SCE Stockholders Vote for Merger : Creation of Largest U.S. Gas-Electric Utility a Step Closer

SCEcorp Chairman Howard Allen’s dream of creating the nation’s largest gas and electric utility took another step toward reality Thursday when shareholders of Southern California Edison and SCEcorp, its parent company, voted to merge San Diego Gas & Electric into Edison.

“This is another important milestone,” Allen told the more than 1,000 shareholders who gathered Thursday to vote at a City of Industry hotel. Holders of the parent corporation’s common stock voted overwhelmingly to approve the merger, as did holders of the utility company’s preference and preferred stock, according to Edison spokesman David Barron.

Allen told shareholders that the proposed merger would produce $1.7 billion in cost savings between 1990 and 2000, most of which would be used to reduce rates for customers throughout Southern California.

Lower Rates Predicted

The merger that is expected to produce lower rates and better service for customers will also improve shareholder value in the long run, Allen said.

That increased value will develop because the merged companies, with 4.8 million customers, will be better prepared to handle anticipated growth in Southern California, Allen said. Shareholders will benefit because Edison would control SDG&E;’s service franchises in southern Orange and northern San Diego counties, which boast the state’s fastest growth rates.

The two counties have the “kind of desirable customer mix” that Edison needs to balance the large commercial and industrial customers who increasingly have been leaving the Edison system and building their own power-generation plants, Allen said.

When pressed by shareholder Rosemarie Reynolds, Allen vowed that the merger would not force SCEcorp, which is based in Rosemead, to alter its dividend policy. However, Allen was unable to predict when the company’s stock would recoup the 7% dilution that will occur if the stock-swap merger is completed.

Allen also discounted the firestorm of protest that the merger has generated in San Diego County, where the County Water Authority has earmarked $100,000 to study a possible government takeover of SDG&E.;

That protest is being led by a “small group of well-intentioned people” who are running a largely emotional campaign against the merger, Allen said. The anti-merger push “is damaging San Diego in the eyes of business leaders nationally,” said Allen, who complained that anti-merger proponents have ignored “the facts” and instead concentrated on “an emotional approach . . . of San Diego against Los Angeles.”

San Diego Mayor Maureen O’Connor responded by calling Allen “the king of misinformation.” She noted that 39% of common stock owners in the two companies voted against the merger and said she believed that the 20% of San Diegans who own common stock were among them.

Rather than reacting from emotionalism, opponents are concerned about rising electricity rates and increased air pollution that O’Connor believes would result from a merged utility.

“Mr. Allen keeps using the term ‘emotional.’ If you look at his record, he’s the one giving out the misstatements and the misinformation,” O’Connor said.

Thursday’s SCE shareholder meeting was interrupted briefly when about two dozen protesters from the Los Angeles-based Brotherhood Crusade began to chant anti-Edison slogans outside the meeting room.

Terse Exchange

During a question-and-answer session, Danny J. Bakewell Sr., the group’s president, repeatedly pressed Allen to modify the way that Edison makes charitable donations. Allen agreed to meet with Bakewell, but during a terse exchange, the executive told Bakewell to sit down and let other shareholders speak.

Bakewell, who identified himself as an SCEcorp shareholder, subsequently complained that Allen had “simply kissed us off, ignored us.”

The brief demonstration, however, was the only unplanned event at the closely scripted meeting.

SDG&E; shareholders Tuesday approved the merger that now must be approved by various regulators, including the state Public Utilities Commission and the Federal Energy Regulatory Commission.

During Tuesday’s meeting in San Diego, 61% of SDG&E;’s common stock shareholders approved the merger. Holders of SDG&E; preference and preferred stock voted in favor by 67.3%. Approval of the merger required a simple majority vote of common shareholders and two-thirds of the preference and preferred stockholders.

According to terms of the merger agreement, SDG&E; shareholders will receive 1.3 shares of Edison stock for each share of SDG&E.; That stock swap is expected to generate a 23% premium for each share of SDG&E; common stock. It would boost SDG&E; common stock dividends by 24% and boost the book value per share of each SDG&E; common share by 29%, according to the company.

SCEcorp closed at $32.125 Thursday, down .125. SDG&E; closed at $37.875, also down .125.

Times staff writer Leonard Bernstein in San Diego contributed to this story.