The city of San Diego can provide cheaper and greener electricity than San Diego Gas & Electric, according to a long-awaited study the city released Wednesday.

San Diego could sell power for 11 percent less than SDG&E within the next decade, under one scenario the study examined.

The study sets the table for months of debate. By early next year, the mayor and City Council are expected to decide if the city should begin buying power for its 1.4 million residents from someone other than SDG&E.

Doing so would satisfy a central provision of the city’s ambitious plan to fight climate change, which was approved in 2015 and pledges to cut greenhouse gas emissions citywide in half by 2035.

One of the main ways it does that is by requiring all electricity sold within city limits to come from renewable sources by 2035. That requirement has made the city consider competing with SDG&E, so it could have control over where its energy comes from.

Right now, SDG&E gets most of its electricity by burning natural gas. The company has given little indication it wants to or can abandon natural gas, which is currently cheap and abundant but a cause of global warming.


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The city study, by consultant Willdan Financial Services, was meant to see if it was feasible for the city to shift away from gas while still competing with SDG&E on price. The answer is, by and large, yes.

It was not all sunshine and roses for the city: The study says the city cannot totally abandon gas within the next decade and still beat SDG&E’s prices.

But it found several scenarios where the city can still be greener and cheaper within the next decade and well on its way to its goal for 2035.

The study assumes the city would be buying power for most residents and businesses by 2022. In doing so, the city would become a community choice aggregator, or CCA. SDG&E would still own the power lines but the electricity running through them would be purchased by the city, not SDG&E.

Because of separate state mandates, 50 percent of SDG&E’s power needs to be renewable by 2030. The city said it can hit that 50 percent target faster and cheaper: The city’s rates would be 2 percent higher than SDG&E’s in the first year of its government-run program but then less and less expensive until 2026, when the city’s rates could be 11 percent lower.

Under another scenario, the city could get 80 percent of its power from renewable resources and compete with SDG&E’s rates by “around 2026,” though city power would be more expensive until then.

The city’s chief sustainability officer, Cody Hooven, cautioned that the numbers in the study are subject to change. She said the point of the study isn’t to predict the future down to the exact cent per kilowatt hour on a customer’s bill, but simply to show whether the city can meet its climate goals while competing with SDG&E.

If the city can competitively get to 80 percent renewable energy by 2026, it still has nearly a decade to figure out how to get to 100 percent, a gap that by then may be easier to close thanks to falling renewable energy prices and rapidly advancing technologies.

In the past, SDG&E has outmaneuvered other local governments that have tried to poke holes in its regional monopoly. If that history offers any indication, it’s certain that SDGE’s parent company, San Diego-based Sempra Energy, and its allies will slice and dice the city’s study to halt a takeover bid.

Sempra and the San Diego Taxpayers Association – which has on its board representatives of both Sempra and SDG&E – both released nearly identical statements on Wednesday, even before the city study was public.

Both called the city’s efforts “premature.” Eight other local governments across California have already formed CCAs and many more are looking to do so. San Diego’s would be, by far, the largest.

The Taxpayers Association and Sempra both warned about unknowns, alluding to rules that make customers who leave SDG&E continue to pay the company for power, even if they no longer use, want or need it.

The city’s study, though, said the city can likely buy power so cheaply that its customers would be able to afford to buy both its new power and pay off SDG&E’s old commitments. But the study also found a CCA may not make sense if those fees increase too much. Right now – and not coincidentally – SDG&E and the state’s two other big power companies both believe those charges are too low and are asking the California Public Utilities Commission to increase them.

But if the city study establishes a new baseline for what is possible for the environment and for customers’ pocketbooks, the company may find itself in uncharted waters: SDG&E, which does not have to compete with anyone, will at very least have to compete with its own shadow. If the city’s study is right and the city can offer cheaper power, why is SDG&E – which has the state’s highest rates – charging so much for dirtier energy?

The city has asked for ideas from basically anyone who might have some alternative way for the city to reach its self-imposed renewable energy mandate. SDG&E may very well respond to the city with ideas of its own about a greener energy grid, but that response may now be measured against the city’s study as a yardstick. Can SDG&E propose a way to offer greener energy that’s both faster and cheaper than the city’s study?

“We have this big goal and we have at least one viable option on the table, so we’re in a good position,” said Hooven.

    This article relates to: Climate Action Plan, Climate Change, Government, Science/Environment

    Written by Ry Rivard

    Ry Rivard is a reporter for Voice of San Diego. He writes about water and land use. You can reach him at ry.rivard@voiceofsandiego.org or 619.550.5665.

    24 comments
    merlot4251
    merlot4251 subscriber

    There is plenty of history that shows the private sector can do business more efficiently (read "cheaply") than a government agency. That is why governments outsource lots of their work to contractors. Let's be realistic.  No matter how much you may hate SDG&E, they been around the block a few times and have learned how to run the business as well as satisfy their shareholders, i.e. deliver some profit.  


    I certainly would not believe a report commissioned by the city government that shows the city government can do this better than a company who has been doing it for more than a century. The city is getting the conclusion from their consultant that they wanted to hear (and paid for). 

    craig Nelson
    craig Nelson

    It's no surprise that taxpayers are skeptical of the city running an energy scheme well given their track record with potholes, homelessness, stadiums and well, pretty much everything. 

    If you want to see how this plays out in the long run there in no need to look farther North than NoCal where Marin Clean energy promised lower rates and cleaner energy - giving the politicians cover to force it upon the ratepayers (what happened to the choice part?). Like cooking a frog on the stove , MCE rates are now higher than PG&E, they have built their own monumental bureaucracy , making the "non-profit" executives rich all on the backs of the consumers. If the ratepayers are tired of being overcharged they can go back to evil PG&E ...but only if they fill out the required governmental paperwork and CHOOSE to pay an exit fee. 

    Al Allen
    Al Allen

    I've reduced my payments to SDG&E by increasing my home's insulation, dual pane windows, all Energy Star appliances, Tier III refrigerator, all LED lights and PV on my roof. 


    Every ratepayer would do well to reduce their power usage to the max, install PV if within their budget. No reason to pay SDG&E one more dime.


    In Japan consumers can buy a home fuel cell to lower their power costs. Once again the USA is years behind other countries. https://www.bloomberg.com/news/articles/2015-01-15/fuel-cells-for-homes-japanese-companies-pitch-clean-energy


    Electrical utilities know their end is coming, just like the dinosaurs left the earth. In time so will they. Resistance is futile.

    Chris Wood
    Chris Wood subscriber

    @Al Allen  Comment on “…Electrical utilities know their end is coming, just like the dinosaurs left the earth. In time so will they. Resistance is futile….”

    Actually I don’t think so.  Note that the “minimum” Cal ISO load today shown is 24,000 Megawatts 7/16/17 @ 6am - which is (73%) of the power required at noon (33,000 Megawatts).  Even all power at noon (solar max) was  solar generated, where do you expect your night time power to come from if SDGE did not provide it?  

    Also would you really want tanks of hydrogen next to your house (i.e Hindenburg disaster).

     

    Chris Wood
    Chris Wood subscriber

    It might be best if the city figured out how to fix pot holes first – and then how to fix the environment, pay government retirement benefits, etc. etc.

    Suggest reviewing the first post on this story – where government operated utilities increased at double the rate of commercial providers to determine the likelihood of the government “saving” you money. 


    “…In 1996, I spent $386 on water and $350 on gas/electricity. In 2015 (the last year I kept my grass green), I spent $743 on water and $502 on gas/electricity in the same house with the same number of people. That is 92.5% increase in my water bill and a 43.5% increase in my SDG&E bill….”

    Bill Bradshaw
    Bill Bradshaw subscribermember

    Making money on Qualcomm Stadium; operating Mission Bay Golf Course at a minimum of a break-even basis;  operating two general aviation airports, Brown and Montgomery Fields at a profit; Operating Petco Park at a profit; Creating and managing a Balboa Park Centenniel celebration….these are a few of the recent things I can recall the city undertook rather than giving it to the private sector.  How have we done?


    I’m not against trying to get out of the usually unreliable and untrustworthy clutches of SDG&E, but it’s a lot easier to have a consultant study tell you what you want to hear than actually pull it off.  I hope this is considered very carefully before jumping off on this adventure.  


    By the way, how’s the pot hole program going?  How about the police staffing?   

    Tyson Siegele
    Tyson Siegele

    Mr. Rivard, another good article on Community Choice. Thanks! 


    It will be good to see San Diego join the ranks of the 60 cities and 9 counties that have an option other than the local utility. Those locations have formed eight CCE/CCA programs. All eight provide lower cost electricity than the utility against which they compete. 


    Now the city commissioned study says that we could have that here in San Diego too. Let's do it!

    Sean M
    Sean M subscriber

    Community choice is a euphemism for an electric tax.

    rhylton
    rhylton subscriber

    Are there any studies concerning San Diego that are not "long-awaited?" And, is there any chance that this one was watered-down? An inquiring mind wants to know,

    David Paul
    David Paul

    I'm not advocating for CCAs, nor do I know if they can be cheaper than investor owned utilities like SDG&E with the departing load charges they are proposing. However, local utilities across California provide electricity at a lower cost, and that is a fact. There is no guaranteed 10-15% rate of return for shareholders, multi-million dollar executive bonuses, and loans can often be made via tax free municipal bonds. They work for and answer to local ratepayers and many are first in line for lower-cost hydro power from the Federal government.


    https://www.smud.org/en/residential/customer-service/rate-information/rate-comparison.htm

    Jeff Sanders
    Jeff Sanders subscriber

    @David Paul There's an irony in government-run utility customers benefiting from their utility not paying taxes to government and receiving the benefits of lower borrowing costs that come from the owners of the bonds not having to pay taxes on the interest payments they receive, a tax-financed subsidy. Private utility customers are paying more because they have to cover the cost of the taxes their utility must pay to government. Why should customer of one utility pay for the cost of government while the customer of another rides for free?

    It regard to that regulated rate of return, what happens to that return when there are a lot less customers to pay for it? Are those remaining going to have to pick up the shortfall from those no longer paying?

    Will the “green” energy customers of a San Diego CCA be paying the cost of having adequate non-green power generation and/or storage needed for grid stability?

    Chris Brewster
    Chris Brewster subscribermember

    In reviewing the comments here, it's important to note that SDG&E is doing everything they possible can to stop this. They are an investor owned utility and their motive is profit, which would be affected by this move. For those who insist that government can't compete with the private sector effectively, it's important to remember that each time city workers have been asked to compete with the private sector locally, the cost was lower for city workers and so the city didn't contract out. According to the website linked below, "On a national average, public [owned] power rates are lower than those of other utility companies."

    http://www.whypublicpower.org/TheBenefits/Affordable.aspx

    Perhaps the most interesting part of this article is this: "Sempra and the San Diego Taxpayers Association – which has on its board representatives of both Sempra and SDG&E – both released nearly identical statements on Wednesday, even before the city study was public." I applaud VOSD for noting the stark conflict of interest at the Taxpayers Association. The idea that their statements were almost identical says it all. This is not an unbiased group. This is simply and emperor has no clothes moment.

    rhylton
    rhylton subscriber

    @Chris Brewster What's in a name? Everything. The San Diego Taxpayers Association chose its name well, because the uninitiated and those with a lack of curiosity would assume that its is other than an organization that supports the interests of (big?) business owners.

    Bill Stoops
    Bill Stoops

    As previously mentioned by other commenters, the likelihood of a government enterprise operating at lower costs than private capital is ludicrous.  Government, in my memory anyway, has not, and perhaps cannot, be as efficient and cost effective as private enterprise.  Governments usually wind up using whatever new authority and funding they obtain to spread their largesse, influence policies elsewhere, and pad pensions and payrolls for political gain.  I think casual readers can recall a few poorly executed government operations where taxpayers have had to dig deeper than ever expected.  So to think a cost forecast is credible is to deny past performance reality.  I am not in support at all of SDG&E's government created service area monopoly , but using MORE government as an alternative to private capital and expect lower costs is simply lacking any credibility.  And, to add fuel to the fire of conversation, there is no credible positive statistical correlation between fossil fuel released CO2 and climate change.  The data is speculative at best, and while treated as factual, simply is not.  A more credible cause of climate change on Earth is solar activity.  

    Don Atenow
    Don Atenow

    SDG&E and City of SD both in the energy supply biz? Geez, that's a lose-lose for San Diego residents.


    All the more reason to go completely off-grid.

    BRYAN HERRING
    BRYAN HERRING

    Residential electricity prices are already outrageous: 17 cents a kilowatt-hour in NY, 19 in CA, 20 in CT and 29 in HI – versus 9 cents in North Dakota. Honoring “Paris commitments” would send rates skyrocketing to German and Danish levels: 37 cents per kWh. Expensive energy will hurt poor and minority families the most and send jobs to countries where energy costs less.


    Bob Gardner
    Bob Gardner subscriber

    So the city paid for the study and got the results they wanted. What a surprise.


    Is there any reasonable person who really believes the City of San Diego could provide electricity cheaper than SDG&E over the long run??


    If so, look at your water rates.


    In 1996, I spent $386 on water and $350 on gas/electricity. In 2015 (the last year I kept my grass green), I spent $743 on water and $502 on gas/electricity in the same house with the same number of people. That is 92.5% increase in my water bill and a 43.5% increase in my SDG&E bill.


    Enough said. 


    And no doubt the utility lines and pipes would end up in the same sorry shape as our roads, our bridges, our schools, and our water and sewer lines.