Study finds municipal utility could save San Diego ratepayers up to 14% in 10 years
An independent study commissioned by the City of San Diego found ratepayers could see lower electricity bills if the city were to form a municipal utility.
The Public Power Feasibility Study, which was written by the consulting firm NewGen Strategies and Solutions, was presented to the City Council's Environment Committee on Thursday. It also noted a number of legal and financial uncertainties that could significantly reduce the amount of ratepayer savings.
Cities have the legal right to form municipal utilities, which can operate as city departments or independent, community-owned nonprofits. But few cities have dared to do so in recent decades, fearing protracted legal battles with private utilities such as San Diego Gas & Electric (SDG&E) that want to protect their assets and profits.
The feasibility study found that if San Diego could purchase SDG&E's electrical grid within city limits for $2 billion, ratepayers could save between 13% and 14% in the first decade. If the purchase price were $6 billion, those savings would be wiped out in the first decade — but would gradually climb to between 5% and 6% after 30 years.
SDG&E charges some of the highest electricity rates in the United States.
Representatives of SDG&E and its unionized electrical workers attacked the study's methodology, saying it grossly underestimated the value of SDG&E's assets and the number of employees a municipal utility would require.
SDG&E spokesman Anthony Wagoner said in a statement that "a long-term partnership with SDG&E remains the best option given our nearly 150-year history of providing best in class service, safety and climate innovation, and unmatched grid reliability to San Diego customers."
Some environmental activists spoke in favor of forming a municipal utility, saying it could do a better job supporting San Diego's climate goals of achieving net zero greenhouse gas emissions by 2035, largely by replacing natural gas appliances with electric ones.
"The investor-owned utilities in the state, including SDG&E, are actively working to undermine rooftop solar and building electrification in California and San Diego," said Jerry Wanetick during the public comment period. "There's no way the city will reach its Climate Action Plan goals to decarbonize the city unless we … move rapidly to a nonprofit, community-owned public power system."
Much of the committee's discussion revolved around how SDG&E employees might be impacted by municipalization. IBEW Local 465, which represents the utility's electrical workers, sees it as a threat to the generous wages and benefits they've managed to negotiate over the decades.
But Councilmember Joe LaCava, who chairs the Environment Committee, sought to reassure workers that their jobs would be protected, and that he would support public power only if it was a separate entity that would be insulated from city politics.
"This is not going to be a city department," LaCava said. "If there is not a one-for-one replacement for the union jobs at the union wages with the union benefits, I am not interested."
Councilmember Jennifer Campbell said with proper regulation, private utilities can offer better reliability and customer service.
"I think financially and liability wise, the risk (of municipalization) is fantastically large," Campbell said.
The consultants hired for the feasibility study are now set to do a "phase 2" study that would go into greater detail on the costs, benefits and options for forming a public utility.