Page’s Future Uncertain if Merger Fails


San Diego Gas & Electric Chairman Tom Page could find himself in the hot seat if the San Diego-based utility fails to complete a controversial merger with Southern California Edison, according to utility industry observers.

Page, 57, has spent more than two years trying to merge Edison, a power-rich utility based in Rosemead, with SDG&E;, a fast-growing utility that will need an estimated 1,000 megawatts of additional electric power by the year 2000 to meet customer demand.

In the process, Page and SDG&E;'s largely home-grown board of directors have angered a number of civic and business leaders in San Diego who view the merger as an ill-advised venture that will increase energy costs and eliminate one of the county’s few remaining locally controlled corporations.

Some observers say the bitter controversy has eroded Page’ credibility and prestige within the community to the point that his effectiveness at SDG&E; could be jeopardized if the merger were to fall through.


“The key question is not whether Tom Page has the brainpower and ability to run a utility, because no question, he does,” said Larry O’Donnell, a pro-merger businessman who in 1989 formed San Diegans for the Merger. “The question is whether (Page) and the area can ever overcome the long-term animosity that has built up since the merger was proposed,” O’Donnell said.

Page, who noted during a recent interview that he serves “at the discretion” of SDG&E;'s board of directors, declined to speculate on his role at the company if the merger doesn’t occur. However, he noted that SDG&E; “is coming off of an absolute record year, the most successful in the company’s history.” And, he said that SDG&E;'s management team has continued with planning for life as a stand-alone utility should the merger not be completed.

Page also repeated his past assertion that the merger makes sense for SDG&E;'s customers, shareholders and employees. He repeated the company’s past claim that the merger would generate $1.7 billion in savings that could be used to hold rates down.

But some local business leaders who oppose the merger doubt whether Page could effectively lead the company if regulators prohibit the merger and SDG&E; remains a stand-alone company.

“I think he’s lost credibility,” said Lee Grissom, president of the Greater San Diego Chamber of Commerce. “I think he’s lost credibility internally, inside the company, as well as in the business community.”

SDG&E; is one the largest locally controlled companies in San Diego County, and the the chamber opposes the merger in part because it is reluctant to see SDG&E; become just a division of the Rosemead-based SCE.

Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group that opposes the merger, believes that Page would be forced to relinquish control of SDG&E; if the merger fails.

“The difficulty is that he has no credibility, not within the community or in his own company,” said Shames, who added that Page might be able to help guide SDG&E; as a consultant.


Page holds a “golden parachute” that would protect his income for a set period if SDG&E;'s board asks him to leave. Page, the only SDG&E; employee with an employment contract, would receive two years’ salary, two years’ bonus and two years of medical and basic life coverage if he were let go by SDG&E;'s board.

Edison has promised employment contracts to Page and three other SDG&E; executives if the merger is completed. Page, who would serve as SCEcorp’s vice chairman, would be paid an amount not less than SCEcorp’s senior vice presidents receive, according to Securities & Exchange Commission documents.

Despite the storm of protest that the merger has ignited, there is surprisingly little debate about Page’s abilities as a utility industry executive.

“He’s clearly a competent executive,” Shames said. Similarly, even Page’s critics commend him for orchestrating a successful turnaround at SDG&E;, which entered the 1980s with electric rates that were among the highest in the nation.


Page, who took over as SDG&E;'s chairman in 1983, has watched as electric rates tumbled to the point where they are lower than those charged by Edison and Pacific Gas & Electric. And, as rates have dropped, customer satisfaction has soared.

But there is obvious friction between Page and some members of San Diego’s corporate and civic leadership.

Frustrated by the Greater San Diego Chamber of Commerce’s decision to oppose the merger, SDG&E; in late 1989 dropped out of the organization and stopped paying $23,000 in annual dues.

The utility has been under constant attack by the San Diego City Council in general and Mayor Maureen O’Connor in particular. Largely at O’Connor’s urging, the council has spent more than $6 million in legal and consulting fees in a long-running attempt to keep the home-grown utility from being swallowed up by Edison.


SDG&E; also drew heat from retired Great American Bank Chairman Gordon Luce, who agreed to co-chair the Coalition for Local Control, an odd blend of civic, business and consumer representatives that was formed to fight the merger. In a surprising twist, however, Luce remained largely on the sidelines as he fought to save Great American from growing financial problems that forced the San Diego institution to sell its California branch system to Wells Fargo Bank.

SDG&E; also has spent considerable time and money opposing the San Diego County Water Authority’s decision to study--and, eventually back away from--a plan to municipalize SDG&E;'s electrical generating and distribution system.

Although the merger has long been controversial in San Diego, just a few months ago most merger opponents agreed that the deal is likely to be cleared by state and federal regulators.

But predictions were recast after law judges at the state and federal level completed reports branding the merger as anti-competitive.


The most recent setback came Feb. 1, when, in a harshly worded opinion, two state Public Utilities Commission law judges urged rejection of the merger on the grounds that it would give Edison an unfair competitive advantage over municipally owned utilities in Southern California that rely heavily upon Edison’s electric transmission system.

The utilities on Friday acknowledged that the merger is doomed if the PUC, in an upcoming vote, forces utility shareholders to absorb millions of additional dollars in merger-related costs.