Was the City’s Deal With SDG&E the Best We Could Do?
When just about everybody is on your “side,” figuring out what goes on with deals like the one the City Council just agreed to concerning San Diego Gas & Electric is never simple.
First up, you can’t assume this was necessarily about where our electricity comes from; we have already established community choice aggregation programs in the region serving as alternatives to SDG&E when it comes to purchasing energy contracts.
What was at stake concerned the use of city land and the infrastructure associated with delivering natural gas and electricity, along with the right to have a monopoly on that process.
And, no, your bills won’t be going down. A state agency handles that part of the equation.
So, with that in mind, let's start looking for answers.... (Items in italics are quotes from the Union-Tribune’s coverage)
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$$$ Did five liberal Democrats (and one moderate Republican) just agree to a deal brokered by our (sometimes) progressive mayor with a company charging the highest rates in California?
Why, yes, they did.
The California Public Utilities Commission says SDG&E’s average rate in 2019 came to 23.13 cents per kilowatt-hour, compared to 16.30 cents for PG&E and 13.62 cents for Southern California Edison.
$$$ Did San Diego and Imperial Counties Labor Council pitch in with the Chamber of Commerce to fund a study saying the status quo is the way to go?
You betcha.
$$$ Was the study a joke?
A not-funny one, perhaps, since it apparently didn’t acknowledge that the cost of transporting power is the primary driver in determining rates.
The study’s authors apparently didn’t bother to check in with the City Attorney's office before making the claim that the new regional community choice energy provider couldn’t legally sell power to a municipally owned utility company.
What the study got right was that there is a lot of uncertainty in changing providers right now.
And if I was in the International Brotherhood of Electrical Workers, I’d damn sure want to know if my livelihood was endangered.
This is not a ‘hold your nose and vote yes’ type of deal,” said Nate Fairman, business manager for IBEW Local 465, which represents union employees at SDG&E. “This is real, the most lucrative agreement that any mayor has ever reached with any utility.”
The words “most lucrative agreement” may be a bit of hyperbole, since consumers in cities like Los Angeles and San Francisco have their energy delivered by city owned organizations who pay union wages, are more motivated by public policy to clean up their acts, and offer cheaper rates.
A city-owned company has seemed like an idea worth exploring for San Diego, with the topic of forming a municipal utility being brought up frequently at public forums on the franchise agreements. A City Council committee took testimony on the subject earlier this year.
From the Union-Tribune:
While there would certainly be challenges, “there’s no question that you can do this, so don’t even think twice that it’s out of your wheelhouse,” said Barry Moline, executive director of the California Municipal Utilities Association.
“There has to be commitment because it’s not an easy process,” said Ursula Schryver, vice president of the American Public Power Association, a trade group that promotes publicly funded utilities across the country. “It’s going to take time, it’s going to take money...”
...“You need to recognize that when you get into this conversation, that it’s basically nuclear war,” Moline said. “For SDG&E, this is an existential issue. Granted, (the city of) San Diego is a little less than half of SDG&E’s service territory but still, that’s a big chunk. It’s not like 5 percent or less.”
Alas, the time frame involved in creating a municipal utility (4-6 years), uncertainty as to costs, and the fact that no major political figure or entity was willing to spend political capital on such a project, meant discussions about taking that path weren’t going to be part of the current round of negotiations.
https://twitter.com/acbowen/status/1396990532274974720?s=20
The hope among advocates was (and remains) that a shorter term deal with SDG&E would allow time for a public option to organize.
SDG&E, whose parent company is San Diego-based Sempra Energy, has held exclusive franchises with the city to provide gas and electric service since 1920. Its last deal had a 50 year lifespan, and just about everybody agrees both ratepayers and the city government were getting the short end of the stick.
With the end-date on that contract approaching, the city asked around to see if anybody else was interested in bidding. A couple of outfits took a look at the numbers and said “no thanks.”
The company’s first offer for another contract was rejected by then-newly elected Mayor Gloria. It met the bare minimum standards for consideration, and had zero chance of getting approved by a super majority of the City Council.
SDG&E’s second offer, covering 10 years with an option for 10 more, was approved on Tuesday. Just about every environmental and activist group in town thought it was a crummy deal.
Masada Disenhouse, executive director of the environmental group, SanDiego350, told the council the city needed “A better plan that is much shorter — no more than five years. Please, don’t do the same thing over again and hope the results are different.”
https://twitter.com/NCapretz/status/1397320598817173509?s=20
More, from Union-Tribune coverage:
After a long session in which the outcome at times appeared uncertain, the council voted in favor of a new deal on a 6-3 vote, just barely meeting the required two-thirds supermajority needed per the City Charter to finalize a new franchise agreement.
“While it is not everything that we wanted, it’s not everything SDG&E wanted either,” said Mayor Todd Gloria in a presentation that kicked off discussion of the item.
Council members Jennifer Campbell, Stephen Whitburn, Chris Cate, Raul Campillo, Marni von Wilpert and Sean Elo-Rivera voted in favor while Joe LaCava, Vivian Moreno and Monica Montgomery Steppe voted no.
SDG&E spreads a lot of money around town to keep its image warm and fuzzy, and its corporate staff are involved in an amazing amount of civic efforts. Good on them. I’m sure they’re all nice people who have little choice but to put their stockholders' interests first.
None of this changes the facts of SDG&E’s not-great history on climate action and squishiness about living up to the terms of the expiring agreement. We needed firm commitments to climate, equity and wildfire safety. We got mostly vague promises. And some of the enhancements negotiated in this company’s second offer appear near the end of the second ten year term.
The Protect Our Communities Foundation press release didn't mince words:
"The Council approved the agreement despite a host of legal errors that punctuate the franchise agreements and the accompanying documents. The Protect Our Communities Foundation’s comments to the City highlight that the agreements (1) violate the prohibition against delegation of the City Council’s policy making authority (2) inaccurately assert the agreements’ exemption from the California Environmental Quality Act (3) conflict with the City’s Climate Action Plan, and (4) illegally surrenders the Council’s duty to set the terms of the franchise agreements."
What made this deal more attractive to city council members who supported it were clauses allowing for future termination of the deal (with the support of a supermajority on the City Council.)
Council member Joe LaCava wasn’t buying this argument:
LaCava said he looked at “the totality” of the agreement when he voted no. “I appreciate off-ramps built into the agreements but they are off-ramps to nowhere,” LaCava said. “We have no viable alternatives and we remain vulnerable. The city and the council must build a path to alternatives, such as public power.”
Maybe this deal is what constitutes ‘go along to get along’ in San Diego. Maybe it was the best deal the Mayor thought he could get. Maybe the price of changing up was higher than we know.
Maybe...
What we know is San Diego brought a butter knife to a gunfight.
Frankly speaking, the deal smells to high heaven like business as usual in San Diego.
Excuse my paranoia, but I’m always suspicious about these sorts of dramatics at the city council. Were it not for provisions of the Brown Act, I’m sure it wouldn’t be too hard to figure out who got to vote which way, with the end result assured.
The best interests of the residents of the city would have been better served if alternatives to the same old, same old had been considered five years ago. So blaming politicians currently in office who weren’t there for something in the past doesn’t seem like a productive idea.
As it is, the best interests of SDG&E stockholders prevailed and they were ‘nice’ about not rubbing it in our faces.
“Coming to these agreements took a tremendous amount of effort and compromise on both sides,” SDG&E said in a statement, “and we believe the result is a positive outcome for the City of San Diego and its citizens, and positions San Diego as a national leader.”
The vote on the franchise agreement is a city ordinance, requiring a second reading by the council within the next 30 days. Although the existing agreement will expire before that happens, SDG&E has pledged to continue providing service, along with collecting the franchise fees customers pay as city revenue.
So the lights won't be going out. (Was never going to happen, anyway)
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Meanwhile, on an unrelated matter, Total Non-Recall in progress. (h/t Greg Mitchell)
https://twitter.com/cmarinucci/status/1397572119488188417?s=20
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Lead image: Peter Kaminski / Flickr