Air Quality Board Backs Edison-SDG&E; Merger

The South Coast Air Quality Management District board Friday backed a controversial merger between Southern California Edison and San Diego Gas & Electric Co., clearing away a major obstacle to Edison’s drive to become the nation’s largest operating electrical utility.

Under the merger plan, Edison intends to shift generation of electricity from older San Diego power plants to more efficient Edison plants in the South Coast Air Basin.

Environmentalists, who have closely monitored the proposal, have warned that the merger would worsen pollution in the South Coast Air Basin when the region is struggling to clean up its air.

The agreement, approved on a 10-1 voice vote, requires Edison to more than offset pollution increases in the South Coast Air Basin by requiring the utility to underwrite the costs for other polluters in the district to switch from internal combustion engines to electrical motors to run their equipment.

“It basically eliminates the air quality issue as an issue in the merger,” Edison Executive Vice President Michael R. Peevey said in an interview.

The $2.5-billion merger must still be approved by the state Public Utilities Commission and the federal Energy Regulatory Commission.

The AQMD said the agreement will mean faster reductions in smog-forming nitrogen oxide emissions than proposed in a far-reaching plan approved last year to bring the basin into compliance with federal clean air standards by the year 2007.

“This agreement is technically sound and provides for the mitigation of all significant air quality impacts,” AQMD Executive Officer James M. Lents said Friday.

The merger proposal has sparked widespread opposition in San Diego, where many resent the prospect that their hometown company will be absorbed by a firm based in Los Angeles.

In rejecting pleas by environmentalists and state officials to postpone the agreement, the AQMD board handed Edison a tactical victory in its efforts to win PUC approval of the merger. PUC hearings close today and Edison executives wanted the agreement in hand in time to place it in the hearing record.

A study by the state Public Utilities Commission said that during 1994--the year when additional emissions would hit a peak--Edison plants in the South Coast Air Basin would pump an added 1,000 to 1,300 tons of smog-forming nitrogen oxides into the sky. In San Diego County, nitrogen oxide emissions would be cut by 65%, Edison said.

The air district, which includes Los Angeles, Orange, Riverside and San Bernardino counties, has the worst air quality in America and has embarked upon an ambitious plan to comply with federal clean-air standards.

Even with tough new controls on everything from oil refineries and motor vehicles to dry cleaners and back yard barbecuers, officials admit that meeting the 17-year deadline will be difficult. Some skeptics, including both business executives and environmentalists, doubt that the deadline can be met.

From the beginning, the AQMD has been heavily lobbied by Edison and opponents of the merger and has twice reversed itself on whether to endorse the offset plan--known as a “mitigation” plan--in testimony before the California Public Utilities Commission.

As recently as two months ago the AQMD staff warned that the merger would result in “significant” air pollution increases in the basin.

Edison then offered a series of changes in the mitigation plan, eventually winning support from the AQMD staff.

But, after a July 10 meeting with environmentalists and a representative of the attorney general’s office, the AQMD staff decided to tell the PUC it lacked adequate information to evaluate the Edison mitigation measures.

Edison was excluded from the behind-the-scenes meeting.

Two days later, after a conference call July 11 with Edison executives, the AQMD staff again reversed its stand and decided to testify in favor of the mitigation plan on July 13--the last day to comment on the PUC’s draft environmental impact report.

The AQMD’s decision drew stern protests from state Atty. Gen. John K. Van de Kamp, state Sen. Herschel Rosenthal (D-Los Angeles), the American Lung Assn. of California, electrical worker unions, the Coalition for Clean Air and a consumer group called Towards Utility Rate Normalization.

Some of them called the agreement “a sham and a fraud.”

Deputy Atty. Gen. Susan L. Durbin said that Edison would have probably proceeded with the conversion program even without a merger, but that suggestion was denied by Edison and the AQMD staff.

“Internal Edison documents reveal that a pilot program has already demonstrated that Edison gets back far more than it spends on the financial incentives,” Van de Kamp said.

The charge was denied by Peevey, who said the utility’s profits are limited by the PUC to a 12.85% return. Any additional revenues received from the conversion to electrical motors would be returned to customers in the form of lower electric bills, Peevey said.

“Edison does not profit from the (additional) electricity sales, not one penny,” Peevey told the board.

Several witnesses urged the board to await a PUC final environmental impact report, which is due later this month, before approving the agreement with Edison.

Attorney Thomas R. Adams of San Mateo, representing electrical worker unions, said that the cancer risks to people living near Edison power plants would shoot up dramatically.

“This is appalling,” he said.

Peevey said Adams’ exaggerated the risk to workers.

Edison has embarked on an intensive drive to win final acceptance of the merger, lobbying officials in Washington and Sacramento, arguing that utility customers in San Diego would benefit from lower rates.

BACKGROUND

The Southern California Edison. Co. is seeking approval from the state and federal government to merge with the smaller San Diego Gas & Electric Co. As part of the merger proceedings, the state Public Utilities Commission prepares environmental impact reports. Concerns by the South Coast Air Quality Management District about the merger’s air pollution impact have figured prominently in those environmental impact assessments. By approving an agreement on Friday--requiring Edison to offset expected air pollution increases when it shifts electricity production from San Diego to the South Coast Air Basin--the AQMD removed a major environmental concern posed by the merger.