THREE COUNCIL MEMBERS CALL FOR SHORTER FRANCHISE DEAL WITH SDG&E

Three members of the San Diego City Council say they want a new electric and gas franchise agreement to run no more than five years — significantly shorter than a 20-year deal set in the previous round of bidding.

“I believe a five-year agreement timeframe is essential,” said Councilwoman Marni von Wilpert, saying a shorter term would help make sure the company that wins the bid will be a good partner for the city.

At a meeting Thursday night of the city’s Environment Committee, fellow council members Joe LaCava and Sean Elo-Rivera also called for a five-year term.

In a memo to Mayor Todd Gloria sent before the meeting, Elo-Rivera said a shorter term “is more responsible” because of “the pace of innovation and policymaking in the energy sector across the county and the state, the possibility of forming a public power agency” and the launch of the San Diego Community Power, a community choice energy program serving San Diego and four other cities in the region, that will purchase power from clean sources.

In a franchise agreement, a utility is granted 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 within the city limits of a given municipality.

As it has for a century, San Diego Gas & Electric is the city’s current franchisee. But the existing electric and gas agreements — in place since 1970 — expire on June 1.

Under former Mayor Kevin Faulconer, the city established what is called an Invitation to Bid, hoping to attract multiple energy companies to compete to win the agreement. Working with industry consultants, Faulconer’s office tried to balance driving a harder bargain for the city with setting requirements that companies would still find attractive.

One of the requirements called for a new agreement lasting 20 years.

When the bids were opened in December, SDG&E was the only company to make an offer. Among other terms, the utility agreed to signing a 20-year deal and paying $80 million upfront to the city. But SDG&E called for numerous revisions to the bid and after consulting with the city attorney’s office, the newly elected Gloria deemed the bid non-responsive, sending the process back to square one.

Gloria has sought input to what requirements the city should put in a new round of bidding.

SDG&E officials said last week they would prefer something like a 20-year term — something a utility spokeswoman echoed Friday.

“Whoever is selected as the next franchisee will need to make large-scale investments to help the city accomplish (its climate) goals,” SDG&E communications manager Helen Gao said in an email. “Significant

and impactful longterm investments in electric transportation infrastructure, new energy technology projects and wildfire risk reduction will only be realized if there is a longer planning window made possible by having a long-term franchise agreement.”

Councilman Chris Cate said he doubted a five-year term would attract more bids from potential energy companies. “It’s just not going to happen,” Cate said.

In his memo to Gloria, Elo-Rivera also called for additional terms, including a minimum bid of $60 million for a five-year term. The price tag would escalate for every additional year, going as high as $135 million upfront for an eight-year deal.

Elo-Rivera pointed to SDG&E’s reported 2020 profits of $824 million. “SDG&E, as is the practice of the corporate world, is looking to socialize costs while privatizing their profits,” he said at the end of Thursday’s meeting.

Gloria plans to issue a new Invitation To Bid later this month, open the bids in April and deliver a first reading of a proposal to the City Council in May. It takes a two-thirds majority of the council’s nine members to approve any franchise agreement.

In a separate development, Councilwoman Vivian Moreno wants the electric and gas franchise agreements to fund about 10 percent of a Climate Equity Fund that would be used for projects such as parks, bike lanes and street lighting in areas disproportionally impacted by air pollution and green house gas emissions.

“The city has forgotten about a lot of these communities,” Moreno said. “Because of the lack of infrastructure, the private sector doesn’t come into these communities.

Moreno has brought a resolution that will be heard Tuesday at City Council to create a Climate Equity Fund that would have a budget of $4.8 million for fiscal year 2022. Moreno said she would not vote for any proposed franchise agreement that does not include a Climate Equity Fund.

In an effort to engage the public about a new franchise agreement, Gloria and the council held 13 community forums in January and February. An online survey was also conducted, attracting 1,378 responses. Among the results, respondents said they were generally satisfied with electric and gas services and placed a high value on reducing pollution.

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