Industry Reorg. Prompts Same at Corporate Level

Fortnightly Magazine - April 1 1996
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The California Public Utilities Commission (CPUC) has approved a corporate reorganization plan making San Diego Gas and Electric Co. (SDG&E) a wholly-owned subsidiary of a holding company structure formed by the utility. The utility said the reorganization would provide the separation of lines of business necessary to insulate regulated utility cash flows from the volatility and risk of competitive markets.

The CPUC did, however, impose a number of conditions to preserve its regulatory authority over monopoly utility activities: 1) guidelines for affiliate transactions will ensure full recovery of costs incurred on behalf of any affiliate; 2) an extensive audit of all affiliate transactions will occur within three to six years of the order; 3) as in the past, the utility's board of directors shall establish dividend policy as if SDG&E were a stand-alone company; 4) the capital requirements of the utility shall have the first priority of the board of directors of both the parent and the utility company; 5) 25 percent of an employee's salary will be paid if an employee is transferred from SDG&E to the parent company or an affiliate; and 6) neither the parent nor any of the parent's subsidiaries shall provide interconnection facilities or related electrical equipment where third-party power producers are required to purchase such facilities or equipment in conjunction with a sale of power to SDG&E. Re San Diego Gas and Electric Co., Application 94-11-013, Decision 95-12-018, Dec. 6, 1995 (Cal.P.U.C.).

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