Environment Report: New Mayor, Council Draw Lines in Franchise Fee Battle
Mayor Todd Gloria wants to negotiate an extension of the city’s contract with SDG&E. Public power advocates hope officials will use that time to consider what it would mean to truly municipalize the entire energy system.
I lay to rest my shattered dreams of watching tweed-suited energy execs outbid each other at City Hall for San Diego’s multibillion-dollar power contract, but at least we’ve finally learned where newly elected Council members stand on some key energy issues.
Turns out, only one company bid on San Diego’s electric and gas franchise fee agreements, which allow a private company to build stuff (like utility poles, electric wires and transformers) on public land for a price. That company was San Diego Gas and Electric, which has held the agreement for more than a century. It expires on Jan. 17. This looming deadline is probably why Mayor Todd Gloria decided last week to publicly open all the bids that have been sitting sealed in the clerk’s office since former Mayor Kevin Faulconer left.
These agreements are important because whoever is in charge of powering San Diego will shape the city’s energy future as the challenges brought on by global warming increase, and influence your utility bill costs. SDG&E’s baseline rates (the price of energy for an average residential customer) rose 106 percent between 2009 and 2019, the highest of any other investor-owned utility in California.
Thursday’s special meeting on the franchise fee agreement gave the five new City Council members a chance to shine some light on their priorities. For instance, there’s a budding citizen’s movement calling on the city to buy out SDG&E and operate its own public power company. (The city is already halfway there with the creation of San Diego Community Power, which is taking over SDG&E’s old job of selecting and purchasing the kind of power San Diego runs on, like solar or natural gas. SDG&E still builds, owns and operates all the infrastructure to get it to your home and is guaranteed a profit to do so.)
Newly elected Councilman Joe LaCava (who represents San Diego’s northern coast neighborhoods) and Councilwoman Monica Montgomery said they want Gloria to put language in the contract that gives the city the right to purchase SDG&E’s equipment. That would make it easier for the city to go public if it wanted to instead of the old way Faulconer left intact, known as condemnation, a more complex and lengthy litigation process to take over SDG&E’s assets.
Montgomery said guaranteeing the city’s purchase right helps “ensure that any time the utility is not meeting its performance requirements, (the) city has the opportunity to reprioritize the assets in the best interests of residents and ratepayers.”
Councilman Chris Cate was the only member to speak out against going public. He said he was worried about the cost and subsequent debt from pursuing that path.
“To say we can issue billions of dollars in debt on a moment’s notice and take on a system for which we have no means to pay for is not fiscally or service prudent,” Cate said.
And it appears there’s new support for a requirement that the next power provider put money into a so-called climate equity fund, which can be funneled toward disadvantaged communities. Councilwoman Vivian Moreno proposed that idea earlier this year but it wasn’t included in Faulconer’s terms. Montgomery and newly elected Councilwoman Marni von Wilpert and Councilman Raul Campillo flagged that as a priority for the final contract as well.
Gloria turned down SDG&E’s offer on Friday and said the utility didn’t give the city what it asked for. So, now what?
Gloria said he’s going to negotiate an extension of the city’s contract with SDG&E, which gives the new Council and the public more time for input. It’s what the majority of the Council asked for Thursday anyway.
Public power advocates want the mayor to make a year-long extension while the city considers what it would mean to municipalize the whole energy system.
“It’s up to the city now to stand up and reclaim their power, what that means is they need to seriously evaluate community power,” said Nicole Capretz, executive director of the Climate Action Campaign who led the charge on establishing San Diego Community Power.
SDG&E said it wants to “work collaboratively” with the new mayor and Council, but as of Monday hasn’t yet been formally asked for an extension of the existing agreement.
Other Interesting Franchise Tidbits
SDG&E made some curiously specific exclusions, especially as it relates to climate change, in the red-inked version of its offer tweeted out by Council President Jen Campbell last week. The city asked its next power provider to cooperate on some specific energy objectives and what the utility company crossed out shows what kinds of projects it would commit to in the future.
When the city asked its next power company to commit to the reduction of greenhouse gas emissions “to the fullest extent practical,” SDG&E made a point of nixing that quoted modifier.
I asked SDG&E to explain, and they pointed me to the new public agency charged with purchasing energy, San Diego Community Power.
“(San Diego Community Power) will largely assume responsibility for greenhouse gas reductions,” said Helen Gao, a spokeswoman for the utility. “The city will be responsible for the procurement of electrons, and how renewable they are, and we will deliver those to homes and businesses.”
In a subsequent listing of objectives, which included more energy storage and more support for wind and solar energy, SDG&E nixed the “advancing of electrification of transportation.”
I asked why, and SDG&E said it already built more than 1,800 electric vehicle charging stations. (Actually the target number is higher, according to the Union-Tribune, a cost borne by you, the ratepayer.)
I found it interesting SDG&E would strike transit electrification from a contract because leaders at an investor-owned utility trade association and lobbying group, Edison Electric Institute, identified electrified transit as a big moneymaker.
“Electric companies only make money when they invest in the system,” said Brad Viator, executive director of the Edison Electric Institute. “If you’re going to be having more electric vehicles or electric transportation, where they connect (to the grid) and how they charge… building all that infrastructure is massive.”
One Final Thought
SDG&E in a statement Thursday characterized the franchise fee as a “steady revenue source” for the city, to the tune of $65 million per year. The franchise fee agreement is like a rental agreement: The city (the landlord) signs with a private utility company (the renter), saying, “sure, you can build your stuff on public land” — typically along the public rights-of-way that border streets. But in exchange, you have to pay the government a fee (the rent) to do so.
Except, once again, that’s not the way it works in practice, anywhere. The cost is usually passed on to customers and it’s you, the ratepayer, who actually pays the franchise fee on your utility bill.
So that $65 million a year is not revenue SDG&E is giving the city from its own pocket.
In Other News
- Voice of San Diego’s Maya Srikrishnan wrote a really cool piece about re-envisioning the U.S.-Mexico border, including by embracing its natural watershed ecosystem.
- SDG&E will refund $51.6 million to ratepayers as part of a botched energy efficiency program that encouraged residents to buy energy-saving lightbulbs. (Union-Tribune)
- The city of San Diego is joining a statewide initiative to monitor untreated wastewater in its Point Loma plant for evidence of COVID-19, which can be detected in poo. (City of San Diego press release)
- Something for the kids: K-12 students can submit art or poetry focused on California’s coastlines as part of a statewide contest until Jan. 31. (California Coastal Commission)
- Lockheed Martin, an aerospace and defense firm, is being ordered to clean PCBs and mercury from a portion of San Diego Harbor Island as part of a long-running environmental dispute. (Union-Tribune)
- The San Diego Association of Governments put out a guide for employers looking to keep telework long term for their employees (you know, once COVID stops ruining everything).