Power to the People? San Diego’s Energy Future Franchise Agreement
Pay attention San Diego!
We as a city have an upcoming opportunity to make a difference and --most importantly-- not end up looking stupid while doing it.
Want a break on your gas & electric bill? We pay the highest rates of any large city in California.
How about speeding up our commitment toward a carbon-neutral future? Our local Climate Action Plan commits us to halving 2010’s green gas emissions by 2035, and the Trump administration’s “deregulation” isn’t making it any easier.
Are you tired about hearing about local elected officials getting bamboozled by big money interests?
Opportunity is knocking. Let’s not screw this up!
The City Council is holding a special meeting Thursday to review a wish list for an upcoming bidding competition to determine who gets to supply residents with natural gas and electricity.
For the past fifty years, San Diego Gas & Electric has ruled the utility business locally thanks to a franchise agreement giving the company access to public land to build its poles, wires and gas lines.
We’re the landlord and they’re the tenant and it’s time to renegotiate. Our property manager, aka the mayor, is retiring later this year and would like to walk away from the job with some kind of legacy-building accomplishment. The would-be feather in his cap, namely an expanded convention center, didn’t happen… and then there are those other missteps..
Don’t allow yourselves to be lulled into complacency by talking heads spouting word salads. The first step in solving any problem is recognizing the existence of the problem.
Civic boosters tend to gloss over the history of the City of San Diego’s bungled opportunities, insider profiteering, and flat out embarrassing history when it comes to our collective assets.
A recent example that comes to mind is the purchase (at an inflated price) of an indoor sky-diving building unsuitable for its stated purpose: addressing the needs of the homeless population. Another would be the $58 million we taxpayers have poured into an asbestos laden office building acquired for consolidating the many city offices scattered throughout downtown.
We’re on the hook for the costs (and it ain’t over yet) in both instances, and nothing was accomplished toward addressing the underlying problems. I could go on… the various stadium deals or near deals… the Balboa Park “centennial” that never happened… funding for facilitating a GOP convention that ended up trashing the pension system… etc, etc…
Getting off this merry-go-round of failure will require some effort by an engaged public. I know it’s going to be hard to focus, given the daily doses of Orange Madness, and the very real dangers surrounding the COVID-19 pandemic.
Other cities recently renegotiating these kinds of deals have come up with innovative ways to insist that private utilities provide more renewable energy and observe climate change-minded policy goals.
Two other things to keep in mind as this process unfolds:
SDG&E's unionized work force doesn't need to get screwed as a result of this deal.
The current arrangement (pun intended) provides a source of sponsorship to many local non-profits. Let's not forget them.
Fortunately, we have a coalition of local activists who’ve done the groundwork for making something better happen.
Here’s the money quote from their explainer.
SDGE has acted in bad faith against the best interests of the City, its businesses, and residents. Under the existing agreements, San Diegans are charged the highest rates in California and among the very highest in the country. The utility fought against community choice energy; attempted to charge ratepayers for SDGE’s own negligence in causing devastating wildfires; and, lobbied and made campaign contributions to boost its bottom line.
In fact, the City says the current franchise terms on relocating utility infrastructure to make way for City projects have been violated. Water is a scarce resource in San Diego, yet rather than help us get a reliable sustainable water supply, the current Franchisee is putting up barriers. At a cost to ratepayers of roughly 100 million dollars!
This adversarial relationship has to stop. The new agreements must have teeth in them to prevent violations and encourage cooperation.
Here’s what you need to know.
A franchise agreement is one of those exceptional situations where corporations are required to pay some of the costs for using our assets to make a profit.
As Elizabeth Warren pointed out a ways back, nobody actually builds a fortune without tapping into the infrastructure and social programs taxpayers fund.
This upcoming agreement will dictate everything about how (and what kind of) our energy is delivered to us, and how much we pay.
Earlier in 2020, the City issued a Request for Expressions of Interest, including documentation of the current deal, and areas of concern for any future agreement. (Wonk alert)
Two things we already know:
In today’s fast moving world, a 50 year deal is a really bad idea. We could end up powered by fossil fuels while the rest of the world takes advantage of (for example) nuclear fusion.
Whoever gets this deal needs to pay upfront for the privilege. It’s our resources they’ll be using and, dammit, the city needs the money.
There are three interested bidders; SDG&E’s corporate parent (Sempra), Berkshire Hathaway Energy (yup, that’s Warren Buffet’s outfit), and Indian Energy LLC (Owned by a coalition of indigenous tribal nations).
The city hired a consultant, Howard V. Golub (a former Pacific Gas and Electric attorney), who recommended slew of changes, including a 20-year term instead of 50. He surveyed over 3,600 utilities, noting that newer contracts are moving toward shorter terms.
The report’s suggestions are what the city council will be voting on this week. Among other things, local energy activists think a five year term (with a renewable option) would be the way to go
The consultant's recommendations (several hundred pages long) were released to the public a week before the July 16th city council committee hearing that approved it moving before the whole council.
There may be a whole lot of devils hiding in those report details, along with a bit of misdirection.
From Voice of San Diego’s explainer (worth a look!):
San Diego’s incumbent utility didn’t really like anything the city’s consultant suggested.
“The unprecedented take-it or leave-it tone of the (proposed contract) by the (consultant) will not help achieve any of the city’s energy or financial goals and will substantially stifle competition in this process, which would be a violation of the city charter,” Mitch Mitchell, vice president of state governmental and external affairs for SDG&E, wrote in a July 15 letter to the San Diego City Council environment committee. (Disclosure: Mitchell sits on Voice of San Diego’s board of directors.)
In that letter, SDG&E indicated it strongly prefers a 25- to 30-year term.
I’m wondering if this response is simply a matter of posturing. A KPBS story about a potential lawsuit over the process of bringing this item to the city council hints strongly in that direction:
Community advocates have said the potentially lucrative agreement could be a significant source of revenue for the city.
But they say the recommendations outlined in a JVJ Pacific Consulting, LLC report to the city is presenting a "sweetheart deal" for SDG&E. The report says the city should ask for a minimum bid of $62 million for the right to service the city for decades. Community advocates say that's too little of an amount.
KPBS reported on July 27 that many members of the public had felt like the discussions over the franchise agreement weren't transparent. Councilmember Jennifer Campbell told KPBS that she had met with members of her team for many weeks before the meeting.
The current franchise agreement expires on January 17th. If no agreement is in place at that time, SD&E is legally obligated to continue service until such time as a deal is struck.
UPDATE:
https://twitter.com/NCapretz/status/1291041326142693381?s=20
Five new City Council members and new Mayor will be sworn in this December. So the vote (super-majority required, probably in November) on accepting a bid--assuming negotiations proceed well-- will be the product of a lame-duck council and executive.
Lame duck deals have a history of being sweet to big business and sucky to us citizens.
This makes it all the more important for people to pay attention even though there will be a million other distractions over the next three months.
Read this explainer about what a good franchise agreement should include.
https://twitter.com/sdclimateaction/status/1290378165823639553?s=20
Finally, there’s one option that’s not--as far as I can tell-- being actively considered, namely municipalization, i.e., the transfer of ownership of utility assets to municipal ownership. This would be the case if the City of San Diego purchased SDG&E assets and became the distributor of energy for the City.
Given that we’re talking about a monopolistic deal, perhaps the best interests of San Diegans would be better served by just running the utilities ourselves. Los Angeles and Sacramento do it…. (they pay less) It’s worth a look, if no other reason to watch the collective freak out of privatization advocates.
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Lead image Gerd Altmann via Pixabay