Today, San Diego City Council Takes on Gloria’s Potential 20-Year Franchise Agreement With SDG&E

by on May 25, 2021 · 0 comments

in Energy, San Diego

Today, the San Diego City Council considers Mayor Gloria’s potential 20-year franchise agreement with SDG&E.

This potential does not sit well with a whole lot of San Diegans.

Specifically, opponents of the deal are not at all happy with a provision that allows SDG&E to recover some of the payments the utility is proposing to make if the deal does not run its full term.

Today’s San Diego Union-Tribune explains:

One of the major components in the tentative agreement reached between Mayor Todd Gloria and SDG&E calls for a deal lasting to years, with an automatic renewal for another to years should the city’ deem the utility a good partner.

If the city wants to void the automatic 10-vear extension, it may do so for any reason, provided a two-thirds vote of the City’ Council agrees. The extension can also be nixed if the city decides to pursue creating its own municipally run power company or if it determines a breach of the agreement has occurred.

Under the proposal, SDG&E agrees to pay the city a minimum bid of $70 million for delivering and maintaining electric power and infrastructure within the city limits. The payments will come in tranches of $10 million in each of the first five years of the proposed agreement, and the next two $10 million payments will come in 2030 and 2031.
However, if the agreement does not last for the full 20 years, there is a provision that requires the city to refund portions of the minimum bid to SDG&E. The size of the refund would be determined by a formula based on how long the agreement was in force.

The city’s Office of the Independent Budget Analyst, in a report issued Friday, offered an example: If the City Council decided to void the deal in 2031, the city would have received $60 million from SDG&E but would have to return $18.75 million of that amount to the utility.

Bill Powers is one of those not happy. He’s a board member of the Protect Our Communities Foundation, an environmental group and longtime critic of SDG&E.  Powers told the U-T, “The utility is getting a fantastic deal,” because of the clawbacks and another piece of the tentative agreement.

The U-T:

The proposal calls for SDG&E to pay $20 million to help advance the city’s climate equity goals, but those payments are not due until 2037. If the deal is terminated after 10 years, the city does not receive the $20 million.
Voiding the extension of the agreement would also erase SDG&E’s payments in the gas franchise of $500,000 per year to the city for the final 10 years of the term.

Powers argues that Gloria’s proposed agreement “absolutely, in its current configuration,” amounts to a 20-year deal rather than a 10-year deal because he believes a future City Council would be very hesitant to wipe such large amounts off the city’s ledgers.

The Voice of San Diego – calling the franchise agreement “the biggest energy contract the city has to dole out,” cautions:

One factor that makes this all a bit awkward, … The city and SDG&E appear poised to ink the franchise deal while they’re fighting over another agreement – the one that guides the project to bury utility lines across the city underground.

Some members of the Council, and the city attorney, aren’t thrilled about signing a massive deal with a company while simultaneously arguing the company hasn’t lived up to a separate deal.

The Voice reports:

The city isn’t happy that SDG&E stalled new projects to bury power lines underground since the expiration of the franchise fee agreement, …. Allegations spelled out by the San Diego city attorney’s office that the company was overcharging for that work remain unresolved. And the city is still fighting SDG&E in court after the company refused to pay for the cost of moving some equipment so San Diego could build Pure Water, its billion-dollar wastewater recycling system.

The franchise fee grants a utility the right to provide power in town. One big potential sticking point to watch for: Gloria’s proposal is essentially a 20-year deal, but several Council members have said they want a much shorter five-year contract.

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