4-billion merger with Rosemead-based SCEcorp, parent company of Southern California Edison.

Under threat of the SDG&E; lawsuit, the Water Authority’s board of directors voted Thursday to increase the budget for the first phase of its takeover effort from $250,000 to $940,000. The budget includes money for the study, lobbying, legal defense and public relations.

Could Cause Taxpayers Harm

As a county taxpayer, SDG&E; argued in a hearing Tuesday morning that allowing the Water Authority to spend public money would cause taxpayers irreparable harm. Water Authority attorney Paul Engstrand did not dispute that the utility has the standing to make that argument, though he disagreed with it.

“This is one of the reasons we jumped in now, because as this thing develops through the feasibility analysis, it is totally possible that they could spend millions of dollars,” said Karen Hutchens, SDG&E;’s governmental affairs director.

Wall also contended that the Water Authority had no right to conduct the study before the passage of legislation allowing a takeover.

Hoping to stave off the temporary restraining order, Engstrand countered that SDG&E; would suffer no irreparable harm if the study proceeded until a fuller hearing on the matter sometime in the future.

Wolters, saying that a balancing of the competing claims led him to decide in favor of SDG&E;, worried that “the expenditure of funds of a considerable sum when from public assets should be of particular concern if, in fact, there is some doubt as to whether such funds could be recovered.”

Wolters, a retired Superior Court judge, scheduled a March 14 hearing on SDG&E;’s request for a preliminary injunction, which, if approved, would extend the ban on the feasibility study until the lawsuit could be litigated.