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Multi-Billion Dollar Energy Franchise Deal Could Be Delayed Another Year

Power lines at an SDG&E facility in North Park are seen here on Sept. 26, 2017.

Photo by Andrew Bowen

Above: Power lines at an SDG&E facility in North Park are seen here on Sept. 26, 2017.

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Even if councilmembers don’t agree on a winning utility in that time, the city has options. That includes forming its own utility and maintaining a relationship with a community choice ... Read more →

Aired: November 11, 2020 | Transcript

A decision on which utility could get a decades-long contract to provide energy for the City of San Diego could be delayed. On Monday evening, City Council President Georgette Gómez delivered a memo saying that she would not docket the franchise agreement for a vote. Instead, she wants the current contract with SDG&E to be extended by a year.

The city closed an auction in late October for utilities to bid for a chance to serve the city of San Diego’s gas and electricity. The decision on which utility could get the multi-billion dollar contract was then sent to the City Council president to be put on the docket.

Listen to this story by Shalina Chatlani.

But in a Nov. 9 memo to Mayor Kevin Faulconer, Gómez wrote, “As a City Council, we must work to ensure maximum transparency, inclusion equity and accountability, especially when making decisions that would impact all San Diegans in a profound way for years, as contemplated under the currently proposed 20-year agreement.”

Gómez also says that the implementation of the City’s Climate Action Plan is a major priority for her in any new franchise agreement.

The mayor’s office does not have the ability to docket items at city council. That option is up to Gómez. Her decision comes after city council twice rejected a motion to move forward with terms of a multi-billion dollar energy franchise deal in August.

In an email, the city's Interim Chief Operating Officer, Aimee Faucett, wrote,“It is unclear why the Council President refused to schedule a vote of such importance when the current agreement has been a year in the making with both community and Council input."

"It is irresponsible to San Diegans to disregard a potential agreement that enjoyed interest from the energy industry with over a billion dollars in revenue for San Diego’s climate and equity goals on the line. It is the obligation of the City Council to conclude the process by opening the bid(s) before we consider other alternatives," she said.

Since the current auction closed in October, other utilities would not be able to bid during the year-long extension unless the auction were reopened. After a year, council would then decide whether to docket an item to examine the bids.

In an email statement to KPBS, a spokeswoman for SDG&E wrote, "This memorandum was a surprise to us and is contrary to the process that was described publicly by the mayor’s office. It appears that this is going to be a discussion between the council president and the mayor. In the meantime we have submitted strong and responsive bids that align with the city’s environmental and energy service delivery expectations.”

But after a year, even if councilmembers don’t agree on a winning utility in that time, the city has options. That includes forming its own utility and maintaining a relationship with a community choice aggregation provider, according to a Nov. 4, 2020 memo from city attorney Mara Elliot addressed to Councilmember Barbara Bry.

In the letter Elliot explains that if incumbent utility San Diego Gas & Electric’s contract expires before the city council makes a decision on a new agreement, the utility would legally still have to provide gas and electric services to residents under code from the California Public Utilities Commission.

“A public utility cannot cease to be such by merely discontinuing operations; CPUC approval is required,” wrote Elliot. “Ultimately, the City would be required to determine whether to grant another franchise or acquire the distribution system facilities through the power of eminent domain and become a municipal utility.”

Bill Powers, an engineer and member of the group Public Power San Diego, says the initial advice from the city’s attorney office on community choice energy wasn’t the full picture and was misleading.

“The understanding was that if we go with a public power agency, we have to sever our engagement with community choice energy. And so it would be difficult to have put it all this time, energy and money to do this and then just switch horses the moment that horse is about ready to leave the barn,” said Powers.

“Based on the statement in the consultant's report, unless you had some background in the material, you go, well, looks like that's the way it is if we were to go to a public agency… but it's incomplete and it gives the impression that we can't continue a relationship with San Diego Community Power (SDCP) when in reality you can continue the relationship in an almost seamless way.”

The Nov. 4 letter from City Attorney Elliot clarifies that while the city can no longer work with SDCP to sell energy, it will still be able to — like other utilities do with community choice programs — buy electricity from SDCP.

“If the City elects to municipalize its services, it can no longer be a member of SDCP for purposes of selling electricity to retail customers within City boundaries, but it could contract with SDCP for the supply of wholesale electricity and/or other services,” Elliot wrote.

A city spokeswoman told KPBS the franchise agreement auction process has been transparent and created a fair bidding process by seeking feedback from city council.

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