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San Diego City Council Approves New Franchise Agreements With SDG&E

Power lines at an SDG&E facility in North Park are seen here on Sept. 26, 2017.
Andrew Bowen
Power lines at an SDG&E facility in North Park are seen here on Sept. 26, 2017.
Activists had been pushing the council to reject the deals, which they said do not do enough to hold the utility accountable. But supporters said they were the best compromise the city could get.

The San Diego City Council on Tuesday approved a pair of 20-year agreements with San Diego Gas & Electric that allows the utility to continue providing electricity and gas to San Diego homes and businesses.

The 6-3 vote was the culmination of years of studies, public outreach and negotiations, with activists pressuring Mayor Todd Gloria to shorten the deals and add stronger accountability measures for the utility.

But Gloria said in a statement after the vote that the deals he struck — technically separate agreements for gas and electricity — were a good compromise.

"These agreements give our residents what they deserve: certainty, accountability, choices for clean energy and pathways to achieve climate equity for all our neighborhoods," Gloria said.

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The deals, called "franchise agreements," allow SDG&E to keep its power and gas lines on city-owned land. In exchange, the utility's shareholders will pay the city $80 million over the course of the contracts. They will also pay another $20 million into the city's "climate equity fund" and provide $10 million in solar energy rebates to historically underserved neighborhoods.

The city can exit the deals after 10 years for any reason, with the approval of two-thirds of the City Council. But if the city chooses that route, it would have to refund SDG&E a portion of the revenue baked into the deals.

"We would essentially at 10 years be having to give up, by my account, close to $40 million to get out of this," said Councilmember Monica Montgomery Steppe. "It makes it very, very hard to justify and to really make those off ramps feasible."

Montgomery Steppe and councilmembers Joe LaCava and Vivian Moreno voted against the deals. Voting in favor were Council President Jen Campbell and councilmembers Stephen Whitburn, Marni von Wilpert, Chris Cate, Raul Campillo and Sean Elo-Rivera.

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A host of city residents called into the council meeting in both support and opposition. Among the opponents were several local environmental groups, which say SDG&E's parent company, Sempra Energy, is too invested in fossil fuels. The opponents also include those in favor of establishing a city-owned utility like those that exist in Los Angeles and Sacramento.

Among the supporters were several SDG&E employees and members of local labor unions, which saw shorter-term deals as a threat to the utility's unionized workforce.

Councilmember von Wilpert said while she would have preferred a shorter-term agreement, Gloria's proposal was the probably the best one the city could get.

"The mayor pushed really hard to build transparency, compliance and accountability into this tough negotiation," von Wilpert said. "We have an audit for the first time ever. We have a citizens oversight committee for the first time ever. So for these reasons I think the mayor got a better deal ... and I will be voting yes."

There were a few last-minute changes to the agreements. At the behest of Councilmember Elo-Rivera, SDG&E agreed to make its payments into the city's climate equity fund in $2 million annual installments starting immediately, rather than $5 million installments starting in 2037. He also asked that the city set aside a portion of the revenues from the deal in case the city chooses to exit it after 10 years.

And Mayor Gloria agreed to fund a study on the feasibility of municipalization — a typically long, expensive and legally fraught process that would have the city purchase SDG&E's assets and form its own utility.

San Diego City Council Approves New Franchise Agreements With SDG&E
Listen to this story by Andrew Bowen.