City Council Approves SDG&E; Bond Measure

The San Diego City Council Wednesday approved a $400-million bond refinancing measure for San Diego Gas & Electric Co. that had been delayed by lingering animosity over the utility’s failed bid to merge with Southern California Edison.

However, the refinancing agreement left unanswered some contentious questions about the city’s relationship with the utility.

By a unanimous vote, the council agreed to allow SDG&E; to refinance the city-issued, tax-exempt industrial development bonds to take advantage of lower interest rates that the company projects will save $65 million--or about $3.30 annually for average residential users--over the next 25 years. Large corporate and municipal customers could save tens of thousands of dollars annually under the refinancing, SDG&E; predicts.

If, as expected, the council ratifies Wednesday’s action by approving the measure as an ordinance in two weeks, SDG&E; hopes to refinance the bonds by mid-August, utility officials said after the hearing.

Normally a routine procedural matter, the refinancing agreement provoked controversy last week when Mayor Maureen O’Connor delayed its approval to put pressure on SDG&E; to reimburse the city for the $6.3 million it spent to block the utility’s merger with Southern California Edison.

In response, SDG&E; executives, who have made it clear that they have no intention of paying the city’s legal bill, accused the mayor of holding its customers and the potential rate savings “hostage.”

The agreement approved Wednesday circumvented that dispute by simply excluding any reference to the reimbursement issue, which SDG&E; general counsel Stephen Baum described as a “totally separate question.” O’Connor, however, stressed that she intends to pursue the matter, hoping to get more than the $1 million that SDG&E; is offering toward construction of a new central library or other public facility.

That $1-million offer, presented as an alternative to the $6.3-million reimbursement request, is characterized by SDG&E; officials as an attempt to mend relations between the utility and the city that were strained during the 2 1/2-year merger battle. But utility executives, who Baum said are eager to speed the “healing process” and put that issue behind them, have not yet received a written response from the city.

“We would like to know what it would take to have peace,” Baum said.

Wednesday’s agreement also skirted another major issue on which the city and SDG&E; have fundamental differences by inserting language into the refinancing measure that does little more than acknowledge that the two sides have agreed to disagree.

In an effort to preclude future merger battles or at least strengthen the city’s legal hand should one occur, O’Connor pressed for a provision underlining the fact that the City Charter requires council approval of any transfer of the utility’s franchise agreement with the city. SDG&E; executives, however, said that, although they would go along with a “reference” to the charter provision in the bond agreement, they are unwilling to accept language suggesting the council holds merger veto power.

Both sides expressed satisfaction with the compromise language--the city because it restates the charter provision, and SDG&E; because it leaves open the possibility of mergers that do not violate “applicable restrictions . . . imposed by law or contract.”

“We know we disagree on this point and probably always will,” O’Connor said after Wednesday’s vote. “They’ll argue from now until hell freezes over that the charter doesn’t mean what we say it does. But at least we’ve got it in the loan papers. And, if we ever have to press it in court, we’ll see who’s right.”