Report on SDG&E; Merger Draws Split Response

Opponents and proponents of San Diego Gas & Electric’s proposed merger with Southern California Edison offered sharply divided opinions Wednesday on a federal report released early this week.

SDG&E; attorney Greg Barnes described the report as “an encouraging development. . . . The Federal Energy Regulatory Commission staff filed testimony and did not oppose the merger.”

Edison Vice President Lewis Phelps described the 1,200-page review--the first substantive document generated by the energy commission on the issue--as a “ringing endorsement” of the proposed merger. “They had no quarrel with our findings” that the merger would generate $1.7 billion in savings for utility customers over the coming decade, Phelps said.

“That’s an assessment based more in fantasy than reality,” said Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group. He said the staff report fails to address “the question of whether savings will occur, or whether the merger would be good for San Diego or California.”

City of San Diego staff attorney Les Girard complained that the report ignores “the issue of the alleged cost savings, which our experts have said are nonexistent.” Girard also contended that federal regulators ignored the city’s contention that Edison has arranged “sweetheart deals” to purchase electric power from its Mission Energy subsidiary.

Edison and SDG&E; executives, however, maintained that the energy commission staff ignored those arguments because they are without merit. “The staff’s lack of comment means that they’ve analyzed our submissions and concur” that the merger is in the best interests of Southern California utility customers, Phelps said.

The report “focused on what it was supposed to focus on,” Barnes said, “and that is whether the merger would decrease competition. They concluded that it had no significant antitrust consequences.”

Proponents and opponents of the merger did agree that the commission staff believes the merger would worsen competitive problems for several municipal utility systems that use Edison transmission lines to import electricity for their customers.

The report, issued Tuesday, will be followed by a final staff report in the wake of public hearings that are to begin in Washington in late January. Merger opponents could use those hearings to press the energy commission staff to tackle issues that were not included in this week’s report, Girard said.