2 PUC Commissioners Saw Benefits in SDG&E; Merger : Utilities: Panelists’ written opinions suggest the merger would have produced lower rates and air quality improvements for Southern Californians.

Despite a unanimous state Public Utilities Commission veto of the proposed takeover of San Diego Gas & Electric Co. by Southern California Edison Corp., written comments by commissioners indicate that at least two of them believed a merger would have created some benefits for customers of both utilities.

Commissioners G. Mitchell Wilkand John B. Ohanian joined fellow panelists last Wednesday in the 5-0 vote against the $1.8-billion stock swap merger that would have created the nation’s largest investor-owned utility, with 5.1 million customers. The utilities are now awaiting a written PUC decision before deciding whether to appeal.

But Ohanian and Wilk subsequently released written opinions that suggest the merger would have produced lower rates and significant air quality improvements for Southern Californians. Ohanian suggested that the negative PUC vote represented a “lost opportunity” for Southern Californians because the merger could have saved ratepayers $1 billion.

Ohanian and Wilk voted against the merger because it failed to meet guidelines included in an amendment--approved by state legislators in 1989--to the Public Utilities Code, which governs most utility mergers.

The two agreed with fellow commissioners that the merger was unacceptable because, at the least, it failed to pass an anti-competition test, one of three guidelines that were added to the code in the legislation, Senate Bill 52.

But the two commissioners were unsure whether the proposed merger failed to meet the code’s remaining two tests relating to long-term benefits and a host of other checks, such as benefits for employees and local communities.

Ohanian voted against the merger because, as defined by the utilities code, SDG&E; and Edison failed to prove that savings were “long-term.” He expressed “reluctant concurrence” with that test because he found the “whole task of proving anything beyond the year 2000 to be problematic.”

Wilk wrote in a strongly worded separate opinion that the merger offered “substantial” long-term benefits for customers of both utilities. Edison and SDG&E;, Wilk wrote, failed the competition test but “met their burden” of proving that the merger would produce significant long-term rate savings for customers.

He complained that the requirement for long-term ratepayer benefits was too severe. Rather than relying upon “common business sense, the (PUC) defines long-term as at least several years into the next century.”

“Let there be no doubt that I concur in today’s decision,” Ohanian wrote. “I agree that the merger creates substantial adverse impacts in the transmission and (wholesale) power areas.”

But Ohanian said his “preference would have been to craft solutions to the merger’s flaws in order to achieve its many benefits . . . solutions that not only fully mitigated anti-competitive impacts, but created significant and beneficial opportunities for the ratepayers and California as a whole.”

Michael Shames, executive director of Utility Consumers Action Network, a San Diego-based consumer group that opposed the merger, suggested that Ohanian might have preferred to use the merger review to change the way the highly regulated utility industry operates. Ohanian had hoped to “open up” the transmission grid that is now dominated by Edison by approving the merger and slapping tough controls on Edison, Shames said.

Ohanian, Wilk and fellow Commissioner Norman D. Shumway also suggested that Senate Bill 52 is so strict that it would prohibit any large mergers in the highly regulated utility industry.

Shumway expressed irritation that former state Atty. Gen. John Van de Kamp, a Democrat, and his successor, Dan Lungren, a Republican, disagreed on a key portion of the amended code that pertains to competition among utilities.

“The fact that two highly trained staffs should differ on this issue is disturbing,” Shumway wrote in his concurring opinion. “The difference (in the interpretations) . . . could determine the outcome of future applications.”

Shumway argued that the opinion offered by Lungren “supplies the (PUC) with more latitude to review the total competitive picture and to weigh the positive and negative aspects of a merger application against one another.”

Ohanian complained that parts of the utilities code contained “vague and restrictive language . . . that prevented the commission from taking advantage of a golden opportunity to achieve benefits for all of California.”

But State Sen. Herschel Rosenthal (D-Los Angeles), who authored Senate Bill 52, defended the law Monday.

“I thought (the bill) was very clear,” Rosenthal said. “I thought that (Lungren) was reaching” when he offered an opinion that clashed with an earlier opinion offered by Van de Kamp. Rosenthal also suggested that Lungren, a conservative Republican, “has never seen a merger that he didn’t like.”