San Diego Gas & Electric released a consultant’s study Wednesday that estimated acquiring the company’s electric system and establishing a new municipal utility would cost San Diego residents as much as $9.3 billion and raise rates.
The study by Massachusetts-based Concentric Energy Advisors estimated it would cost $3.95 billion to $4.37 billion to purchase SDG&E’s assets in San Diego, another $3.16 billion to $4.16 billion to separate the system from the rest of the county, and $300 million to $800 million to set up a municipal utility.
Scott Crider, SDG&E’s senior vice president of external and operations support, said the study was prompted by a new ballot initiative that calls for the city to buy out the utility in hopes of lower electric rates through nonprofit operation.
Power San Diego is currently gathering signatures for the measure. The group claims the acquisition cost would be only $2.5 billion, and it promises a 20% savings in electric rates.
But the study by Concentric found that municipalization would likely result in a rate increase because the cost to pay off the resulting debt would exceed the utility’s current profit from customers in the city. And the city would also lose over $100 million annually in property taxes and franchise fees paid by SDG&E.
“We think customers deserve to know the facts,” Crider said. “What we found should give everybody pause.”
Crider noted that the cost of splitting the electric system between a new utility in San Diego and SDG&E operations in the rest of the county would be almost as costly as buying the assets. Major investments in new transmission lines, substations and other equipment would be necessary.
Backers of the ballot measure cite the municipal utility in Los Angeles, but Crider said that was established in 1903 and grew with the city — it wasn’t created all at once in a buyout. And he pointed to the recent failure of municipalization efforts in Chicago and Maine.
He said he understands that customers are frustrated with high rates, which he blamed on the transition to clean energy and investment in wildfire protection for East County.
“If you’re a working family right now, you want relief from the high cost of everything, including utilities,” Crider said.
But he said the Power San Diego plan is too expensive, lacks transparency and would put five “political appointees” in charge of creating a new municipal utility.
“They will be given a blank check to spend as much money…to force government seizure of the power grid,” he said. “We’re very concerned from a reliability and safety standpoint.”
Bill Powers, chairman on the Power San Diego campaign, said Wednesday that SDG&E is inflating the value of their system and overstating he cost of splitting it up.
“SDGE is consistent,” he said in an emailed statement. “They’ve inflated their asset values as much as they inflate their rates.”
He said that if the ballot measure is approved by voters the sale price would be set by either a negotiation or a condemnation proceeding in the courts.
The ballot measure has drawn sharp criticism from the business community and union leaders, with the San Diego County Taxpayers Association calling it “a bill of goods.”
Jerry Sanders, the president and CEO of the San Diego Regional Chamber of Commerce, said the new study shows that spending billions of dollars to create a municipal utility would be an “egregious” error for San Diego.
“A government run utility is not the solution to addressing the cost of energy in California and will likely mean higher electric rates for San Diego businesses,” he said.