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Gloria sets climate-, labor-focused terms for utility franchise agreements

SDG&E requests major rate hike
Posted at 1:54 PM, Mar 19, 2021
and last updated 2021-03-19 16:54:01-04

SAN DIEGO (CNS) - Mayor Todd Gloria Friday announced he has formally invited prospective bidders to compete for the exclusive right to provide gas and electricity services to city residents and businesses -- the city's utility franchise agreements.

"With these invitations to bid on gas and electricity services, we are ensuring franchise agreements that meet the needs of residents, make financial sense for the city, advance our climate goals and provide equitable access to environmental benefits for all our communities," Gloria said. "To win the exclusive right to use the taxpayers' land to provide energy to San Diegans, bidders will have to be a good partner in our effort to create a sustainable future for all of us."

The announcement follows several developments in the city's franchise agreements in the past six months. When Mayor Kevin Faulconer was still in office, he worked with the council to set bid requirements for new franchise agreements, which were set to expire on Jan. 17.

Despite rumors of multiple companies interested in the franchise agreements -- which allow the franchisee to use the public right-of-way to install and maintain utility infrastructure, such as pipes, poles and wires -- only San Diego Gas & Electric submitted a bid. Gloria and City Attorney Mara Elliot determined SDG&E's bid, which met the minimum bid of $70 million for electricity service and $10 million for gas, was unresponsive to the minimum requirements set forth in the Invitations to Bid.

Gloria canceled the bidding process and reached an agreement with SDG&E to extend the current agreements through June 1.

SDG&E has held exclusive franchises with San Diego to provide gas and electric service since 1920. The current agreements were signed in 1970.

The terms of Gloria's new invitations to bid include the requirement for a cooperative agreement that will help the city achieve its climate action and environmental equity goals. The proposed franchise agreements also contain accountability measures compelling the franchisee to be a good partner and protect the city's use of the public right-of-way.

Also included in the solicitations is support for San Diego's Climate Equity Fund, which will finance new green infrastructure in communities of color that have historically not received their fair share of investment and been disproportionately plagued by pollution.

"With Mayor Gloria's leadership, the city is on a much better path than what the previous administration left for the new council," said City Council President pro Tem Stephen Whitburn. "The mayor's invitations to bid give the city the ability to hold the utility much more accountable by providing the city with the means to exit the contract after 10 years, rather than the previous administration's guaranteed 20-year contract."

The invitations to bid include that 10-year term, plus an additional 10 years if the franchisee has been a good partner. If the franchisee has not complied, the city may cancel the agreement on the recommendation of the mayor and six votes of the City Council.

It also includes worker protection and retention language, a dispute resolution process allowing for mediation and desired terms including modernizing the local energy grid and boosting clean-energy resources.

Climate goals include working collaboratively with San Diego Community Power -- the community-choice alliance under which San Diego and four other cities purchase energy on the open market that SDG&E distributes -- climate- proofing the energy grid and transitioning away from natural gas and training gas workers in green-energy jobs.

"Now that the ITBs have been released, we are looking forward to continuing to work hard to secure gas and electric franchise agreements that San Diego ratepayers want and deserve," said City Councilman Raul Campillo. "We have taken significant public input over the course of this process, and we feel ready to advocate for the kind of agreements that San Diegans need in order to receive excellent gas and electric service for their homes and businesses at a reasonable rate."

All bids for the gas and electricity franchises will be opened on April 16, after which the city may initiate negotiations with the responsive bidders to ensure the final agreements provide the best value to the city. Tentatively, the franchises will be awarded in May.