Too Many Negatives to SDG&E; Merger, City Attorney Tells Council

San Diego City Atty. John Witt recommended Wednesday that the City Council oppose San Diego Gas & Electric’s proposed merger with Southern California Edison because the deal “is not in the best interests” of San Diegans.

In a memorandum circulated Wednesday, Witt suggested that the merger would eliminate local utility jobs, damage San Diego’s civic pride and hurt the environment. He also maintained that the merger would not produce the rate reductions promised by the utilities.

The City Council, which has held five public hearings on the merger, is expected to take a stand for or against the merger during a 2 p.m. hearing today. Utility company representatives have claimed that San Diego Mayor Maureen O’Connor and council members already oppose the merger.

Executives at both companies Wednesday contested Witt’s claim that the merger would hurt San Diego.

“We continue to believe the merger is in the best interest of the people of San Diego,” said Karen Hutchens, SDG&E;’s manager of governmental affairs.

“He’s wrong,” said Edison spokesman Lewis Phelps of Witt’s stand. Phelps argued that the merger would bring the promised rate reductions--and that they would “far exceed” the negative economic effect of any SDG&E; job cuts.

Witt is also seeking City Council approval to start court proceedings to determine whether SDG&E; needs council approval to transfer city-granted franchise agreements to Edison.

The utilities have maintained that, under state corporation law, the proposed merger would not constitute a transfer. However, earlier this year, Witt advised council members that SDG&E; needs permission to transfer the franchises to Edison.

If the city does sue to settle the franchise question, SDG&E; might steer more than $20 million in annual franchise fees to an escrow account “until the matter is settled,” Hutchens said. Hutchens said council members must consider “the risk to the city if they do (go to court) and have to make up for a $20-million hole in their budget.”

Although the franchise disagreement will probably end up in court, it could be some time before any legal action occurs. “It’s a matter of timing,” Hutchens said. “And the transfer issue clearly isn’t ripe” for legal action, she said.

The establishment of an escrow account would “signal SDG&E;’s intention to play hardball,” said Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group. However, Shames, who has urged council members to oppose the merger, suggested that SDG&E; could risk alienating the public by halting the payments.