Mayor Kevin Faulconer Wednesday officially opened bidding on San Diego's gas and electric franchises, opening the door for multiple energy companies to submit their best offers on the city's utility needs for the next generation.
"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.
"The proposed franchise terms will ensure ratepayers are protected and accountability is front and center," he said. "The terms laid out deliver the best deal possible to help meet the city's future demands for energy and climate goals."
Terms for the bid include the elimination of a 2002 .35% surcharge — which Faulconer's office said will save ratepayers a minimum of $110 million; a minimum bid of $80 million for both franchises, $70 million for electric and $10 million for gas; performance audits of the utility every two years; workforce protections for utility employees under the new franchise; and "good faith" efforts by the utility to help San Diego achieve Climate Action Plan and climate equity goals.
"The terms of this new franchise will add to our general fund, protect workers and save San Diegans money while providing flexibility to adapt to a changing energy future," said City Councilwoman Jennifer Campbell.
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San Diego Gas & Electric has operated the city's electric and gas utilities since 1920. The company, whose parent company is San Diego-based Sempra Energy, signed 50-year deals in 1920 and 1970, with the current agreement set to expire January 2021.
Many residents, business owners and city leaders have spoken at council meetings over the past year, contending another 50-year contract is too long. Faulconer's recommendations for bids stipulate 20-year franchise agreements, which his office says will provide revenue of more than $1.4 billion. Others, including SDG&E employees, have urged the city to stick with the company and infrastructure it knows and is used to operating and maintaining.
However, unlike in 1970, SDG&E isn't the only company interested. Berkshire Hathaway and Indian Energy have both expressed interest.
Additionally, a call for the city to municipalize the franchise agreements is swelling and could prove attractive to council members who will be elected in November. The agreement will likely be signed in late 2020 or early 2021.
The final terms set the franchise fee for both gas and electric at 3%. Under this same rate, SDG&E paid roughly $65 million in franchise fees to the city in 2019. As an added protection for San Diego ratepayers, the Invitation to Bid includes strict language as to how the minimum bid may be paid, ensuring that costs be passed on to utility shareholders, not ratepayers.
Terms outlined in the new franchise ordinance not only require regular performance audits of the winning utility but also fortify language on damages and relocation provisions to strengthen the city's ability to defend ratepayers in advancing projects. Those terms leave intact the city's ability to pursue municipalization if the winning bidder does not meet performance and transparency standards.
Following the advertisement of the Invitation to Bid, prospective bidders will have until Oct. 23 at 5 p.m. to submit bids. Upon docketing by the City Council, the bidding process will open for active bidding in the council chamber. Bidders will be required to prove they are qualified under the terms of a responsible bidder and that they are able to meet the payment requirements of the minimum bid.
All approved responsible bidders will participate in a live bid before the City Council. Immediately following the determination of the winning bid, the council will require a two-thirds vote to finalize the awardee.
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September 24, 2020 at 02:03AM
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Mayor Faulconer Opens City's Electric And Gas Franchise Agreements To Bids - KPBS
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