San Diego City Wire

San Diego has until June 1 to drum up more bids for its multibillion-dollar energy franchise agreement for gas and electricity service in the city after a yearlong effort failed last month.

The city operates under a five-month extension of its agreement with San Diego Gas & Electric, which has provided utility services to the city for more than a century and ended up being the only bidder to submit a proposal last fall.

The paucity of bids from other energy companies might suggest that SDG&E will end up serving the city for another generation.

San Diego City Councilman Joe LaCava | twitter.com/joe_lacava

"SDG&E has boxed us in," San Diego City Councilman Joe LaCava said during a council meeting late last month, as reported by Energy Central. "We have to wonder whether SDG&E is a partner or an adversary."

SDG&E, a subsidiary of Sempra Energy, has been San Diego's electric and gas utilities servicer since 1920, the first time it signed a 50-year deal with the city. In 1970, San Diego again agreed to a 50-year franchise for electric and gas services with SDG&E. That agreement was scheduled to end this month.

About a year ago, the city put out a call for bids for a new franchise covering both gas and electric services. In its request for expressions of interest for gas & electric services letter, the city asked all interested parties to respond by Feb. 21 "so that the city can remain on its current timeline to present a draft franchise agreement to the city council by spring 2020 with the intent to go to full council by end of summer 2020 with an executable franchise."

The winning bid still required a two-thirds vote of the San Diego City Council. That deadline came and went with no bids at all.

In September, then soon-to-be-outgoing San Diego Mayor Kevin Faulconer opened bidding for San Diego gas and electric franchises, which he hoped would yet attract interest from energy companies eager to provide for resident's utility needs.

Terms of the bid, this time for 20 years, included elimination of the 35% surcharge, implemented in 2002, in hopes of saving ratepayers at least $110 million. Bidders also were expected to bid a minimum of $80 million for both franchises and agree to performance audits every other year, workforce protections for utility employees, and "good faith" attempts to help the city meet its climate action plan.

"San Diego has the largest, most valuable electric franchise and second-largest gas franchise in the state, and we have a once-in-a-generation opportunity to get the most bang for our buck with this agreement," Faulconer said in comments published in a Sept. 23 Times of San Diego news story.

"The proposed franchise terms will ensure ratepayers are protected and accountability is front and center," he told the Times. "The terms laid out deliver the best deal possible to help meet the city's future demands for energy and climate goals."

The same Times of San Diego news story also said Berkshire Hathaway and Indian Energy expressed interest and that all prospective bidders had until Oct. 23 to submit their proposals.

Some called it a "sweetheart deal" but the Voice of San Diego referred to the would-be franchise agreement an "even greater failure" than the multimillion-dollar 101 Ash St. debacle.

"With so much at stake - green jobs, climate and equity goals, millions in city revenue - one might expect the mayor to learn from history, listen to expert consultants and leverage these lucrative contracts to hold corporate utilities accountable," the Voice of San Diego said in an Oct. 1 opinion piece. "Unfortunately, the mayor has decided to hand off a sweetheart deal to the next Wall Street utility provider and leave vulnerable communities of concern behind."

With the October deadline bearing down, only one company submitted a bid: SDG&E. The company told the San Diego Union-Tribune it had bid the minimum of $80 million.

"Today SDG&E submitted bids for the city of San Diego's gas and electric franchises," company spokeswoman Helen Gao said in the San Diego Union-Tribune Oct. 23 news story. "Together with our partners in the labor movement, along with several business and community leaders, we believe our energy delivery record over the past 140 years positions us best to work with the city to achieve its energy and climate goals over the next 20 years."

As SDG&E’s longtime franchise agreement with San Diego came closer to expiring, elected city officials tried to find competition but there were no submitted bids. That, ultimately, left SDG&E's bid, hand-delivered on Oct. 23, as the last and only one standing.

On Dec. 17, the city council and San Diego's new mayor, Todd Gloria, confirmed the actual state of bid process results, which KBPS said "was a surprise for many who believed multiple energy companies had expressed interest."

SDG&E tried to put a good face on its lone-bidder status by reminding San Diegans of their past relationship.

"San Diegans depend on SDG&E to power their daily lives, and we are proud of our strong record in providing clean, safe and reliable service over the past 140 years," the company said in a Dec. 17 news release. "We have proven we are the best positioned and most qualified to meet the city’s environmental and service expectations, and the needs of the city's new Community Choice Aggregation (CCA) program. Our 4,400 highly trained and skilled employees stand ready to deliver a bright energy future."

Gloria announced his formal rejection of SDG&E's bid in a Twitter post the following day, saying the bid was "unresponsive to the city's invitation to bid."

Two days before the new year, city council members unanimously approved Gloria's proposal to extend the existing franchise agreement with SDG&E for another five months.

"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 in a Twitter post. "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."