Merger to Forge ‘Jewel,’ SCEcorp’s Allen Says

The proposed merger involving San Diego Gas & Electric and Southern California Edison would create the “crown jewel of the electric industry,” SCEcorp Chairman Howard Allen has told a meeting of New York-based utility industry analysts.

The combined utilities “will have one of the most economically prosperous service territories in the world,” according to Allen.

While SCEcorp’s Edison subsidiary enjoys relatively healthy growth in its existing 3.8-million customer service territory, “San Diego’s territory is projected to grow at a faster rate than Edison,” Allen said Thursday.

But growth won’t be the only benefit, according to Allen. The proposed merger would produce reduced operating costs that are expected to range from $100 million to $160 million, Allen said. Some of those reductions Allen expects would be generated by:

- Reduced use of SDG&E;’s older and less-efficient oil- and gas-fired electrical generating plants. Edison’s newer and more-efficient plants would provide lower-cost electricity, according to Allen. Edison also would use excess generating capacity at its plants rather than return to service “less efficient generating units” in San Diego, Allen said.

- An “improved mix” of generating plants, including specialized units fired up only to meet peak demand in Southern California.

- Reduction in capital requirements for SDG&E; by $350 million over the next 10 years because Edison has sufficient excess generating capacity to provide the added 400 megawatts that SDG&E; will need during the coming decade, Allen said.

- Benefits from the combined Edison and SDG&E; transmission and distribution systems, especially the SDG&E; Southwest Powerlink that connects San Diego to power-rich Arizona. Edison plans to integrate its high-voltage power line in that area with the Powerlink, producing “operating synergies and reliability benefits.”

Allen told analysts that SDG&E; and Edison shareholders would vote on the proposed merger during April shareholders’ meetings. Edison plans to file a completed merger application with the PUC before the end of December, Allen said.

Allen also said that two state Public Utilities Commission members recently indicated that SCEcorp shareholders might be allowed to share in the more than $100 million in savings produced by the merger. According to a transcript of Allen’s speech, PUC President Stanley Hulett and Commissioner G. Mitchell Wilk have told electric industry analysts that they are “sympathetic” to sharing the expected savings.

However, the commissioners said savings could only be passed along if “customers were not adversely affected,” Allen said during the meeting.

However, Hulett on Monday said Allen’s statement “is not precisely correct. What I said (in a recent speech to utility industry analysts) is that, as long as the (PUC) sees ratepayer benefits, we would not necessarily object to a price that would include some sort of bonus for SDG&E; shareholders.”

Splitting anticipated savings among shareholders and ratepayers “is clearly something that the commission would consider,” Hulett said. “But I don’t know if I’d actually do it.”