Impact on Competition : PUC Broadens Its Study of SDG&E;, Edison Merger

State regulators have significantly broadened their study of San Diego Gas & Electric’s proposed merger with Southern California Edison to include the effect on competition if the two utilities combine.

In a ruling that drew heated objections from both utilities, Lynn Carew, a state Public Utilities Commission administrative law judge, determined that the PUC has an obligation to study the proposed merger’s impact on competition in the utility industry.

The utilities have maintained that the PUC lacks authority to address competitive issues. The utilities have argued that competitive effects will be addressed in the Federal Energy Regulatory Commission’s upcoming review of the proposed merger.

Order Issued

But Carew ordered the utilities to prepare testimony on how the proposed merger would affect wholesale power purchases, transmission-line access and retail rates and service.

In a related decision, Carew ordered interested parties, including the city of San Diego and consumer groups, to suggest alternatives that SDG&E; and Edison might consider instead of a merger.

During a daylong session in San Diego, Carew also proposed an extended review schedule that could delay a final PUC decision on the merger until December, 1990.

Carew’s proposed review schedule drew praise from critics of the proposed merger. But it provoked heated opposition from the utilities, which had hoped to gain PUC approval and complete the merger before a March 30, 1990, deadline.

The “drop dead” date that was written into the merger agreement allows either utility to walk away from the proposed merger if it is not complete before March 30, according to Edison spokesman Lewis Phelps. However, Phelps indicated that it is highly improbable that either utility will abandon the merger plan.

PUC President Mitchell Wilk, who attended Thursday’s session, maintained that the schedule ensures “there will be no rush to judgment” on the merger. Wilk suggested that the merger, which would create the nation’s largest gas and electric utility, is “one of the most important proceedings ever to come before” the PUC.

Edison officials were “very disappointed” by Carew’s proposed schedule, according to Phelps. An attorney representing Edison at the hearing said the schedule might needlessly delay the lower electric rates that the utilities expect the merger to generate.

Philip S. Weismehl, an attorney with the PUC’s Division of Ratepayer Advocates, predicted that long-term benefits from the lengthier review would outweigh the “short-term” disadvantages predicted by Edison and SDG&E.;

The City of San Diego is “very pleased with the proposed schedule,” according to Deputy City Atty. William Shaffran.

Carew’s proposed schedule also drew praise from Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group. “I think the utility juggernaut has been slowed,” said Shames, who has consistently opposed the utilities’ request for an expedited review.