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Mayor Gloria Announces Agreement on Gas and Electricity Franchises

CITY COULD NET NEARLY $3 BILLION IN REVENUE, COUNCIL CAN TERMINATE AFTER 10 YEARS

SAN DIEGO – Following through on his commitment to advance the City’s climate goals, distribute environmental benefits more equitably, protect the City’s financial interests, and provide strict transparency and accountability, Mayor Todd Gloria announced today that he has reached a tentative agreement with San Diego Gas & Electric (SDG&E) to provide energy services to San Diego residents and businesses.

“The agreements I’ve reached with SDG&E reflect our renewed partnership to address the existential threat of climate change, while providing financial benefits to the City,” Mayor Gloria said. “These agreements contain strong transparency and accountability measures that would not have been possible without the thoughtful input from members of the public and the City Council. If approved by the Council, these agreements put us on a path toward environmental sustainability, community equity and financial certainty, while providing an easy offramp for the City. This is a better deal for the City and for ratepayers.”

Agreement highlights include:

  • An initial term of 10 years, with the potential for a 10-year renewal. The City Council may terminate after 10 years for any reason.
  • Provides nearly $3 billion in revenue over 20 years, including:
    • A bid payment from utility shareholders of $80 million – the highest any city in the U.S. has ever received;
    • Certainty in franchise fee and undergrounding revenue, estimated at roughly $130 million annually, providing the City with certainty in funding for essential resident services;
  • $20 million to advance the City’s climate equity goals; and
  • $10 million in solar-energy rebates in historically underserved neighborhoods.
  • An “Energy Cooperation Agreement” that focuses on environmental and greenhouse gas reduction benefits, safety, equity and reliability – all while centering on the needs of historically underserved communities.
  • A reset relationship between the City and SDG&E that identifies pathways for resolving disputes and creates unprecedented transparency about customer rates, environmental commitments and equity.
  • Accountability and financial transparency measures that include biannual audits by an independent auditor, a performance bond, options for liquidated damages and increased insurance requirements.
  • Creates a citizen-focused Franchise Compliance Review Committee, which ensures public engagement on energy matters.
  • The continuation of and improvements to the accelerated undergrounding program, which provides hundreds of good-paying union jobs.

SDG&E has held exclusive franchises with the City to provide gas and electric service since 1920. The agreements allow the franchisee to use the public right-of-way to install and maintain the infrastructure, such as pipes, poles and wires, necessary to provide energy to San Diego’s residents and businesses.

The current franchise agreements, signed in 1970, were set to expire on Jan. 17, 2021. Under a process created by the previous administration, SDG&E was the lone bidder for new franchises. Mayor Gloria cancelled the Invitations to Bid (ITB) process and reached an agreement with SDG&E to extend the current agreements through June 1, 2021.

In January, Mayor Gloria initiated a robust public-outreach effort to educate city residents about the franchise agreements and solicit opinions about San Diego’s energy future. The process included partnering the City Council to hold 13 virtual community forums, which hundreds of people attended, and an online survey that drew nearly 1,400 responses.

In March, the Mayor released new ITBs. SDG&E was the lone bidder.

The City Council is expected to vote on the agreement on May 25.

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