Mayor Faulconer’s Utility Franchise Plan Is a Multi-billion Dollar Giveaway

by on September 24, 2020 · 0 comments

in Energy, San Diego

From Public Power San Diego

Mayor Faulconer’s last-minute decision to proceed with a new franchise agreement will result in a multi-billion dollar giveaway of a key City asset, at a time when the community is reeling from multiple crises and has failed to consider better options, Public Power San Diego (PPSD) said Wednesday, Sept 23.

“Everyone with eyes open sees tourism and other industries collapsing, with tens of thousands losing their jobs, all while the need to address the climate crisis grows ever more urgent,” said Craig Rose of Public Power San Diego, which advocates for the creation of a non-profit publicly owned utility.

“The City Council must insist on careful consideration of its options, including a public utility, instead of this giveaway that would lock us into paying the highest utility rates in California for 20 years.”

PPSD urges the city council to reject any franchise deal on the proposed terms and instead begin immediate planning and transition toward a public utility. Public Power San Diego, which believes a public utility is the only way to lower rates and keep badly needed resources in the city, says the mayor’s plan presents a challenge for every member of the City Council, as well as all candidates for city office in the upcoming election.

“Every incumbent and every candidate must go on the record,” said John Mattes, a member of PPSD. “Do they support this rushed giveaway of a multi-billion dollar asset, risking another debacle like the deal to buy the unusable 101 Ash Street building?”

“Or will they reject the mayor’s plan and consider options like public power?” Mattes asked.

The San Diego City Attorney says that despite the January 2021 termination of the City’s current franchise agreement, the City can proceed under the terms of this agreement while it considers its options. SDG&E is obligated to continue providing utility service until the City decides on a new course for utility service.

The City’s current franchise agreement allows San Diego Gas & Electric to earn $1 million a day in net profits, while using City property rent free. SDG&E’s frequently repeated claim about paying franchise fees to the City – a claim repeated by the mayor ­– ignores the fact that these fees are paid by City residents through their utility bills, not the owners or shareholders of SDG&E.

In reality, City residents pay franchise fees to themselves, with none of these fees coming from SDG&E shareholders.

The award of an exclusive 20-year franchise to use City property for utility service will provide the winner with at least $15 billion in profits, not the $6 billion miscalculated by the city’s consultant.

The consultant’s calculation assumed no rate hikes, no increase in electric usage and no growth in profits over 20 years for SDG&E, whose profits have already grown more than 40 percent over the past year.

“The consultant dramatically underestimated the value of the franchise, handing billions at no cost to the potential winner,” said Bill Powers, a PPSD member and principal of Powers Engineering. “Every dime of those billions will come from the pockets of San Diegans.”

With at least $15 billion at stake in the franchise award, the mayor’s proposal for a minimum $80 million bid would represent less than 1 percent of the City’s franchise value.

“Who would start an auction for their home at less than 1 percent of its value?” said Sonja Robinson, a member of the NAACP San Diego Branch. “Even if bidders exceed the minimum, it won’t come close to a fair value for the city’s franchise.

“And the mayor’s proposed elimination of a fractional surcharge is nothing but a distraction from this corporate giveaway.”

The only way to capture the franchise value, to stop the loss of $1 million per day in profits to SDG&E, is through a non-profit publicly owned utility. Electricity customers of the Sacramento Municipal Utility District, for example, typically pay $100/month less than customers of SDG&E.

“The large public utilities in California are different,” said Derek Casady, a member of Citizens Franchise Alliance.

“But they share one characteristic: Their customers pay less.”

Public Power San Diego is a coalition of groups and individuals advocating for the creation of a non-profit public utility. The coalition includes the Sierra Club, San Diego Democrats for Environmental Action, the Democratic Socialists of America, NAACP San Diego Branch, the Racial Justice Coalition, Activist SD, and other groups.

To learn more or to contact PPSD, please visit our website .

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