Utility’s Plans Fan San Diego’s Fears of L.A.

A local group that opposes Southern California Edison’s proposed merger with San Diego Gas & Electric recently unveiled a television commercial that compared San Diego’s fate in the wake of the proposed merger to that of a man facing death in the electric chair. An off-screen voice urged San Diegans to “get out of the chair and call 233-NO LA. Before it’s too late.”

The hard-hitting commercial struck a responsive chord. In a city that prides itself on staying clear of the Los Angeles/Orange/Riverside/San Bernardino county megalopolis, the proposed merger has many business and civic leaders seeing red. Covering much of Central and Southern California--though not Los Angeles--the Edison utility giant headquartered in Rosemead would, if it takes in San Diego, become the nation’s largest supplier of electricity, serving 4.8 million customers.

San Diego Mayor Maureen O’Connor recently described the proposed merger as the most important issue of her political career. That assessment came even as the city struggles with drugs and gang violence, an intensifying debate over growth controls and problems linked to the international border with Tijuana.

To merger opponents in San Diego, Edison’s attempt to gobble up the city’s local utility symbolizes everything that is wrong with Los Angeles, with its smog, traffic and crime. The intensity of the feeling among community leaders can be gauged, for example, by Greater San Diego Chamber of Commerce President Lee Grissom, who derisively refers to Los Angeles as the dreaded “L word.”

Many San Diegans took pride in a recent Los Angeles Times Magazine poll suggesting that many Angelenos would rather live in San Diego, where the quality of life is better.

On the Edison/SDG&E; merger question, a Times Poll in February showed that San Diegans with an opinion were opposed by a lopsided 4-1 margin, with two-thirds of the opponents saying they “strongly disapprove.”

Many San Diegans tend to distrust Edison’s management, the poll suggested. Although Edison executives have pledged to seek a 10% rate reduction for existing SDG&E; customers, the poll showed that, while 33% took the company at its word on that promise, 49% did not.

There is the belief that the quality of life in San Diego will deteriorate should control of SDG&E; move from the utility’s downtown office building to Edison’s headquarters in far-off Rosemead. The merger, they argue, will ultimately drive up electric rates--despite Edison’s claims to the contrary--and eliminate 1,000 local jobs. San Diegans also fear that Edison will dirty the county’s relatively clean air by boosting use of three under-utilized electric generation plants owned by SDG&E.;

“We might as well rename (the county) Branch Diego because that’s about all we’ll have left,” Grissom complained shortly after the proposed merger was announced in 1988. “We need that corporate headquarters here.”

Turning control of SDG&E; over to Edison would “clearly label San Diego as a division town,” said Dan Pegg, president of the San Diego Economic Development Corp. “We would become the largest city in the United States whose utility was not headquartered within the community. . . . It (would be) a major mistake.”

University of San Diego Prof. Peter Navarro believes that the proposed merger would devastate San Diego by aligning Edison, generally known as a hard-nosed, pro-development force, with land developers who will build at an even greater rate.

“I just shudder to think of what will happen,” said Navarro, whose Prevent Los Angelization Now (PLAN) group hopes to place a growth control initiative on the ballot in June.

San Diego’s labor, business, civic and consumer group leaders, who generally don’t agree on many things, nonetheless were able to sit down in the same room and create the Coalition for Local Control. Grissom, for one, acknowledged that he had never been in the same room with the Sierra Club representative or the leader of a San Diego-based consumer group that monitors SDG&E.;

The organization, which hopes to derail the merger and keep “control” of SDG&E; in San Diego, is unfazed by the fact that SDG&E; already is owned largely by out-of-town investors.

The merger has spawned a number of other groups. One group supports the merger, while another was formed to oppose a possible government takeover of SDG&E; intended to thwart Edison’s bid.

San Diego’s new-found fervor for the utility industry surfaced last winter, shortly after Edison made its uninvited bid for SDG&E.;

Curiously, for nearly a decade before the merger proposal, SDG&E; was the object of scorn in San Diego. During the early 1980s, SDG&E; managers gave serious thought to stripping the company logo from trucks and cars to protect employees from irate San Diegans who were upset by the utility’s notoriously high electric rates.

Why has the current love affair with SDG&E; blossomed?

“We have the reputation of our city at stake,” Great American Bank Chairman Gordon Luce said earlier this year. “I think this is a very unusual situation.”

Luce, a rock-solid Republican and proponent of the free-market system, has used acquisitions and mergers to transform Great American from a tiny San Diego thrift to a regional powerhouse with branches in California, Oregon and Arizona.

But Luce, a native San Diegan, has set corporate etiquette aside and agreed to chair the Coalition for Local Control. His opposition is based largely on a philosophical issue: Utilities, he argues, with their government-guaranteed monopolies, are unduly protected from free-market forces. Keeping SDG&E; alive, he reasons, would keep competition alive in Southern California’s utility industry.

San Diego’s business psyche has taken a beating in recent years with the departure of other large, publicly held companies--most notably PSA and Signal Cos., which was devoured by Allied-Signal Inc.

But ill will caused by those mergers pales in comparison to the open hostility generated by the proposed utility merger. SDG&E; Chairman Tom Page, for example, who just over a year ago was hailed as a hero for reducing SDG&E;’s electric rates, now finds himself cast as the villain for embracing Edison’s takeover bid.

It will take at least another year for state and federal regulators to complete their reviews of the merger. In the meantime, O’Connor and the City Council are holding hearings to determine if the city should try to derail the merger. Similarly, the San Diego County Water Authority recently completed a preliminary report suggesting that a government takeover of SDG&E; would be economically attractive to consumers.

While San Diegans might want to stop the merger, it will be difficult: The state Public Utilities Commission will approve the merger if the utilities prove that it will generate both short- and long-term benefits for customers in Southern California. City leaders have acknowledged that they lack the financial resources to do battle with the utilities.

And, while Edison Chairman Howard Allen has expressed surprise at the reaction in San Diego, he has pledged to spend whatever it takes to win the battle. “We’re an industry where it takes at least 10 years to build a power plant, so we’re used to waiting,” Allen said earlier this year.

Edison executives argue that the merger will bring lower electric rates and better service to SDG&E;’s service territory in San Diego and southern Orange counties. Those benefits will accrue because the merger will generate $1.7 billion in savings during the 1990s alone, Allen said.

“The merger will allow us to save at least $100 million a year in operating expenses by cutting out duplication in the organizations, staffing and facilities of the two utilities,” Allen said during a recent speech in San Diego.

NEXT STEP

The proposed merger is subject to approval by the state Public Utilities Commission and the Federal Energy Regulatory Commission. Both are conducting reviews that are not expected to conclude until late 1990. Their rulings will follow thereafter.