Some experts say ratepayers could be on hook for up to $20 under
loophole in proposed law
By Miriam Raftery
June 5, 2021 (San Diego) – On Tuesday, the San Diego City Council will have its second reading of a proposed utility franchise agreement with San Diego Gas & Electric (SDG&E). But a coalition of public interest, environmental and racial justice groups are calling on the Council to overturn its earlier 6-3 approval of the plan. Only four votes are needed to block the agreement, since a supermajority of two-thirds is required for passage.
For the past century, SDG&E has been the city’s exclusive energy provider. But ratepayers have chafed at high utility rates, anger over wildfires that regulators found were caused by SDG&E equipment, and other concerns. So the city submitted requests for bids from competitors under both Mayor Todd Gloria and former Mayor Kevin Faulconer.
But no other companies or organizations submitted bids for the franchise agreement, which grants a utility the exclusive use of public rights of way for transmission and distribution, as well as the right to install and maintain wires, poles, power lines and underground gas and electric lines. So the city crafted a 10 year franchise proposal with SDG&E, with a mandate to extend for another 10 years provided the utility complies with all terms.
But some want to see the contract axed, the timeframe shortened, and/or tougher terms added.
“We need the Council to protect our City from SDG&E,” says Craig Rose, a member of Citizens Franchise Alliance and Public Power San Diego. “This proposed agreement would hand the utility $20 billion in profit for a return of less than one cent on the dollar. It’s a giveaway that neither the ratepayers nor the environment can afford.”
A press release from Activist San Diego, which also opposes the franchise deal, states that the agreement would “shackle residents and businesses in San Diego “with the highest rates in the continental United States for 20 years.”
Groups including Activist San Diego, Protect Our Communities Foundation, Public Power San Diego, Racial Justice Coalition, Citizens Franchise Alliance, and Sunrise Movement San Diego held a rally on Friday outside City Hall downtown, calling on Council members tor reject the proposed utility franchise deal.
Some critics are sounding the alarm over a possible loophole in the city’s pending ordinance which could leave ratepayers on the hook for $20 million under the franchise agreement. While one section specifically states that SDG&E “shall not apply to the CPUC [Calif. Public Utilities Commission] to recover shareholder contributes to the Climate Equity Fund in rates or other charges from electric customers,” another section doesn’t specify that shareholders should foot the bill.
Craig D. Rose, a former business writer for the San Diego Union-Tribune, says three attorneys have advised the Citizens Franchise Alliance that without clarifying language to the ordinance, SDG7e can indeed seek reimbursement of $20 million from ratepayers.
Indeed, there is historical precedent, Times of San Diego reports that Rose said a similar action occurred in franchise talks a half-century ago, when the city thought it wrested some money from SDG&E, “only to have the utility go to state regulators and win authorization to get reimbursed by ratepayers.” San Diego opposed reimbursement at that time and lost, Rose noted. Though he believes the amendment would offer greater protection for ratepayers, he still calls on the Council to reject the measure outright.
SDG&E regional public affairs director Warren R. Ruis advised Mayor Todd Gloria’s chief of staff and the city’s interim Chief Operations Officer Jay Goldstone at the May City Council Meeting, “All this revenue – the $80 million from the bid amount as well as the additional $30 million – is coming from shareholders and not ratepayers.”
SDG&E has contended that its proposal is best for the city and ratepayers.
SDG&E spokeswoman Helen Gao said in a statement issued May 13, “Mayor Todd Gloria, his administration, and the City Attorney challenged us to identify new and creative ways to work with the City as part of modernized franchise agreements. The proposed agreements reflect solutions to the feedback heard during the robust public process and goals expressed by the City Council and their request for more transparency and accountability.”