Sign outside San Diego Gas & Electric building
A sign outside a San Diego Gas & Electric building. Courtesy of the company.

San Diego Mayor Todd Gloria announced Tuesday he has come to an agreement with San Diego Gas & Electric to extend the existing franchise agreements through June 1 to allow the City Council more time to determine its next action.

The council, meeting in special session Wednesday, must approve the extension by a two-thirds majority for it to become active.

SDG&E, whose parent company is San Diego-based Sempra Energy, has held exclusive franchises with the city to provide gas and electric service since 1920. The current franchise agreements, established in 1970, are set to expire on Jan. 17, 2021.

“This extension will create certainty and continuity for ratepayers and provide the city with the time we need to craft new terms for the next franchise — one that will help us protect residents and businesses, strike the best deal for taxpayers, and achieve our climate goals,” Gloria said. “All options are on the table. Critically, the extension will allow San Diego residents ample time to make their voices heard as we prioritize people and sustainability and work together to create an energy future that works for all of us.”

Under an open bidding process created by former Mayor Kevin Faulconer’s administration, SDG&E was the lone bidder for a new franchise agreement — meeting the city’s bare minimum bid.

However, Gloria, in consultation with City Attorney Mara Elliott, determined that the bid was unresponsive to the minimum requirements set forth in the Invitation to Bid. Consequently, the mayor cancelled the bidding process and initiated talks with SDG&E on extending the current franchises.

Gloria rejected the bid on Sept. 18, a day after the sole bid from SDG&E was revealed — $10 million for gas and $70 million for electric — for the 20-year contract. Faulconer, with guidance of the previous council, helped set the terms for the bid in September.

Gloria and five of the nine City Council members were sworn in this month, leaving them just weeks to decide whether to approve SDG&E’s minimum bid for 20 years, ask for an extension to allow newly elected officials to get up to speed, cancel the process altogether and start over or pursue municipalization — purchasing and putting the city’s utilities under public control.

Councilman Chris Cate, one of the four incumbent members, expressed frustration at the delay on Thursday.

“This is a process which has been undertaken for well over two years,” he said. “We knew the deadlines years ago.”

He said an extension wouldn’t be a good use of the city’s time or resources, and shot down the municipalization idea as a costly endeavor already looked at by analysts, which the city could ill-afford as it grapples with budgetary fallout from the COVID-19 pandemic.

Other councilmembers urged patience.

“We cannot commit to a bad deal because we are in an economic downturn at the moment,” said Councilman Sean Elo-Rivera. “This will affect us for years after the crisis has passed.”

The lone bid came as somewhat of a surprise. Berkshire Hathaway and Indian Energy had both expressed interest previously but failed to submit bids.

— City News Service