Council Votes to Oppose Merger of SCE, SDG&E; : Utilities: Unanimous decision by the San Diego council clears the way for the city to mount a legal challenge to the union.

The San Diego City Council voted unanimously Thursday to oppose San Diego Gas & Electric’s planned merger with Southern California Edison, clearing the way for a legal battle to determine whether San Diego can prevent Rosemead-based Edison from becoming the nation’s largest electric utility with 4.8 million customers.

Mayor Maureen O’Connor, who described the controversial proposal as the “most important merger in this country,” asked council members to “vigorously oppose” the proposed combination during state and federal hearings. O’Connor painted Edison as a debt-heavy corporation that would be inaccessible to most San Diegans because of its “remote” location in Rosemead, a city in the San Gabriel Valley near Los Angeles.

The council’s opposition vote came a year to the day after SDG&E;’s board of directors first accepted a $2.4-billion stock swap offer from SCEcorp, Edison’s parent company.

Utility executives at Thursday’s hearing expressed little surprise at the unanimous vote.

“They made their position known in January, before the (recent) public hearings,” said Edison Vice President Michael Peevey.

SDG&E; Controller Frank Ault described the action as “premature” because council members have not heard all of the testimony being gathered by the state Public Utilities Commission and the Federal Energy Regulatory Commission, which will complete hearings on the merger during 1990.

Thursday’s council vote empowers City Atty. John Witt to seek a court decision on whether San Diego can stymie the merger by refusing to allow SDG&E; to transfer city-granted franchise agreements to Edison.

Witt previously advised council members that SDG&E; needs the council’s permission to transfer the franchises to Edison. But SDG&E; and Edison contend that, under California corporation law, the merger does not constitute a transfer of the normally mundane franchises that give SDG&E; right of way on city property.

It was unclear Thursday when the city will go to court for the “declaratory relief” action. SDG&E; officials have stated that the franchise question would not be “ripe” for a court test until after state and federal regulators have approved the merger. The PUC and FERC reviews will not be completed until late next year.

Robert Hudson, executive director of the Coalition for Local Control, credited the unanimous vote to “stepped-up lobbying” by his group during the past week. But Hudson expressed surprise at the unanimity because Councilman Bruce Henderson and other council members seemed uncertain about how they would vote during Thursday’s session. The coalition includes members of civic, consumer, business, environment and labor organizations.

Peevey and Ault said the vote was not a complete defeat for the utilities because four council members--Wes Pratt, Bob Filner, Gloria McColl and Ed Struiksma--indicated that the council could reverse field if federal and state regulators uncover hard evidence that San Diegans will benefit from the merger.

The four council members noted that their vote to oppose the merger was based on the facts known now. Struiksma, who, along with McColl, leaves office Monday, was concerned that the council was “closing the door” should the new council decide to reconsider the merger.

“I’ll be the first to admit if our experts are wrong,” said Pratt, who chastised Edison for successfully lobbying against a state legislative proposal that would have allowed San Diegans to vote on the merger.

Filner, who attacked SDG&E;’s track record, asked council members to give serious thought to whether SDG&E; could continue to provide adequate service if the merger were blocked.

During Thursday’s meeting, O’Connor painted Edison as a debt-heavy corporation that might jeopardize the quality of utility service in San Diego.

The mayor hinted that the company’s past decision to sell convertible bonds to foreigners might turn control of the company over to owners who would pay little heed to San Diego’s energy needs.

After the meeting, Peevey said Edison entered debt markets in Japan, Europe and New Zealand because “it would lower the cost to ratepayers.” Ault said that SDG&E; has given serious thought to entering the Japanese bond market, but that has not happened because the local utility has not needed to increase its borrowings.

In a related action Thursday, a Superior Court judge rejected a pro-merger group’s contention that the council violated the state’s open-meetings law by holding a series of closed-door discussions this year on merger-related regulatory proceedings.

Judge Philip Sharp ruled that there was no evidence that the council discussed $2 million in payments to lawyers and consultants behind closed doors, gave improper notice of hearings on merger issues or attempted to avoid public scrutiny of merger-related decisions.

“I just don’t see any blatant attempt by council to subvert the Brown Act,” Sharp said.

San Diegans for the Merger, organized by an energy consultant who lists Edison as one of his clients, filed suit Oct. 4, claiming that debates held in closed sessions denied the public the right to hear council discussion.