Gloria Reaches Terms With SDG&E For Franchises, Now Heads To City Council
Friday, May 14, 2021
Photo by Nicholas McVicker
Mayor Todd Gloria Friday announced a tentative 10-year agreement with San Diego Gas & Electric to provide energy services to San Diego residents and businesses.
"The agreements I've reached with SDG&E reflect our renewed partnership to address the existential threat of climate change while providing financial benefits to the city," he said.
"These agreements contain strong transparency and accountability measures that would not have been possible without the thoughtful input from members of the public and the City Council," Gloria said. "If approved by the council, these agreements put us on a path toward environmental sustainability, community equity and financial certainty, while providing an easy offramp for the city. This is a better deal for the city and for ratepayers."
Highlights of the tentative deal, according to the mayor's office, include:
• an initial term of 10 years, with the potential for a 10-year renewal. The City Council may terminate after 10 years for any reason;
• providing nearly $3 billion in revenue over 20 years, including an $80 million bid payment from utility shareholders, certainty in franchise fee and undergrounding revenue — estimated at roughly $130 million annually — providing the city with certainty in funding for essential resident services, $20 million to advance the city's climate equity goals and $10 million in solar- energy rebates in historically underserved neighborhoods;
• an "Energy Cooperation Agreement" focusing on environmental and greenhouse gas reduction benefits, safety, equity and reliability;
• a "reset relationship" between the city and SDG&E identifying pathways for resolving disputes and creating transparency about customer rates, environmental commitments and equity;
• accountability and financial transparency measures including biannual audits by an independent auditor, a performance bond, options for liquidated damages and increased insurance requirements;
• creation of a citizen-focused Franchise Compliance Review Committee, which will ensure public engagement on energy matters; and
• the continuation of and improvements to the accelerated undergrounding program, intended to provide hundreds of good-paying union jobs.
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. The agreements allow the franchisee to use the public right-of-way to install and maintain the infrastructure, such as pipes, poles and wires, necessary to provide energy to San Diego's residents and businesses.
The current franchise agreements, signed in 1970, were set to expire on Jan. 17 of this year. Under a process created by the previous administration, SDG&E was the lone bidder for new franchises. Gloria and City Attorney Mara Elliot determined SDG&E's bid, which met the minimum bid of $70 million for electricity service and $10 million for gas, was unresponsive to the minimum requirements. He canceled the Invitations to Bid process and reached an agreement with SDG&E to extend the current agreements through June 1.
In January, Gloria initiated a public outreach effort to educate city residents about the franchise agreements and solicit opinions about San Diego's energy future. The process included partnering with the City Council to hold 13 virtual community forums, which hundreds of people attended, and an online survey that drew nearly 1,400 responses.
In March, the mayor released new ITBs. SDG&E was, again, the lone bidder.
The option still remains to municipalize or to purchase and put the city's utilities under public control. According to a consultant report by NewGen Strategies and Solutions conducted last year, SDG&E's property is valued somewhere around $2.5 billion, making the option to buy the company out an expensive one.
The City Council is expected to vote on the agreement on May 25.
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