Interim COO Jay Goldstone on SDG&E payments

Critics of the SDG&E deal with San Diego to continue providing electric and gas service are sounding an alarm over a potential loophole in the pending city ordinance facing a second reading Tuesday.

One interpretation suggests SDG&E customers could be on the hook for $20 million under the so-called franchise agreement — at least the section helping areas mainly south of Interstate 8 add parks and other amenities to address effects of climate change.

City and San Diego Gas & Electric officials have consistently vowed that ratepayers won’t be seeding the city’s new Climate Equity Fund.

Clause doesn’t specify shareholders will pay $20 million toward Climate Equity Fund. (PDF)

“All this revenue — the $80 million from the bid amount as well as the additional $30 million — is coming from shareholders and not ratepayers,” interim city Chief Operations Officer Jay Goldstone told the May council meeting where the deal won initial approval by a 6-3 vote.

Indeed, a section of the ordinance states: “Grantee [SDG&E] shall not apply to the CPUC to recover shareholder contributions to the Climate Equity Fund in rates or other charges from electric customers.”

But another clause doesn’t specify shareholders having to foot the bill.

SDG&E “shall contribute … a total of $20 million to the City’s General Fund for the City to use to further the City’s Climate Action and Climate Equity goals,” says the ordinance.

By contrast, the associated Electric Cooperation Agreement says of solar subsidies: “SDG&E commits to spend up to $1,000,000 of annual shareholder contributions in each of the first ten City fiscal years the Electric Franchise is in effect.”

Craig D. Rose, a former San Diego Union-Tribune business writer and public-energy activist, says three attorneys have advised the Citizens Franchise Alliance that without additional language in the ordinance, SDG&E can seek reimbursement for $20 million from ratepayers.

“It’s not there now,” he said Friday. “Let’s see if they do it.”

Rose argues that if the city and SDG&E agree this $20 million should never be reimbursed by utility customers, it should be no problem tweaking language in the ordinance.

Rose, whose group is a member of the Public Power San Diego coalition, said something similar happened in franchise talks a half-century ago, when he said the city thought it wrested some money from SDG&E, “only to have the utility go to state regulators and win authorization to get reimbursed by ratepayers.”

San Diego opposed reimbursement at that time and lost, he said.

“Even with this money, the franchise proposal is a terrible,” Rose added. “But this could make a terrible deal $20 million worse. We urge every council member to reject this agreement when it comes to a vote on June 8th.”

Times of San Diego contacted SDG&E and the offices of Mayor Todd Gloria and Councilman Sean Elo-Rivera, who on May 25 made sure half of the Climate Equity Fund bill was paid in the first five years of the deal instead of all in the last four — ending in 2040.

On May 27, two days after the council vote, SDG&E regional public affairs director Warren R. Ruis wrote the city’s Goldstone and Paola Avila, Mayor Gloria’s chief of staff.

“As a confirmation of our Agreement and understanding, the contributions from SDG&E outlined in Section 4(e)(7) of the Electric Franchise Ordinance will be coming from shareholder funds, not ratepayer funds,” Ruis said via email. “Please advise if you have any questions.”

Elo-Rivera, successor to Councilwoman Georgette Gomez in District 9, said in a statement:

“Our office confirmed with the Mayor’s office and SDGE that all funds for the Franchise Agreement bid, Solar program, and Climate Equity Fund will come from shareholder dollars. Additionally, I am committed to ensuring the City of San Diego provides evidence in California Public Utilities Commission rate cases that ensures SDGE doesn’t recoup the expenses from the ratepayers.”

Nicole Capretz, the Climate Action Campaign founder pushing San Diego to make faster progress, isn’t taking sides in the fight over the ordinance wording.

“We are moving on,” she told Times of San Diego. “The dye is cast. Time to start the campaign to wean us off methane gas in buildings in our quest for a zero carbon future by 2030.”

But Rose of Citizens Franchise Alliance keeps ringing the bell.

This matter could be resolved simply, he said, by inserting the word “shareholder” into the section designating the $20 million.

“That would (probably) prevent SDG&E from seeking recovery of that dough,” he said. “Just one word resolves the question. It’s a small point in a $20 billion giveaway, but $20 million is far from chicken feed.”