Franchise Fee Deal Is a Major Test for City Leadership

Opinion

Franchise Fee Deal Is a Major Test for City Leadership

We desperately need strong leadership from the mayor and Council to center the community and put the city in the driver’s seat for these once-in-a-generation agreements.

Utility lines in the Grant Hill neighborhood of San Diego / Photo by Megan Wood

For the first time in 50 years, our mayor and City Council have an opportunity to reset our energy future. New electric and gas franchise agreements can put our families, small businesses and communities ahead of corporate interests, and help transition us off of fossil fuels to reach a zero-carbon future.

The city’s franchise fee agreement grants a utility permission to operate in city limits – for a price. Why should we all care about these billion-dollar real estate deals? Well, for 50 years San Diegans have suffered under one-sided agreements that allowed our current energy utility, SDG&E, to raise our rates to more than double the national average, fight every possible path toward a clean energy future and shed its responsibilities to the community.

Today, we find ourselves with the highest energy bills in the continental United States. Average bills have gone up 24 percent in recent years, with another 18 percent increase by the end of 2021. There is nothing in the current franchise agreement to incentivize or stop SDG&E from continuing to fleece us. These rates threaten working families, small businesses and those on fixed incomes trying to survive a global pandemic and economic recession, and just like the impacts of COVID-19, this pain is felt most in communities of color.

SDG&E now wants to charge us hundreds of millions more every year in exit fees for daring to establish a community choice energy program — San Diego Community Power — a program it formed a whole special subsidiary to try and stop, and is now actively trying to thwart at the state level.

SDG&E’s hostility to community choice is another reminder of its refusal to help San Diego build an energy system that is ready for climate change. It continues to build out expensive gas infrastructure that’s poisoning our families, including $700 million for a methane gas pipeline we did not need or ask for. It prioritizes untested and still explosive hydrogen and biogas instead of proven and resilient local clean energy solutions like rooftop solar and storage, which SDG&E’s army of lobbyists work around the clock to undermine at the state and local level.

All of this while SDG&E fails to shoulder its responsibilities to the community, trying to hand off billions of dollars in business and liability costs directly onto the city and ratepayers to protect its shareholders. This includes close to $400 million in wildfire damages, and breaching the existing franchise agreements to hand the city a $100 million bill for the Pure Water project, which the city is suing to get back. No doubt, if given the opportunity, SDG&E will continue to violate any agreements if the city does not hold them accountable.

We desperately need strong leadership from the mayor and Council to center the community and put the city in the driver’s seat for these once-in-a-generation agreements. To restore our faith in City Hall, leaders must represent us, not Wall Street shareholders.

The most important thing the mayor and Council must do is not hand SDG&E another decades-long deal. The previous 50-year agreements left the city with no leverage or opportunity to hold SDG&E accountable. The only way the city can ensure mutual accountability is with short-term, three-year electric and gas franchise agreements. Not only do three-year agreements allow the city to remain flexible and nimble in responding to the changing climate and energy landscape, but when coupled with annual audits and shared goals, short-term deals allow the city to hold SDG&E accountable.

The city must also make certain that SDG&E is responsible for modernizing our electric grid and starting the critical work of transitioning our energy system off fossil fuels, specifically methane gas.

As recent events in Texas showed, SDG&E’s centralized and natural gas-dependent business model will only lead to disaster. Instead, we need an electric grid that can withstand and stop the climate crisis. That means franchise agreements that foster a more decentralized, local clean energy system with no fossil fuels. The agreements must also start the process of equitably transitioning dangerous methane gas out of our neighborhoods, which is not only causing climate change, but is also a silent public health disaster shortening lives and diminishing our quality of life.

Of course, both the electric and gas franchise agreements must recognize the importance of protecting good union jobs to support utility workers, and centering social equity to prioritize vulnerable communities who are being hurt first and worst by the climate crisis.

The city must also honor the consistent community calls for a full evaluation and vetting of public power. A robust public power business plan will allow the city to fully understand what alternatives are available, and incentivize SDG&E to do better or be replaced by a public power utility.

Now is the time for the mayor and Council to restore our faith in City Hall. We cannot let this opportunity slip through our hands and give SDG&E and their lobbyists another long term, monopolistic deal that’s bad for the community. For San Diego to thrive, our leaders must strive for all communities to be equitable, sustainable and healthy with affordable clean electricity and a utility accountable to the people, not Wall Street.

Mikey Knab is board chair of Business For Good SD. Matthew Vasilakis is co-director of policy at the Climate Action Campaign.

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