It’s Official--Proposed Utilities Merger Dies : Vote: Both SDG&E; and Edison executives throw in the towel, deciding not to appeal the PUC decision.

Southern California Edison Corp. on Thursday abandoned its hard-fought but ill-conceived plan to merge with San Diego Gas & Electric Co. and create the nation’s largest electric utility.

The decision came just eight days after the state Public Utilities Commission voted 5 to 0 to prohibit the merger on anti-competitive grounds. Commissioners, in a stinging rebuke, scored the utilities for their failure to prove that the merger would produce long-term benefits for utility customers in Southern California.

In a terse statement issued Thursday, Edison Chairman John Bryson said the two utilities’ boards of directors had terminated the merger agreement and withdrawn their applications from state and federal regulatory agencies.

“It’s time to put the merger behind us,” Bryson said.

“What’s past is past,” SDG&E; Chairman Tom Page agreed during an afternoon press conference at SDG&E;’s downtown office building. Page said SDG&E; employees are ready to enter a “whole new ballgame” now that the controversial merger has been abandoned.

Thursday’s decision to abandon the merger ended three years of “merger mania” that began early in the summer of 1988 when SDG&E; agreed to merge with Tucson Electric Power. That plan was abandoned later in 1988 after Edison made an uninvited bid to merge with SGD&E.;

For merger opponents, the Thursday board votes by SDG&E; and Edison ended a three-year struggle to keep SDG&E; from being swallowed by the much-larger Edison. Few observers expected the utilities to appeal the unanimous PUC decision, because commissioners had made it very clear that the merger made little sense for SDG&E; and Edison customers.

“It’s over,” said a gleeful Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group that has opposed the merger since it was proposed. “There were no surprises . . . we all knew it was going to happen after the 5-0 vote.”

“Today, Southern California Edison has admitted defeat,” San Diego Mayor Maureen O’Connor, a staunch merger opponent, said during a Thursday news conference at City Hall.

O’Connor also demanded that SDG&E; agree to seven tough conditions that city attorneys believe will give the city veto power over any future utility mergers or sales.

O’Connor wants SDG&E; to absorb the $6 million that the City Council spent on attorney fees to fight the merger before state and federal regulators. She also wants SDG&E; to allow the council to appoint one member of the utility’s board of directors. And she is pushing the utility to modify a franchise agreement that gives SDG&E; exclusive rights to service San Diego’s gas and electric needs.

O’Connor argued that the conditions would “guarantee that the city never be put through” another merger fight.

Page said he would entertain any “constructive” suggestions from O’Connor. “We are both looking for . . . (ways) to meet the energy needs of San Diego,” he said.

However, Page stopped short of agreeing to any of the demands. It is unclear whether the city can force SDG&E; to accept any of them--some of which might violate state or federal securities laws.

While merger foes were celebrating Thursday, the defeat was especially bitter for the utilities, which spent more than $100 million in shareholder funds and nearly three years seeking federal and state regulatory approvals.

Edison, fulfilling its part of the merger agreement, Thursday agreed to pay $15 million to SDG&E; for its merger-related expenses. Page said the payment will help to cover the $20 million SDG&E; has spent on merger activities since early 1988.

Page said SDG&E;, which meets more than half its customer demand for electricity by importing power from other utilities, is well-positioned to resume its corporate life as a stand-alone utility. He said the two utilities severed their relationship at 1 p.m. Thursday, shortly after the two boards cast their votes.

“Frankly, we’re all set for the next two years,” said Page, who explained that SDG&E; holds previously signed agreements to buy lower-cost electricity from other utilities. “But beyond that, everything is open.”

SDG&E; hopes to take advantage of a temporary glut of excess electrical-generating capacity in the Southwest that Page linked to the recession. Several utilities are now peddling excess electricity because customer demand has been stalled, he said.

Page applauded SDG&E; employees, who lived through “some very difficult times” since SDG&E;’s board approved the merger in late 1988. Many employees erupted in celebration May 8 when the PUC unanimously voted to prohibit the merger.

Page said he intends to stay in his current job, despite some calls for new leadership.

Bryson said Edison, a subsidiary of Rosemead-based SCEcorp, will focus on “other approaches to providing environmentally responsible, dependable and economical electricity and energy services for Southern California.”

The utilities had long maintained that the merger, which would have created a utility serving 5.1 million customers, would have produced at least $1 billion in savings that would have been passed along in the form of lower rates.

SCEcorp closed up $.375 at $39 on Thursday in New York Stock Exchange Trading, while SDG&E; closed down $.125 at $38.75.