Point Loma Nazarene University’s Fermanian Business & Economic Institute on April 27 published a summary review of public power for San Diego. The review somehow concluded that San Diego transitioning to a nonprofit public utility would have an uncertain impact on rates and little impact on the city’s struggle to deal with climate change.
Unfortunately, the Fermanian review relies on misinformation, worst-case assumptions and omissions to make its case. The San Diego Regional Chamber of Commerce paid for the review. The chamber was the recipient of over $250,000 in dues and contributions from Sempra and its affiliate San Diego Gas & Electric in 2020.
There is no mention in the Fermanian report that the far more extensive evaluation conducted by the city in 2020 determined that public power would cost less and provide the local control needed to achieve our ambitious climate and equity goals.
Fermanian relies on outdated information to incorrectly assert that San Diego’s new community choice energy provider, San Diego Community Power, cannot sell power to a San Diego public utility. The City Attorney’s Office has confirmed that it can.
The report mistakenly states that the cost of power, which will be provided by community choice, largely dictates rates. In reality, it’s the cost of transporting that power that largely dictates rates, and the owner of the wires — currently SDG&E — controls that transport infrastructure and charges the highest rates in the continental United States.
Fermanian asserts that much of the rationale for transitioning to a public utility is undercut by the launch of San Diego Community Power, which will largely address what a public utility would do anyway. But San Diego Community Power will have no role in delivering power to customers.
It is ironic that Fermanian’s review would put so much stock in the role of community choice energy. In 2017, SDG&E’s affiliate Sempra Services commissioned Fermanian to undermine community choice with another flawed study as the city weighed whether to move forward, which it did.
Now Fermanian’s misleading review of nonprofit public power comes as San Diego is negotiating new electric and natural-gas franchise agreements with SDG&E.
California’s more than three dozen electric nonprofit public utilities — every one — charge lower rates than SDG&E. They charge less because public utilities have no need to generate $1 million a day in profits in the city, as does SDG&E. That’s because public utilities pay executive salaries that are substantial. The chief executive of Sacramento’s public utility earns about $600,000 — roughly a 10th of what executives earn at SDG&E, whose chief executive earns $7 million annually.
In addition to its sky-high rates, let’s not forget that SDG&E has not been a good partner. Despite explicit language in the current franchise agreement obligating it to do so, SDG&E has refused to cover the cost of relocating its equipment to accommodate the Pure Water project, essential to our drought-prone region’s future.
The city is now suing the utility over its failure to do the work at its expense.
As the city’s franchise agreement consultant noted in 2020: “City operational departments report that SDG&E has become increasingly uncooperative in coordinating street work. … These problems have become so severe that there has been repeated litigation.”
This troubled history with SDG&E makes public power an attractive alternative. That was the conclusion of the city’s consultants hired by our previous mayor. The city spent nearly $600,000 evaluating its options in 2020. The city’s consultants concluded that San Diego would pay lower rates and have more control over electricity and natural gas service with public power.
The lead consultant, JVJ Pacific Consulting, advised the city to go straight to public power if San Diego failed to receive bids meeting a minimal standard. And among the first acts of Mayor Gloria’s administration was concluding that the bids received from SDG&E, the only bids received, failed to meet the standard.
The failure of the current city administration to pursue a transparent and detailed assessment of public power — the only option to a costly agreement with SDG&E — sets up a fait accompli, with the city in the role of supplicant accepting whatever deal SDG&E deigns to put on the table.
Fortunately, the City Council still has time to compare public power with another bad franchise deal. The council can take the reasonable course and insist on a detailed and impartial analysis of public power for San Diego.
Should we pass the June 1 expiration date of the current franchise agreement extension, the lights will stay on. The franchise fees will continue to be paid. SDG&E has an obligation to serve until a new provider is in place, if that is the direction the city chooses.
There is ample time for the city, not third parties with an agenda, to step forward and carry out a comprehensive study of the public power alternative. That is the leadership we need.
Bill Powers is a registered professional mechanical engineer in California and Missouri with over 35 years of experience in energy and environmental engineering. Powers is the author of the 2020 strategic energy plan for San Diego, Roadmap to 100 Percent Local Solar by 2030. He is a board member of the Protect Our Communities Foundation.