An important juncture in the proposed $5 billion merger ofPacific Enterprises and Enova Corp. is expected this week when anadministrative law judge with the California Public UtilitiesCommission recommends a proposed decision to the five-memberregulatory body. The CPUC is then expected to act by the end ofMarch. No one is expecting the proposed decision or the ultimatefinal one by the state to turn down the marriage of the holdingcompanies for Southern California Gas Co. and San Diego Gas andElectric Co., but it is unclear whether the conditions placed onthe deal will make it financially unattractive for one or both ofthe companies
If the two companies, whose utility subsidiaries collectivelyhave more than six million customers, the largest localdistribution utility customer bloc in the nation, get California’sokay, the final federal rulings from FERC and the Department ofJustice are expected by mid-year, according to spokespeople for themerging holding companies
A troubling issue for the two companies is the possibility thatthe ALJ’s recommendation will require the savings from the proposedmerger to be accelerated into a five-year period, instead of theten-year time period proposed by the merging companies, whichannounced late last year the name of “Sempra Energy” for its newlyconsolidated corporation. The concern is that if the shorter periodis mandated, the shareholders will lose up to $200 million inprojected savings
In a related proceeding at the CPUC dealing with the rulesgoverning transactions between regulated utility companies andtheir unregulated affiliates, PE-Enova have been arguing that theirrespective regulated utilities-SoCalGas and SDG&E-should befree to carry out “utility-to-utility” transactions aside from thenewly formed rules. Consumer watchdog groups are opposing thiscontention. However, PE-Enova have formally argued to the CPUC thatthe overall merger savings-estimated at more than $1 billion over10 years-will be reduced by some $340 million if utility-to-utilitydeals are prohibited.
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