Gloria Wants to Take the City for a Ride on the SDG&E Train

by on May 21, 2021 · 7 comments

in Energy, San Diego

By Frank Gormlie

In San Diego’s continuing saga over who gets to be the franchise holder for the city’s electric and gas utilities, it is staggeringly clear now that Mayor Todd Gloria really wants SDG&E to stay. Gloria is pushing the city to get on board the SDG&E train for a ride.

He and City Attorney Mara Elliott have concluded “multiple rounds” of negotiations with SDG&E, formed a tentative agreement, and he is beginning to talk with the councilmembers about a new contract. Gloria claims his new deal is “certainly an improvement over the existing franchise agreement….” That’s not saying much.

Nothing is for certain. Gloria needs a “super-majority” of votes from the Council, six of the nine members. Three of those members (Joe LaCava, Monica Montgomery Steppe and Sean Elo-Rivera) took part in a rally in April hosted by environmental and political groups opposed to the city signing a new agreement with SDG&E, saying the utility has been a bad partner over the course of the existing agreement.

Working on an extension currently, SDG&E’s extension runs out in June. The Council will have Gloria’s proposal before them on Tuesday, May 25. “I haven’t heard anyone say that they are a ‘no,’” Gloria told the San Diego Union-Tribune editorial board.

The mayor also stated: “I believe this deal is good on its face. It’s certainly an improvement over the existing franchise agreement and as a consequence, I believe [Council] will support it because it’s a good deal … I’ll leave it to others to say what that means for my administration but I believe we went out and worked a negotiation that is a good deal and deserves the council’s support.”

So, what’s so good about this new deal with the utility company that charges arguably the highest rates in the state and nation?

The U-T says, the new proposal requires SDG&E to pay the city $80 million — $70 million for the electric franchise and $10 million for the gas franchise — “from shareholder, not ratepayer, funds.” This is confusing. That $80 million was the minimum bid that the city put out in the first place. No big deal there. But it’s coming from shareholder, not ratepayer monies. This could be something and somebody else needs to explain that.

Meanwhile, other good things about the tentative agreement includes that it is for only ten years – not 50. Well, that’s something, gee. And there’s an automatic renewal clause for another 10 years. Plus if city officials figure out that SDG&E has breached its contract (some say it did with the current contract), then with a two-thirds vote of the council, the city can terminate the deal – but only after ten years! Does this mean that the company can breach the agreement but only suffer sanctions after a decade? That doesn’t seem to stabilize anything.

There’s supposedly another clause that says if the council ever adopt an ordinance to bypass SDG&E and create its own municipal utility, the city has the right to end the agreement “at any time.” Okay dokay, but many on the Council and in the community want the city to create its own municipal utility NOW!

Other sections of the “good deal” are:

• $20 million to help advance the city’s climate equity goals, which include a recently created Climate Equity Fund that will build parks, plant trees and improve public transit in lower-income areas. But, as the U-T explains:

The $20 million for climate equity goals will come in tranches of $5 million over four years that SDG&E will start paying no later than 2037 and go into the city’s general fund.

2037??? Really? I at first thought when I read that it was a typo. But no. SDG&E has until “no later than 2037”, 16 years from now to begin paying it. Then they pay it over a 4-year period. Is this today’s money or is it 2037 money? Nobody making this deal will even be alive then.

Then there’s also:

• $10 million in shareholder funds to help increase access to solar power and rebates for residents living in neighborhoods that have often been overlooked.

Okay, that seems to be good. But wait, what about that big sticking point, the rates that SDG&E demands?

The only reference to rates in the U-T report, which was based on an extensive discussion between Gloria and the U-T’s editorial board, was that once the proposal is approved, “SDG&E officials will come to City Hall and discuss issues such as the rates they charge ….” Oh, great. Nothing in writing now about rates, it looks like. Gloria’s policy director, Jessica Lawrence, said, “You’ll be seeing a lot of SDG&E in front of City Council, in committee hearings, on a very regular basis.” So what? Nothing in this proposal guarantees anything about new rates, except that SDG&E officials will “discuss” them.

So, no promise of a rate change or lowering.

Also, another part of the “ride” is that there will be an audit to review SDG&E’s performance conducted every two years by an independent firm. Whoppee do! Some San Diegans want an audit NOW of SDG&E to determine whether they breached their current contract with the city.

The U-T also reports:

The franchise fees that SDG&E collects from the monthly bills of customers who live or own businesses within the city limits are sent directly to the city. The fees generate a significant amount of the city’s annual budget.

In fiscal year 2022, the fees are projected to come to $66.3 million, with 75 percent (or $49.7 million) going to the city’s general fund. The remaining 25 percent (or $16.6 million ) is deposited into the city’s Environmental Growth Fund for park and open space maintenance.

In addition, there’s a surcharge that is collected that goes to utility undergrounding of electrical lines that is projected to generate $65.8 million in revenue in FY2022.

Somehow we’d led to believe this is all from the good graces of the giant utility company. But, these numbers would be similar no matter what company or municipal entity ran the franchises.

Well, what happens if there is no agreement on a franchise holder by the June 1 extension end? Again, we rely on the U-T:

With Tuesday’s meeting coming just eight days before the existing contract is up, what happens if Gloria’s recommendation fails to win at least six “yes” votes?

While SDG&E would have what is called an “obligation to serve” to keep electricity and gas flowing within the city limits, it’s an open question whether the utility would continue to collect the franchise fees that go into the city’s coffers.

Which is kind of like saying, if you don’t play my game, I’m taking the ball home. Or, if you don’t like my train, go find yourself another one to ride. It’s actually a threat, as well. No deal. No franchise fees. This is money we’re talking. And we all know the city needs that.

{ 7 comments… read them below or add one }

Avatar Don Wood May 21, 2021 at 5:01 pm

You missed one glaring hole in this contract. It says “$10 million in shareholder funds to help increase access to solar power and rebates for residents living in neighborhoods that have often been overlooked.” Let’s see, what the heck do they mean by “access to solar power”? Will shareholder funds be used to help neighbors in disadvantaged communities install rooftop solar power systems on their roofs at the same time SDG&E and the other utilities are united in their efforts to kill off rooftop solar in California in the legislature via AB 1139 (Gonzalez) and at the CPUC? I kinda doubt it. What “rebates” will shareholder funds be used for? For that matter, what are neighborhoods that have often been overlooked”?? None of those terms are defined, there are no measurable goals or timelines with performance milestones the utility must meet. If I had ever written a contract with such vague and undefined goals I would have been out of a job. Let’s see if Jen Campbell and the council can convince Gloria to grow a spine and negotiate a good deal instead of what he’s brought before the council the first time.
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Avatar Frank J May 21, 2021 at 6:02 pm

Is it easier to fund the coffer when you deal with an monopoly?

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Avatar Don Wood May 21, 2021 at 6:10 pm

Since the city’s stillborn strategy of gaining leverage over SDG&E by inviting other companies to bid for the franchise did a faceplant, Gloria doesn’t have much ability to pressure SDG&E to agree to a more stringent agreement that holds the company accountable. He may have a little more if the council rejects this first proposal.

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Avatar Gravitas May 22, 2021 at 8:39 am

Maybe former City Attorney, Mike Aguirre’s threatened lawsuits, (over Gloria’s violation of the Brown Act..dealing with each Council member individually–arguably to get their vote outside of public view–with concessions) will stall the Council decision until a better “deal” or some competition comes forth.

Oh, and how is all that “undergrounding” of utility wires going? Residents paying for it for years and years….and…..still they remain.

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Avatar john mattes May 22, 2021 at 10:46 am

So sad,why don’t we have a progressive city administration? We elect Dems and we get stuck with the guaranteed highest rates in the country? Could republicans done any worse?

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Frank Gormlie Frank Gormlie May 22, 2021 at 3:12 pm

Just to be even-handed here, over the past 50 years of the current SDG&E contract, we’ve had more Republican mayors than Democratic ones.

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Avatar norma damashek May 24, 2021 at 3:06 pm

SDGE knows it has a good thing going in a town like ours, where collective memories are short and complacency rules.

Year in and year out, SDGE has gotten away with shortchanging the city while overcharging us customers. This double whammy has been more than okay with a long lineup of San Diego mayors and city councils. Why? because our elected officials know they can count on SDGE to honor a longstanding “gentleman’s agreement” to provide them with financial cover should their mismanagement and misdeeds become too obvious.

Think back a couple of decades to the days when Mayor Susan Golding was successfully sucking the city dry to finance her futile political ambitions. Remember how SDGE bailed her out with a quid pro quo that waived years of SDGE’s franchise obligations to underground millions of dollars-worth of power lines in exchange for a meager one-time, quick-fix payment into the city coffers?

It looks like former mayor Kevin Faulconer and current mayor Todd Gloria gave SDGE the same secret handshake because SDGE still acts as if it’s been permanently let off the hook when it comes to fulfilling its contract with the city’s ratepayers. Will tomorrow’s City Council give SDGE the same unethical hand signals?

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