MAYOR GLORIA TO PROPOSE FIVE-MONTH EXTENSION OF SDG&E DEAL

San Diego Mayor Todd Gloria has worked out a proposed extension of the city’s soon-to-expire franchise agreement with San Diego Gas & Electric that will add just over five months to the current deal — through June 1.

Gloria will present the proposed extension before the City Council in a special meeting scheduled to begin at 9 a.m. today.

“I urge the City Council to support it during their special meeting tomorrow,” Gloria said Tuesday in a statement. “I thank SDG&E for working with me in a collaborative process.”

In order for the proposed extension to go into effect, the City Council has to approve it on a two-thirds vote — meaning at least six of the council’s nine members have to vote yes.

“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.”

Officials at SDG&E confirmed the June 1 extension but declined to comment further.

Under a franchise agreement, a municipality grants a utility the exclusive use of public rights of way for transmission and distribution, as well as the right to install and maintain wires, poles, power lines and underground gas and electric lines.

As it has been since 1920, SDG&E is the current franchisee for the city of San Diego. But the existing agreement, in place since 1970, expires Jan. 17.

At a Dec. 17 City Council meeting, a number of council members urged Gloria to seek a one-year extension, but in November, SDG&E officials said they were opposed to extending the contract for that long. Any extension on the current franchise agreement, the San Diego city attorney has said, requires approval from both parties — the city and SDG&E.

Councilman Chris Cate, the lone Republican on the newly constituted City Council, said he would vote in favor of granting a fivemonth extension to the franchise agreement.

“I think a modest extension to get us to a point where we can move forward on this is a good thing,” Cate said. “I look at this from a financial standpoint and I think the risks and liabilities of not having something in place is not in the best interests of the city and its residents.”

Earlier this year, City Attorney Mara Elliott addressed what would happen if the current agreement were to lapse.

In a memo, Elliott cited the California Public Utilities Code that says “the incumbent gas and electric corporation has a duty to continue service” unless the utilities commission for some reason authorizes SDG&E to stop.

However, Elliott said, “it is possible” that SDG&E “may cease to pay all or a substantial part” of the franchise and undergrounding fees to the city, which are applied to the city’s budget.

Under the current franchise agreement, the fees paid by SDG&E generated $47.8 million to San Diego’s general fund and $15.9 million to the city’s Environmental Growth Fund in fiscal year 2020. In addition, a surcharge in SDG&E’s electric franchise accounted for $63.6 million to the city’s Utility Undergrounding Program.

Tyson Siegele, energy analyst for the Protect Our Communities Foundation, has been a sharp critic of SDG&E. Siegele called the five-month extension “ridiculously short” and “demonstrates SDG&E’s unwavering dedication to its shareholders over its community. San Diego deserves better, especially during a pandemic.”

Siegele and some other environmental and political groups have called on the city to exercise its option to bypass SDG&E altogether and form a municipally run utility. Such a move would be complicated and cost billions, but supporters say it would save San Diego customers money in the long run, pointing to the fact that SDG&E’s rates are the highest in the state.

With the existing franchise agreement nearing an end, former Mayor Kevin Faulconer set up a competitive bidding process in the hopes that multiple energy companies would vie to sign a new franchise deal with the city.

But on Dec. 17, at another special meeting of the City Council, bids were unsealed and only SDG&E had turned in an offer. The utility’s bid included agreeing to a 20-year deal and paying the city $80 million in shareholder money upfront ($70 million for the electric franchise and $10 million for the gas franchise).

However, SDG&E’s proposal included notations that called for various changes “so that any ultimate agreements would comply with federal, state and local law and best utility practices.”

After consulting with staff members and the City Attorney’s Office, Gloria one day later rejected SDG&E’s bid, deeming it “unresponsive” because of “the extensive exceptions” the utility made in its offer. Gloria pledged to work with SDG&E to get an extension to the existing franchise agreement.

Gloria said the f ivemonth addition he proposes that the council adopt “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.”