SDG&E Tries to Bully San Diego – Refuses to Negotiate Extension of Franchise Agreement

by on November 13, 2020 · 1 comment

in Energy, San Diego

SDG&E is throwing its weight around and trying to bully San Diego. And in particular, it’s trying to bully Georgette Gomez, president of the city council.

In a letter sent to city officials Thursday, SDG&E – who has had a 100-year monopoly on our electricity and gas – said it would refuse to consider an extension to the franchise agreement for one year – something city officials are asking for in order to allow the new city council to have a say in all of  it. The new city council – with 5 new members – is sworn in on December 10.

SDG&E senior vice president and general counsel Diana Day stated in the letter:

“We do not believe that a one-year extension is in the best interest of the City or San Diego electric and gas consumers.”

Setting aside the audaciousness of that statement, which Mayor Kevin Faulconer, Mayor-elect Todd Gloria, members of the City Council and the city’s budget analyst all saw, it still did not give any specific reasons why SDG&E refuses to negotiate a one-year extension. The current agreement which covers the city limits runs out Jan. 17, 2021.

SDG&E’s is very unhappy with Gomez, because as council president, she refused to put discussion of a potential new franchise agreement on the city council docket. This will allow the new, incoming council members – along with mayor-elect Gloria – to make the decision on the franchises. Which makes a lot of sense. But SDG&E wants Gomez to change her mind.

When Gomez punted the issue to the new council, she stated: “Granting these franchises is a momentous decision for the City Council that should not be rushed.” And then SDG&E’s bullying came three days later in the form of their letter.

“SDG&E would be disappointed if the City Council President does not docket the responses to the (invitation to bid),” Day said. “We stand ready to fairly and openly compete for the new Electric and Gas Franchise Agreements.”

Tyson Siegele, energy analyst for the Protect Our Communities Foundation and a critic of Faulconer’s plan, said the SDG&E letter was using “brinksmanship” to prod the current City Council to move on the issue, as quoted by the San Diego Union-Tribune.

“The city should absolutely continue with its due diligence process, they should not rush the decision,” Siegele said. “This is posturing that SDG&E is going through. Clearly, SDG&E wants to play hardball instead of being a good partner for the city.”

The U-T reports:

The money San Diego collects from SDG&E through the electric and gas franchise fees account for the city’s fourth-largest source of revenue — about $60 million to the general fund last year. The city also collects more than $60 million dollars for the Utility Undergrounding Program.

What happens if a new deal is not struck by time the 50-year franchise agreement expires in January?

According to a memo from City Attorney Mara Elliott, the California Public Utilities Code says “the incumbent gas and electric corporation has a duty to continue service” unless the utilities commission for some reason authorizes SDG&E to stop. However, in the same memo, Elliott said “it is possible” that SDG&E “may cease to pay all or a substantial part” of the franchise and undergrounding fees to the city.

The bid or bids that have been submitted have remained sealed. Should a date for a new franchise agreement receive a date on the City Council docket, Faulconer’s plan calls for bids to be revealed in a live, open session of the council. …

Under a franchise agreement, a municipality gives a utility the exclusive use of public right-of-ways for transmission and distribution, as well as the right to install and maintain wires, poles, power lines and underground gas and electric lines.

Getting the city to sign up with SDG&E has been one of Mayor Faulconer’s goals (a notch on his Legacy Belt) and he too was pissed off at Gomez. The man – who has 26 whole working days left as mayor – said – through his Interim COO, Aimee Faucett – “While the reasoning behind the Council President’s refusal to reveal the existing bid(s) remains unclear, I have no doubt the current leadership at City Hall is best equipped to tackle the complexity of securing a new franchise agreement after being regularly briefed for over a year.”

It’s just beyond Faulconer’s comprehension to understand why the current council leadership – and probably most San Diego voters – would like to have such a heavy-duty issue decided by the people that were just elected by the voters.

More from the U-T:

Any new franchisee must also receive a two-thirds super-majority of the City Council’s nine members. Plus, the Public Utilities Commission, which regulates California’s electric and gas power companies, may also weigh in on the agreement.

There is yet another option: The city can skip the bidding process altogether and form its own municipally-run utility to oversee San Diego’s electric and gas system — similar to the Los Angeles Department of Water and Power and the Sacramento Municipal Utility District. Faulconer’s plan calls for the city to look into that option if no qualifying bids are received.

Creating a publicly-owned utility raises a host of questions, including the prospect of the city making an investment that would total into the billions of dollars. But Siegele and other critics of SDG&E have advocated taking the “municipalization” route.

“I see it as a way for the city of San Diego to save $400 million per year. That’s about what SDG&E makes in profit every year off the city,” Siegele said. “That’s $400 million that can stay in the city of San Diego, that could be used to help pay for the startup of a municipal utility.”

A utilities consultant hired by the city estimated San Diego’s electric and gas franchises, combined, are worth roughly $6.4 billion in profit to the winning bidder over the course of a 20-year agreement.

In the end, Gomez should refuse to buckle under the pressure of a city contractor. Allow the new council and mayor to get involved. Better yet – let’s move in the direction of having our own utility company. Power to the people!

 

{ 1 comment… read it below or add one }

Avatar Tom November 16, 2020 at 6:35 am

Why is San Diego even dealing with SDG&E in the first place? Why don’t they just take over and run the utilities themselves like many other cities in California do? San Diego politicians are always talking about creating and bringing in good paying jobs, well here is a great opportunity to do such a thing.

Not to mention that if the city runs and operates the utilities, it will more than likely lower the rates for city residential and business.customers.And depending on the city charter (if they have one), it would bring in revenue for the city. But it seems that the city government rather be cheap about it and contract it out to a private for-profit company.

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