San Diego business and labor leaders warned Tuesday than a municipal takeover of electric and gas utility service would cost taxpayers $8.9 billion up front and not result in cheaper or greener power.
“Both the business community and the labor community see how important this issue is,” said former Mayor Jerry Sanders, who now heads the San Diego Regional Chamber of Commerce. “I see red flags all over the place.”
Sanders spoke outside an electrical substation in Kearny Mesa, where he was joined by officials from the San Diego & Imperial Counties Labor Council and members of IBEW Local 465.
The groups are responding efforts by community organization to champion public power, under which government provides utility service. Examples include the century-old Los Angeles Department of Water & Power and the Depression-era Bonneville Power Administration in the Pacific Northwest. Proponents say public power can be cheaper because there is no need to make a profit.
The chamber and the labor council released a report by Point Loma Nazarene University’s Fermanian Business & Economic Institute that found “municipalization would deliver little, if any, of the city’s goals, while exposing it to enormous logistical, legal, and financial burdens and risks.”
The Fermanian Institute’s economists calculated that it would cost taxpayers $8.9 billion to acquire electric and gas distribution assets from San Diego Gas & Electric and $1.7 billion a year to operate the network.
“These costs come with a wide range of risks,” said Dr. Lynn Reaser, chief economist at Fermanian, citing liability for accidents, the need for costly equipment upgrades and the responsibility for ensuring reliability.
She noted that San Diegans can already choose greener power through the new Community Choice initiative, so municipal control would provide no environmental improvement.
The report examined 64 recent attempts to create municipal utilities and found only nine have succeeded. “The experiences of other cities over the past 10 years should give San Diego pause,” Reaser said.
Keith Maddox, executive secretary treasurer of the labor council, expressed concern that union electrical workers would lose their jobs as the city sought to cut expenses because “municipalization would cost more than double San Diego’s annual budget.”
He called the idea “all risk and no reward.”