Powerful legislator authors bill that short-circuits Edison merger.

Powerful legislator authors bill that short-circuits Edison merger

On person can still make a difference, even when it comes to billion-dollar buy-outs.

Witness state Sen. Herschel Rosenthal, eight-year chairman of the state Senate's Energy & Public Utilities Committee. The West Los Angeles Democrat proposed antitrust amendments to the state's Public Utilities Code after the two biggest electric utilities that serve Southern California announced a merger plan in 1988. His bill became law in 1989.

This month it tripped up the $2.9 billion merger proposal that would have created the largest investor-owned electric utility in the nation, serving 513,000 local businesses.

When voting 5-0 against the melding of Southern California Edison Co. and San Diego Gas & Electric Co. May 8, state regulators pointed first and foremost to Rosenthal's amendments, which set up tougher criteria for approval.

"We have concluded that this application fails to meet any one of them," pronounced Public Utilities Commission President Patricia Eckert to many surprised faces in the audience. Eckert and the four other commissioners had declined to comment on their leanings prior to the dramatic May 8 vote.

"I was thrilled about the PUC decision," said Rosenthal last week. But the St. Louis native, who was raised in Boyle Heights (near downtown L.A.), told the Business Journal the happiness came "not because it was a defeat for Edison that could enhance my political stature as a giant-killer." Rather, "because ratepayers and competitors in Southern California were ultimately protected by a precedent-setting law that I authored." Edison announced May 16 it would not appeal the PUC's denial.

PUC commissioners said the merged company would gain too much monopoly-like power, which is counterproductive to their policy of promoting more competition among utilities. That might have lead to higher rates, they reasoned, despite Edison's projections of lower rates.

"I was concerned that the laws on the books were insufficient to protect the public against significant adverse impacts which might result from very large electric, gas and telephone utility mergers," said Rosenthal.

In fact, the record $6.5 billion merger proposed between the parent companies of Victorville-based Contel of California and Thousand Oaks-based GTE California will also undergo the Rosenthal test, according to Brian Cragg, an administrative-law judge at the PUC in San Francisco. GTE serves about 500,000 business customers in L.A. Count. A full decision on GTE-Contel is not expected until 1992.

Among Rosenthal's criteria that proved too tough for Edison were demands that major utility mergers must:

* Boost service and provide net benefits to customers, short-and long-term.

* Be beneficial to state and local economies, and to communities in the utilities' service areas.

* Be "fair and reasonable" to the majority of all shareholders.

In eight years, Rosenthal has authored many consumer, energy and utility bills.