DETAILS OF BIDS OFFERED TO WIN S.D.’S GAS, ELECTRIC FRANCHISE TO BE AIRED THURSDAY
Gloria called for no-vote meeting as expiration of SDG&E agreement looms
San Diego’s new mayor and the newly formed City Council expect to find out Thursday what’s actually in the bids to win the city’s new electric and gas franchise agreement — and determine if more than one company made a submission that meets the minimum requirements the city has sought.
After Mayor Todd Gloria on Tuesday morning called for the
council to hold a special meeting to disclose the bids, City Council President Jennifer Campbell placed it on the docket for 10 a.m. Thursday.
However, the meeting will not determine which company — if any
— will win the agreement because the meeting has been listed as an “informational” item, not a voting item.
Instead, the meeting is designed to open up the sealed bids turned in by private energy companies and find out what is being offered to win the right to deliver gas and electric services within the city limits of San Diego.
“The public deserves to know what bids have been submitted,” Gloria said in a statement. “We must ensure that we do not squan
der this once-in-a-generation opportunity to help meet the City’s climate goals and protect ratepayers.”
Under a franchise agreement, a municipality gives a utility the exclusive use of public right-of-ways for transmission and distribution, as well as the right to install and maintain wires, poles, power lines and underground gas and electric lines.
San Diego Gas & Electric has held the current franchise agreement since 1970 but the deal expires in little more than one month — Jan. 17.
SDG&E officials have said they are not interested in signing a one-year extension on the existing agreement, putting the issue on the front burner for the new mayor and City Council.
It is not known exactly how many companies have submitted bids. When the deadline for proposals passed in October, the San Diego City Clerk’s office would only reveal that the city had received at least one bid.
SDG&E has confirmed it made a submission. Two other companies — Berkshire Hathaway Energy, a subsidiary of billionaire Warren Buffett’s Berkshire Hathaway, Inc., and Orange County-based Indian Energy — earlier this year had expressed interest in bidding but neither company has confirmed whether they had followed through and submitted proposals.
Gloria’s office said Thursday’s meeting is not designed for the City Council to approve a potential agreement but to “provide an open forum for the public to better understand what bids have been submitted.”
Spokeswoman Jen Lebron said Gloria would “work very closely” with City Attorney Mara Elliott after the bids are opened and reviewed to see what the next steps at would be at City Hall.
The framework for the bidding process, set up by former Mayor Kevin Faulconer, was predicated on the hope that multiple energy companies would compete to win the lucrative franchise agreement, thus allowing the city to drive a harder bargain.
Bidders were required to make commitments to help San Diego meet its Climate Action Plan goals and agree to performance audits every two years. Perhaps most notably, prospective winners must sign on to a 20-year pact with the city and make a minimum upfront payment to the city of $80 million ($70 million for the electric franchise and $10 million for the gas franchise).
Under the plan envisioned by Faulconer’s team, if more than one company submitted proposals that met the minimum requirements, they would then bid against each other — auction-style — until just one bidder remained. That’s something a number of utility analysts across the country said they have never seen before.
Faulconer wanted the City Council to reveal the bids and make a decision in November but former Council President Georgette Gómez refused to place a hearing on the docket, saying the franchise agreement “should not be rushed, especially when a new council and a new mayor are about to be inaugurated.”
Five new members of the council were sworn into office last week, along with Gloria.
Gómez also called for the city to work out a one-year extension with SDG&E but the utility balked, saying it did not believe an extension “is in the best interest of the city or San Diego electric and gas consumers.”
The council has the final say on accepting any new franchise agreement, but it takes a supermajority of at least six of its nine members to approve a deal. Gloria’s spokeswoman said that under the “strong mayor” system of city government, Gloria has the ability to call for a voting meeting to be put before the council.
The newly constituted City Council held its first meeting Tuesday and while the franchise agreement was not on the agenda, six callers dialed in during the public comment period to criticize SDG&E, with four saying the city should keep pushing to get a one-year extension.
“What is on the table is a sweetheart deal for SDG&E,” said Tara Hammond of San Diego. “SDG&E is a utility monopoly that prioritizes shareholder profits.”
Some environmental groups have called for the city to oversee its own electric and gas services by forming a municipal power company, such as the Sacramento Municipal Utility District and the Los Angeles Department of Water and Power.
“I have high hopes that our new mayor will reject the previous plans and refuse to donate billions in city assets to a single utility company,” Tyson Siegele, energy analyst for the Protect Our Communities Foundation, said in an email. “Signing new franchise agreements would disadvantage every San Diego business and resident by way of higher rates for decades to come.”
SDG&E described its bids for the electric and gas franchises as “comprehensive,” with company spokeswoman Helen Gao adding, “(we) believe we are bestpositioned and most qualified to meet the city’s environmental and service expectations.”
At the meeting, the Department of Finance reviewed the city’s five-year budget outlook and estimated a $124.1 million shortfall for fiscal year 2022. One analyst said an $80 million upfront payment from a potential franchisee could help defray the deficit but cautioned the payments can be spread out for as long as 10 years.
Earlier this year, a consultant for the city has estimated that over a 20-year term, a new franchise agreement is worth at least $6.4 billion in profit to the company that wins it. But some outside groups have said the deal is worth twice that.