Franchise, Franchise – Who’s Got the Franchise?

by on April 27, 2021 · 1 comment

in Energy, San Diego

There’s been a number of developments in San Diego’s efforts to sign a new franchise agreement for its gas and electric utilities.

As you may know, the city’s 100 years with the SDG&E has ended – there’s a temporary extension right now with the giant utility company that has had a virtual monopoly for a century with the fair city. And two mayors, Faulconer and Todd Gloria had tried to re-establish a utility franchise contract with SDG&E, only to be met with intransigence from city council members and those pesky ratepayers.

And it turns out, after Gloria opened a second round of bidding for the franchise, once again, SDG&E was the sole bidder: they offered $70 million to provide electric services and $10 million to deliver gas within the city limits. Gloria will put his head together with the City Attorney to study the bid. Gloria also needs a “super-majority” of council votes to approve any deal. This is good.

The Council does have the final say on approving any franchise agreement, as it will require “yes” votes from at least six of the council’s nine members to ratify a deal. From what members of the council have been saying of late, that is not a sure thing. One of the more independent new councilmembers, Joe LeCava, told the U-T:

“My view of how we protect ratepayers and our environmental future has yet to be seen in these bids. San Diegans deserve more than ‘cooperation’ from the franchisee. We need a fully committed and accountable partner to our energy goals.”

Councilman Sean Elo-Rivera has also been openly critical of SDG&E. He said he is still evaluating SDG&E’s response, and he is “concerned the sole bidder is currently entangled in litigation with the city for tens of millions of dollars as a result of their breach of the previous franchise agreement.” This is a reference to a lawsuit the city has filed with SDG&E over the city’s Pure Water San Diego recycling project.

The city wants to get reimbursed for $35.6 million after moving utility equipment that was obstructing the city’s Pure Water project. The city says the franchise agreement requires SDG&E to pay for the move, but the utility says it’s unfair that SDG&E customers who live outside of the city and do not benefit from the project should share in the move’s expense.

So, there’s that. And now there’s this:

Superior Court Judge John S. Meyer ruled last Friday, April 23, that San Diego officials wrongly withheld records and communications related to the city’s franchise agreement with SDG&E. Meyer overruled legal objections put forward by the City Attorney’s Office and directed the city to comply with a California Public Records Act request for emails and other communications between the city, the utility and consultants. Meyer wrote:

“The city has not demonstrated that it is not in actual or constructive possession of communications between the city’s consultants and SDG&E’s representatives.

“Therefore, the city is improperly withholding public records and has failed to conduct a reasonable search for petitioner’s Request No. 20-2685. The city of San Diego is ordered to disclose the communications between city representatives (including City Council members and staff, and consultants hired by the city) and SDG&E representatives (including agents, officer[s], employees and lobbyists).”

Attorney Maria Severson on behalf of her law partner, former City Attorney Michael Aguirre (you’ve heard that name!), filed the case. Aguirre requested communications last year between city officials and others related to the last 50-year SDG&E franchise agreement. City lawyers had argued that certain communications were exempted from public disclosure under the open-records law. But Severson dissed that position. She argued:

“The city cannot spend nearly $1 million of the public’s money to hire professional consultants to represent the city, and thereby the public’s interest in the proposed franchise agreement for gas and electric services, and then claim those consultants are not agents for the purposes of the (Public Records Act).”

Gloria would like to see SDG&E with a 20-year contract. Councilmembers and people of the community don’t like the concept of two decades more with the profiteer. Sempra Energy, SDG&E’s parent company, reported that SDG&E made a $824 million profit in 2020. “This is less than pennies on the dollar,” said Craig Rose of the Citizens Franchise Alliance to the U-T. “This is a terrible giveaway of city assets if this deal goes through … We think the franchise is worth $20 billion over the course of two decades.”

Many would rather see a 5-year contract period.

Others want a publicly-owned utility company to take the franchise reins. Municipal utilities tend to have lower rates than investor-owned utilities and SDG&E has the highest rates in the state.

Gloria is getting pushback from the other side. Haney Hong, president of the San Diego County Taxpayers Association, called on the Mayor “to stop wasting taxpayer time and dollars on conversations or any further studies or business plan development around municipalization of the electric or gas delivery systems until we resolve homelessness and our housing crisis … With the economy slowly reopening and the city’s coffers eventually getting refilled by tourism taxes, let’s keep our eye on the ball.”

But there’s more. Has it seemed recently that SDG&E has been waging a PR campaign to show San Diegans just how lucky we are to have them around?

Very recently, SDG&Ec has pledged to reach net-zero greenhouse gas emissions by 2045, which aligns with Senate Bill 100, passed in 2018 and signed by then-Gov. Jerry Brown, to have California derive 100 percent of the state’s electricity from carbon-free sources by 2045. The utility announced it is developing two hydrogen pilot projects, three battery storage projects and will break ground on a clean transportation project in El Cajon.

But critics say the goal can’t be accomplished as long as the utility keeps natural gas a core part of its energy, transmission and delivery system.

Tyson Siegele, energy analyst for the Protect Our Communities Foundation, a local environmental organization, called the SDG&E pledge an exercise in “greenwashing” — public relations spin to lead customers into thinking a company is environmentally friendly when it is not. He added:

“SDG&E is using hydrogen projects as a way to justify their fracked gas infrastructure. Until they start making announcements saying we’re going to shut down our fossil fuel infrastructure, then we are not going to see any true decarbonization of the energy infrastructure that SDG&E or its parent company, Sempra Energy, run today.”

Gloria is expected to propose a new agreement to the City Council within the next several weeks.


{ 1 comment… read it below or add one }

Don Wood April 27, 2021 at 2:49 pm

Each year, SDG&E and SoCal Gas turn the majority of their profits over to Sempra Energy, their holding company. Perhaps any new franchise agreement should prohibit that practice, and require that SDG&E reinvest some of their profits into new initiatives that will bring down customer rates and support the City of San Diego’s Climate Action Plan, with measurable goals and milestones the company has to achieve in order to retain the franchise agreement.


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