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Corona Unplugs Plan to Break From Edison

City ends effort to seize assets and form its own utility, citing revenue and other concerns.

May 09, 2003|Nancy Rivera Brooks | Times Staff Writer

Beset by budget and other worries, the city of Corona has called off its divorce from Southern California Edison.

The Corona City Council announced late Wednesday that it's dropping plans to form a full-fledged municipal utility, and will no longer attempt to seize Edison's power lines and substations by eminent domain.

The council said it has asked its lawyers to begin talks with Edison to settle lawsuits the city and utility filed against each other.

A unit of Edison International, the Rosemead-based utility had promised a costly legal fight to block the seizure of its assets, and had bankrolled a signature-gathering campaign to put the issue to a public vote. The plan also had triggered sharp debate within the city.

Corona already has spent more than $1 million on utility consultants and attorneys developing the plan, and city officials said revenue cuts being considered by the state made the prospect of a costly fight with Edison untenable.

"When we began our electric municipalization project, we did so because it made sense for our city," Corona Mayor Jeffrey Bennett said in a statement he read aloud during the council meeting.

Bennett said the five Corona council members unanimously agreed to abandon the project in light of several recent developments, including budget uncertainty, potential legislative constraints, delays caused by legal wrangling and a plan by Edison to lower rates 8% to 16% this year.

Corona's municipalization plan had promised customer savings of at least 15%, but the cost of acquiring Edison's power lines and transmission facilities for the city's 130,000 residents was estimated at $200 million or more.

"We think they made the right decision for the city and for our customers, and we applaud them for that," said Edison President Robert G. Foster.

"We have said over and over that our system is not for sale," he added. "This is a very complex business, and a business where scale matters. To Balkanize the system is not a good idea."

Corona's dreams of a municipal utility sprang from the dark days of California's energy crisis in 2000-01.

High rates imposed on Edison customers to pay for soaring electricity costs have been driving businesses out of town, the city said.

Corona formed its utility department in April 2001 and announced plans to build a 65-megawatt power plant, primarily to serve a cheese factory. Those plans shredded when the California Department of Water Resources, which was then buying power for the state's investor-owned utilities, declined to participate.

Corona began providing electricity to business customers anyway, buying power under a bulk contract with PG&E Corp.'s Pacific Gas & Electric and distributing it over Edison lines.

Although plans for a full-fledged municipal utility are on hold, Corona serves about 50 companies and will continue its role as an independent power provider, Assistant City Manager Beth Groves said. The city also intends to provide electricity service to new commercial development.

Groves said the City Council began to question the utility plan as it began budgeting for the new fiscal year that starts July 1. The city worried that the state budget crisis could lead to revenue cuts to local government.

In addition, two bills in the state Legislature could make formation of a municipal utility less financially attractive, Groves said.

Bennett said Corona still believes in the validity of its plan.

"The potential merits of the project are still intact," he said. "However, in the normal review of the project, we have found that the climate we are operating in has changed."

Attorney Kent A. Hansen, a Corona resident leading the fight against the proposed utility, said the City Council's action "will save a lot of grief."

"They should have thought about some of these things before they took the big plunge," he said.

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