A San Diego City Council committee voted 3-1 Thursday to draw up details of a proposed franchise agreement for the city’s electric and gas utilities and begin a bidding process.
The Environment Committee directed staff to create a document with terms for potential bidders for the franchise agreement — a contract between the city and an energy provider. The highest responsible bidder would then have to be recommended by the mayor and approved by two-thirds of the council.
Howard Golub, a consultant the city hired to analyze its needs, recommended the minimum bid in the terms should be $62 million — low enough to encourage bids but not so low the city and its residents are suffocated by high rates and later surcharges with no money back to show for it, he said.
Golub also recommended franchise fees of 3.5% for natural gas and 3% for electric and a 20-year term with the bidder the city chooses.
San Diego Gas & Electric has been the sole provider of natural gas and electric utility services for San Diego since 1920. The current franchise agreement, finalized in 1970, is set to expire in January. Berkshire Hathaway expressed interest as a potential bidder to rival SDG&E. San Diego is California’s largest city to have franchise agreements with its utilities.
According to Golub’s recommendations, the city should not do what it did in 1970 — accept a franchise agreement it wasn’t happy with because SDG&E was the sole bidder. SDG&E is owned by Sempra Energy, an international corporation based in San Diego.
“I recommend a franchise agreement first,” Golub said. “And if that’s not feasible, move to a publicly owned utility.”
High interest rates in 1970 prevented the city from seriously examining that route, but much lower interest rates now make a public-owned utility more feasible, Golub said
Council members Jennifer Campbell, Scott Sherman and Vivian Moreno voted to draft bidding language, while Council President Pro Tem Barbara Bry was the sole no vote.
“This feels like another rushed deal, and it’s so important to the future of our city,” Bry said. “I think more time is needed.”
Moreno wanted some stipulations for a fund to help low-income communities disproportionately affected by climate change.
Campbell, the committee chair, also wanted some changes to the consultant’s recommendations, amending them to include the winning bidder using “reasonable effort” to employ those previously employed by the loser of the bid.
Sherman said he was interested to watch the bidding and hoped auditing would continue to be part of the process to “get the most bang for our buck.”
Nearly 100 members of the public called in to the meeting to express support for a franchise renewal of SDG&E or for municipalization of the city’s electric and gas needs.
The callers were fairly evenly split, with many of the calls in support of extending the existing franchise agreement with SDG&E coming from employees with the company or those representing the International Brotherhood of Electrical Workers local representing SDG&E workers.
They claimed job security, 100 years of history with the city and keeping it local as reasons to renew the franchise as soon as possible for 20 years or more.
Opponents to moving any franchise agreement forward claimed SDG&E’s lack of reliability, its high utility costs and its parent company’s involvement in fracking are all reasons to avoid franchising with SDG&E.
Some of them made impassioned pleas to municipalize the city’s gas and electric, essentially making the city take on the burden of providing the utilities. None of the committee members seriously considered this route in their public comments.
The next step will be releasing the terms of the franchise agreement as an invitation to bid. In August, the city with gather those bids and prepare to bring them in front of the full council.
— City News Service