Water Board Condemns SDG&E; Lawsuit : Says Free Speech at Stake in Bid to Stop Study; Judge to Rule Monday

San Diego Gas & Electric Co.’s attempt to quash a feasibility study for a municipal takeover of the utility is an attempt to breach the County Water Authority’s First Amendment rights of free speech, an attorney for the water agency said at a hearing Tuesday.

The charge was leveled during a two-hour argument by attorney Michael S. Gatzke before Superior Court referee Harold F. Wolters. The hearing was held to consider SDG&E;’s request for an injunction that would bar the authority-sponsored study until a trial is held to decide SDG&E;’s claim that it is outside the board’s authority.

“The water authority is trying to get information about the biggest business event in the history of the county,” Gatzke said of SDG&E;’s announced plan to merge with Rosemead-based SCEcorp. “Why is SDG&E; here? They don’t want us to have information.”

Written Decision Monday

Wolters, a retired Superior Court judge, said Tuesday that he will issue a written decision Monday on whether to recommend the injunction. Wolters’ recommendation will then go to Superior Court Presiding Judge Michael Greer for signature.

After the hearing, SDG&E; attorney Steven S. Wall said the preliminary injunction is not an issue of free speech but of whether the water authority is overstepping its powers even by studying a takeover’s feasibility, much less mounting a full-blown attempt.

The County Water Authority, the City Council and local state legislators are seeking to block SDG&E;’s merger with SCEcorp, the parent of Southern California Edison, on grounds that rates would go up and San Diego would lose influence in the running of the utility.

To that end, the water board contracted with R. W. Beck & Associates of Seattle last month to study the feasibility of a municipal takeover. The study was to have cost $100,000, part of $940,000 budgeted by the board for takeover activities. The sum includes lobbying expenses to promote a bill introduced by state Sen. Larry Stirling (R-San Diego) that would give utilities clear takeover powers.

SDG&E; filed suit against the water authority Feb. 10, charging that the board overstepped its powers in spending public funds on the study. Any such study would first require a takeover-enabling act passed by the Legislature, SDG&E; maintains.

Surprise and Setback

In an action that was described by the water board as a surprise and a setback, Wolters granted SDG&E;’s request for a temporary restraining order Feb. 14, halting the study for 30 days. In granting the order, Wolters said he wanted the study placed on hold until Tuesday’s fuller hearing. But he seemed to give SDG&E;’s reasoning at least a qualified endorsement.

“Until legislative action authorizes (the Water Authority) to own and operate the SDG&E; system, it cannot legally do so. . . . 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.”

Boosters of the municipal takeover, including Stirling, say that getting a new enabling law through the Legislature is a long shot because of the immense lobbying power of SCEcorp and SDG&E.; “I hold out no hope for it,” Stirling said in an interview Tuesday.

At the hearing, Gatzke tried to persuade the court that both the state constitution and the public utility code contain language conferring powers on bodies such as the water authority to mount takeover bids and, by extension, to authorize feasibility studies.

Gatzke also defended the authority’s power to conduct the study, not solely to prepare a “blueprint for a takeover,” to use Wall’s phrase, but for a variety of other reasons connected to its role as a public agency.

Identifying Assets

Among the legitimate reasons for the study listed by Gatzke were to identify individual SDG&E; assets that it may condemn if the merger succeeds. The study would also help familiarize the water board with regulatory issues that will come up as the proposed merger undergoes scrutiny.

“If we can’t get adequate information, we can’t make adequate decisions to serve the public,” Gatzke said.

Wall insisted Tuesday that the water authority has no such powers or rights under existing statutes and said the authority’s contract describes the study only as a “takeover study.” Contesting Gatzke’s assertion that lobbying funds are required for the success of virtually any state bill, Wall said “plenty of bills get passed without spending hundreds of thousands in studies and lobbyists’ fees.”