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For the first time in 50 years, San Diego Gas & Electric must soon ask for permission to operate inside city limits.
SDG&E pays San Diego each year to put its equipment — including poles, wires and underground lines — within city rights of way. A few other utilities, including cable companies, have similar deals, known as franchise agreements.
The last time SDG&E negotiated a whole new franchise agreement was in December 1970. The 50-year deal expires in three years.
The city can either do another deal with SDG&E, do a deal with someone else, or take over SDG&E’s equipment and become its own power company.
Environmental activists think the timing couldn’t be better. They have been looking for pressure points in their long-running battles against the company. In sum, they want to take the “gas” out of “San Diego Gas & Electric” and force the company to support more rooftop solar projects.
Activists, led by long-time SDG&E foe Bill Powers, think the franchise agreement negotiations may be just the ticket. Without permission to operate within the city’s rights of way, SDG&E would lose access to roughly half its customers.
Powers’ plan would force SDG&E to provide 100 percent renewable power by 2035. It would also make SDG&E’s parent company, Sempra Energy, stop resisting efforts by the city to create a new government agency that would buy green energy and compete with SDG&E.
If SDG&E doesn’t agree to the terms, Powers argues the city should take over the company’s equipment and run its own utility. The city already has the right to do this either through eminent domain or by negotiating a purchase. Powers estimates that would cost about $1.5 billion, but the long-term benefits would be greener power and lower rates.
“The city should gain the economic benefit of an energy transition like this, and that should be in the franchise agreement,” Powers said.
SDG&E, for obvious reasons, does not agree. Company spokeswoman Helen Gao said Powers’ effort was “misguided.”
“The city already has a document to guide its renewable energy strategy — the council-approved Climate Action Plan,” she said, referring to the city’s ambitious goal of getting 100 percent of its power from renewable sources by 2035. “Franchises are not designed to address issues raised by Powers’ proposal.”
Gao said franchise negotiations should only be about access to rights of way and the fees for that access. Right now, the company pays about $44 million a year in such fees.
The city updated the terms of the current franchise agreement in 2002. Those negotiations were mostly conducted in private, according to letters sent at the time by the San Diego County Taxpayers Association and the Utility Consumers’ Action Network.
That deal resulted in higher bills for city residents. The city got SDG&E to impose a surcharge for the city’s ongoing efforts to move power lines underground. The Taxpayers Association blamed the city for using the negotiations as a “backdoor approach” to raising taxes.
Environmentalists hope the city can get a better deal this time.
“The city is at a great disadvantage because they don’t see that they have any leverage,” said James Ferguson, a co-chair of San Diego 350, a group dedicated to fighting climate change.
San Diego spokeswoman Katie Keach said the city and SDG&E are not negotiating yet, but the city is reviewing its current agreement in preparation for the negotiations.
If San Diego tried to use the agreement as leverage, it would not be a first. Chula Vista tried a similar tactic following the energy crisis when, by chance, SDG&E’s franchise agreement there came up for renewal.
Some within the Chula Vista government thought the city could better serve customers than a for-profit company. In the end, under pressure from SDG&E, Chula Vista backed off when the company agreed to help remove its unseemly infrastructure from prime coastal real estate and to help the city bury power lines, among other valuable enticements.
Like Chula Vista then, San Diego is now thinking about entering the energy market to compete with SDG&E. The city is studying a plan to buy power for its 1.4 million residents by becoming a community choice aggregator, or CCA.
Nicole Capretz, head of the nonprofit Climate Action Campaign, said she wants the city to use the negotiations to force SDG&E and Sempra to drop their opposition to community choice. Although Sempra relies on a front group designed to criticize CCAs, SDG&E is asking for permission to use ratepayer money to lobby the city.
“The city is in the driver’s seat,” she said. “The city should be acting like it is in the driver’s seat. It should be dictating the terms of engagement.”