Merger Foes Hope to Sway SDG&E; Board : Utilities: After Saturday, either company can back out. But, so far, neither the officials of Edison nor of the San Diego company see any reason to do so.

The sentences buried deep in the massive federal regulatory filings that describe San Diego Gas & Electric’s proposed merger with Southern California Edison are loaded with legalese, but the message remains clear: either corporation has the option of backing out of the controversial utility merger if the deal is not completed by Saturday.

Merger opponents plan to focus on those sentences in a campaign to get SDG&E;’s board members to reverse their merger vote.

But SDG&E; and Edison executives maintain that there is no reason to abandon the deal that would create the nation’s largest electric utility with 4.5 million customers.

During recent interviews, SDG&E; Chairman Thomas Page and other board members said public opinion alone won’t be enough to make them abandon the merger. And, despite publicity surrounding the merger, four SDG&E; board members who agreed to talk about the merger said they have rarely--if ever--been approached by merger opponents or representatives of the city of San Diego, which is opposing the merger in regulatory reviews of the merger.

Merger opponents acknowledged that they have not yet attempted to sway the board’s opinion. Now, the Coalition for Local Control, which was formed last year to oppose the merger, plans to use the Saturday “walkaway” date to begin a lobbying campaign aimed at getting SDG&E;’s board to reverse its November 1988 vote to accept the $2.4-billion stock swap merger.

“The merger agreement allows for the directors to take another look at it,” said Robert Hudson, executive director of the coalition, an unlikely blend of civic, consumer and business groups. “We think we should give them some information to help them” re-evaluate the proposed merger, Hudson said.

The coalition soon will begin a largely behind-the-scenes lobbying campaign aimed at getting the six San Diego residents who serve on SDG&E;’s seven-person board to drop the agreement that would create the nation’s largest gas and electric utility.

“We think there’s a legitimate case to be made to board of directors at this time,” said Hudson, in reference to negative merger reports issued by the state Public Utilities Commission’s staff and state Atty. Gen. John Van de Kamp.

Utility executives, however, remained adamant that the merger continues to make sense for shareholders, customers and San Diego County residents.

“Either party has the legal right to withdraw (after March 31), but there’s no obligation to withdraw, and I know of no reason why the merger agreement would not continue in effect,” Edison spokesman Lewis Phelps said.

During interviews recently, SDG&E; Chairman Thomas Page and three SDG&E; board members said a decision to reverse field on the $2.5-billion stock swap merger must be driven by cold, hard facts, not public or peer pressure.

Page, speaking as an individual board member as well as board chairman, maintained that the merger makes as much sense today as it did when first proposed. Board members who agreed to talk about the merger echoed Page’s opinions.

“The decisions I would make in connection with this (issue) have to do with the facts of the case, not with emotions or public pressure,” said Fred C. Stalder, an SDG&E; board member since 1969.

“I’ll be glad to listen,” said another board member who requested anonymity. “But it comes down to what (regulators) say. If they, with due diligence and careful review proceedings conclude that the benefits to ratepayers aren’t there, or are marginal, then that’s where it is.”

“I was born here, I love this city, and I’m proud of it,” said Ralph R. Ocampo, an SDG&E; director since 1983. “But I’m not going to reverse (a vote) simply because of emotion . . . ultimately, the bottom line of is winning out for the ratepayers and the shareholders and others who consider themselves to be part of San Diego. This has to be decided on the merits, not because someone wants to maintain a fiefdom in San Diego.”

“The issues from my standpoint are very clear,” said Daniel W. Derbes, a San Diego businessman who has served on SDG&E;’s board since 1983. “And I have every reason to believe that we should continue to pursue” the merger.

“The regulatory process is the proper place for discussions to take place,” Page said. “Not with debates with a local committee.”

Page and Phelps acknowledged that the merger would be finished if state and federal regulators, who will complete their merger review later this year, determine that the merger won’t produce long-term benefits for ratepayers, or would harm air quality.

SDG&E; board members are among San Diego’s most powerful business and civic leaders. Malin Burnham, a businessman, is perhaps best known by the public for his backing of the recent America’s Cup campaign. Former Congressman Clair Burgener spent 24 years in public office. Stalder has been involved in many civic and cultural activities for the past 40 years.

The only non-San Diegan on the board is Catherine Fitzgerald Wiggs, a Los Angeles business consultant.

Anti-merger forces acknowledge that their fight might have been easier had two other SDG&E; board members--businessmen Charles R. Scott and O. Morris Sievert--not resigned their board seats to protest the proposed merger in late 1988.

Scott and Sievert subsequently took the unusual step of testifying in public about what went through their minds in late 1988 as SDG&E;’s board contemplated the merger with Edison. And, the PUC, in a highly unusual move, ordered the utilities to make public hundreds of pages of documents that SDG&E;’s board used to study Edison’s merger offer.

During depositions conducted by city of San Diego attorneys, Scott alleged that Edison executives lured SDG&E; board members to support the proposed merger by improperly promising them seats on the Rosemead-based utility’s board after a merger was completed. Scott also testified that the board heard relatively little discussion about the environmental impact that the merger might have on San Diego.

Sievert testified that SDG&E; lawyers gave the utility board bad advice on the merger vote. Sievert maintained that, after listening to SDG&E;’s outside law firms, he had no choice but to vote for the merger because the deal was so potentially lucrative for the utility’s shareholders.

Sievert testified that he subsequently read the disputed legal opinions and now believes he could have given more consideration to SDG&E;’s employees and customers.

“Yes, it would be nice to have (Scott and Sievert) on the board,” said Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group. “But, on the other hand, we wouldn’t have found out any of the things we’ve learned” through the depositions had they not resigned.

Merger opponents will rely heavily upon Sievert’s contention that board members were ill-served by the three high-powered legal firms that advised SDG&E;’s board on the merger.

The anti-merger lobbyists also will rely upon a state Public Utilities Commission staff report that ripped the utilities for proposing a merger that would not produce long-term benefit to utility customers. And, they are likely to use information generated by Atty. Gen. John Van de Kamp, who is opposing the merger on antitrust grounds.

Merger opponents also are awaiting a PUC staff report that is expected to include a scathing environmental impact review that will paint the utility merger as doing serious damage to Southern California’s already-poor air quality.

During interviews with The Times, four SDG&E; board members said that, despite the considerable public opposition to the merger, they have had little or no contact with merger opponents.

“I’ve not heard any negative comments,” Ocampo said. “I’ve had peripheral comments, like ‘isn’t it a difficult situation for you to be in’ . . . but there’s been nothing direct.”

“There have been no real pressure,” Stalder said. “I’ve heard very few comments or that sort of thing.”

Similarly, Derbes maintained that only a handful of his business associates in San Diego have even mentioned the merger.

“I think they’re more interested in media attention than lobbying,” said the board member who requested anonymity.

The coalition is aware that a hard-nosed, highly public lobbying campaign against SDG&E;’s board members would probably alienate rather than persuade. So it is carefully assembling a cadre of board members’ “peers” who will quietly lobby the board, Hudson said.

“It will take peer pressure” to change the board’s thinking, Shames said, who acknowledged that consumer groups such as UCAN are not likely to sway a corporate board. “The quality of people (the coalition has assembled) is pretty awesome,” Shames said. “You won’t see people throwing rocks at (board members’) cars.”

“It’s going to be a tough one to pull off, but I do think it’s a viable strategy,” said Dan Pegg, President of the San Diego Economic Development Corp. “I’ve been hearing a lot of discussion,” Pegg said, that Sievert’s questions about legal advice created “a chink in Edison’s armor.” Opponents are now armed with public support that could make the March 31 “walkaway” date a real opportunity to sidetrack the merger, Pegg said.

However, one San Diego businessman who knows several board members questioned just how far San Diego’s business community will be willing to press. “I don’t think anyone is willing to risk their friendships with associates who happen to be SDG&E; board members,” the businessman said. “You’ll have appeals on a personal level, but the anti-merger forces are going to have a hard time getting anyone to push really hard.”

Derbes said that most businessmen understand the position that SDG&E;’s board has taken on the merger, “and that we have a duty and obligation to fill for our shareholders.” Still, he said he has “complete respect” for San Diego Mayor Maureen O’Connor or any elected officials who feels that opposing the merger will serve their constituencies.

Derbes said the coalition has a right to express its opinions, but that “ultimately, the outcome will be decided by the government authorities.”

Opponents acknowledge that they face an uphill fight.

“They won’t back away on March 31,” Shames acknowledged. “But I think it’s likely (eventually). It’s more likely than it ever was. (It will be difficult) getting them to do an independent re-evaluation of this deal, but if they did, they’d probably be compelled to walk away.”

Hudson acknowledged that the coalition has not actively courted support from SDG&E;’s board members. “There were a lot of people waiting to see what Scott and Sievert would say during testimony, and only recently did outsiders like the PUC (public staff) and the attorney general express their opposition,” Hudson said. “We now think we have a legitimate case to make to the board of directors at this time.”

Hudson declined to identify the “peer group” that will approach SDG&E;’s board members. However, the coalition is chaired by Great American Bank Chairman Gordon Luce and developer George Gildred. The coalition’s board includes HomeFed Bank Chairman Kim Fletcher, developer Tawfiq Khoury, former City Councilman Bill Cleator and San Diego State University President Thomas Day. Many coalition members “have asked to remain anonymous for various business reasons,” Hudson said.