Judge Recommends Approval for Energy Firms’ Merger

A California Public Utilities Commission administrative law judge has recommended approval of the planned merger between Pacific Enterprises, the parent firm of Southern California Gas Co., and Enova Corp., the parent of San Diego Gas & Electric.

The ruling includes a recommendation that $288 million in projected savings over five years be split between ratepayers and shareholders.

The proposed merger, which will go before the PUC on March 26, would create a utility with 6 million customers, more than any other in the nation.

In a proposed decision mailed late Monday, Judge Robert A. Barnett ruled that the nearly $6-billion merger of Pacific Enterprises and Enova would not reduce competition in gas and electricity markets if certain conditions are met.

Most of the conditions were recommended last June by the Federal Energy Regulatory Commission, including a requirement that SDG&E; sell its last two gas-fired generators by the end of 1999. Barnett said Southern California Gas must sell its options to acquire the California portions of the Kern River and Mojave natural gas pipelines.

Barnett estimated that the $288 million in savings will be achieved as a result of efficiencies in combining the two companies, but he limited to five years the amount of time that shareholders can participate in those savings.

Pacific Enterprises and Enova had requested a 10-year sharing period and had estimated that $1.1 billion could be saved during that time.

“We are very pleased with what the judge has done,” said Bill Reed, vice president of regulatory and governmental affairs for Enova and SDG&E.; “He has determined that our merger with Pacific Enterprises is in the public interest and should be approved.”

Michael Shames, executive director of the United Consumer Action Network in San Diego, said the consumer advocacy group is pleased with the five-year limit on sharing savings with shareholders, but is unhappy that Barnett did not place barriers to certain transactions between the two utilities themselves, which will remain separate after the merger of their parent corporations.

The merger still requires final approval from the PUC, FERC, the U.S. Justice Department and the Securities and Exchange Commission. Reed said the deal is expected to close this summer.