The Franchise Agreement is Bad for San Diego and its Residents
Why Public Power San Diego pushes our San Diego City Council to vote “no” on a 20-year Franchise Agreement in which greed wins and the people of San Diego loose.
We, the PPSD Coalition, are concerned that San Diego is on course to hand over billions of dollars to a flawed private utility – through a flawed franchise auction involving flawed assumptions, calculations, and conclusions.
This potential multi-billion-dollar loss – due to an imminent franchise sale by the city for a fraction of its true value – would continue the unfortunate local legacy of hastily, badly crafted deals that have sold-out our city, robbing us of badly needed resources for high-priority projects, thereby outraging properly-informed citizens and ultimately subjecting San Diego itself to national ridicule.
Fortunately, this potential multi-billion-dollar loss can still be avoided–by correcting these flawed assumptions, calculations, and conclusions, as discussed below, ASAP.
In particular, the value of the city’s utility franchise can be reasonably estimated at more than $15 billion – not the $6 billion miscalculated by the city’s consultant – and the loss of these billions would come during a period of unprecedented need created by the pandemic, the deepening economic downturn, and the climate crisis.
SDG&E’s profits in the first half of this year are up more than 40 percent, underscoring the absurdity of the city’s consultant assuming there would be zero-profit growth for two decades.
It cannot be a reasonable “auction” when the process significantly undervalues the franchise’s value in the first place. Who would accept an auction of their home that began at less than 1 percent of its value? And that is precisely what this so-called auction would do.
We can’t forget that SDG&E still faces over 2,000 lawsuits in court, and is responsible for numerous wildfires in Southern California – unnecessary fires that destroyed homes, wildlife, and displaced residents. In fact, the three SDG&E fires from 2007 alone killed 10 people, injured 40 firefighters, destroyed 1,700 homes, and forced more than 10,000 people to seek shelter at Qualcomm Stadium.
To add insult to injury, SDG&E filed an application to charge customers the $379 million in costs related to the wildfires, so they wouldn’t have to cover the expenses from their own coffers. Luckily the California Public Utilities Commission refused to approve it, and the California State Supreme Court agreed.
Do we really want a profit-driven company like that to run San Diego’s power utilities for 20 years?
Making matters worse, the franchise process has failed to allow full public comment or the level of Council deliberation that a multi-billion agreement deserves.
If a franchise is awarded using this flawed framework, the only answer to emerge will be the size of the City’s sellout to the winning corporation. Will it be $14.9 billion? Or merely $14.7 billion? Or a deal that results in a giveaway of just $14.0 billion?
No matter the magnitude, each of those dollars would come from the pocket of a San Diego utility customer, who will continue paying the highest rates for electricity and gas in the state for 20 years.
History would place such a massive sellout atop the list of San Diego’s infamously bad deals, making the tens of millions lost on this 101 Ash Street transaction seem like a rounding error.
There is an alternative, a way to set a new course in San Diego.
By voting “no” to a franchise deal that emerges from this sellout, we can make careful considerations of San Diego’s options for utility service, including a rigorous review of the consultant’s report upon which the city is basing so much, as well as rigorous council deliberation and ample opportunity for public input.
A “no” vote consider all options, including a non-profit, independent public utility. Public utilities have proven to deliver lower rates – customers of Sacramento’s public utility pay $100/month less for electricity – and public utilities are better partners in the fight against climate change. Instead of money going to profit the company, the city can use the money to invest in renewable energy sources.
And by voting “no”, we’ll be moving to end a system that allows San Diego Gas & Electric or whatever company emerges to earn $1million/day in net profits from us in a no-risk, monopoly business that depends on the rent-free use of city property.
Please don’t be misled about the franchise fees that SDG&E or any other company vying for the franchise award claims it will to pay to the city for use of our streets and property. Yes, they pay franchise fees – after they collect them from residents of San Diego.
In reality, we pay franchise fees to ourselves.
In the months to come, San Diego will desperately seek resources for pandemic recovery, to stop the looming eviction crisis, and to deal with the host of other problems already hitting hard or on the horizon. If the City Council votes to accept the results of the franchise “auction”, a vast trove of those resources will be easy to locate: they’ll be gone, transferred to a monopoly utility that continues to charge us the highest rates in California.
Public Power San Diego (PPSD) is a coalition of groups and individuals advocating for an independent public utility in San Diego. We’re confident that a public utility can duplicate what these utilities have done elsewhere, from Los Angeles, CA to Burlington, VT: provide lower rates and a better partnership for dealing with the climate crisis, as well as other community issues.
PPSD’s coalition includes the local chapter of the Sierra Club, San Diego Democrats for Environmental Action, the Protect Our Communities Foundation, Democratic Socialists of America – San Diego, the local chapter of the NAACP, as well as numerous supporters acting as individuals.
We thank you for your consideration and look forward to your “no” vote that avoids awarding a utility franchise from this flawed auction. And we look forward to the extended consideration of how best to provide the most efficient utility service to the residents of our city.