City Claims Power to Block SDG&E; Franchise Transfer

The city of San Diego claimed Friday that it holds the power to block San Diego Gas & Electric from transferring various gas and electric utility franchises to Southern California Edison through a proposed merger.

“We have concluded that this proposed merger . . . would constitute a transfer of the franchises,” according to an opinion released Friday by City Atty. John W. Witt. A city council vote is required because the proposed merger would “result in a transfer of the franchises from the disappearing corporation to the surviving corporation,” according to the opinion.

Utility spokesmen in San Diego and Rosemead said Friday they had not seen the opinion.

But Witt’s opinion clashed with the utilities’ longstanding claim that a merger would not require city council approval. The utilities have argued that Edison, as SDG&E;’s “legal successor” under California corporation law, automatically would assume the franchises that are necessary to provide gas and electric service in San Diego.

Witt’s opinion analyzes the city’s authority to grant or revoke its franchise agreement with the power company. Governments regularly grant franchises to companies that provide light, water, power, cable television and telephone service. Without a franchise, a company cannot go into business.

The franchises in question give SDG&E; the right to use municipal streets, highways and rights-of-way to transmit and distribute gas, electricity and steam. Similar charter provisions exist in Chula Vista and other cities in San Diego, as well as in southern Orange County where SDG&E; provides service.

SDG&E; and Edison, in a statement filed last year with federal regulators, acknowledged the existence of those franchise agreements--along with the possibility that they could trigger a series of public hearings and legal challenges. The Securities & Exchange Commission filing also acknowledged the possibility that the utilities might have to negotiate settlements with the franchise holders.

2 Public Hearings Scheduled

But the utilities’ filing maintained that the proposed merger “does not constitute a transfer or assignment in violation of such franchises.” The utilities based that claim upon state and city law that allows for the transfer of franchises when one corporation becomes the “lawful successor” of another corporation.

Mayor Maureen O’Connor has scheduled two public hearings during which the City Council will gather public comments on the proposed merger. After the hearings, the council will vote on whether the franchises should be assigned to Edison.

Those wide-ranging hearings will be held at 2 p.m. Sept. 14 and Oct. 12, in the Council Committee Room on the 12th floor of City Hall.

Hearings to Proceed

The city has ignored a recent request from SDG&E; and Edison to postpone hearings until after state and federal regulators complete their in-depth reviews of the proposed merger. “It would be less costly to the city if the City Council were to defer its hearings on this matter” because state and federal proceedings will answer many of the city’s questions, Edison Vice President David N. Barry III said in a recent letter to Witt.

According to a memo issued Friday by O’Connor, council members are soliciting public comment on:

* SDG&E;’s “record of service” to the city and Edison’s “intention and capability” of providing service after the merger.

* The “fairness, reasonableness and level of rates” that Edison has proposed.

* Edison’s ability to “preserve, protect and improve the natural environment of the city.”

* Edison’s ability to “be a good corporate citizen” after the merger.

* Edison’s intention to “contribute to the city’s economic base and its economic development.”