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San Diego Could Provide Cheaper, Greener Energy Than SDG&E, Study Shows

The study commissioned by the city of San Diego 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.

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.

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.

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