This post first published in the July 20 Morning Report. Get the free newsletter in your inbox today.
Even if the city of San Diego had to pay $6 billion to buy its power grid off San Diego Gas and Electric, the savings to ratepayers could eventually top $180 million over 30 years of the sale.
That’s what a new study suggests.
Today, the city’s Environment Committee will hear results of an analysis by NewGen Strategies & Solutions, LLC hired to study whether a public takeover of the electric grid is possible – and what it might cost. NewGen studied two basic scenarios, assuming SDG&E would sell its grid at a price tag of $2 to $6 billion. But that’s a range SDG&E would likely dispute.
“We remain confident that once the city has all the facts, they will again arrive at the same conclusion reached in 2021 when they approved the recent franchise agreement: a long-term partnership with SDG&E remains the best option,” said SDG&E spokesperson Anthony Wagner in an emailed statement.
The NewGen report is just the first step in the public power pursuit. The city would eventually have to get permission from entities like the Local Agency Formation Commission, (which recently approved the divorce between water districts), the Federal Energy Regulatory Commission and the California Public Utilities Commission. The estimates on savings to ratepayers also don’t account for costs of an inevitable legal battle over municipalization or inflation.
SDG&E makes money for its investors by building things like poles, wires and transformer stations. Proponents of public power argued that profit should instead be put toward lowering energy prices. San Diegans pay the highest electric rates in the continental United States.
Catch up: After a contentious battle over whether the city should renew its franchise agreement with its investor-owned utility, San Diego eventually signed up for another 20 years with SDG&E. While that dashed public power proponents’ dreams of a full takeover of the local energy grid, a contingent of councilmembers swore to keep the option on the table and put money aside to study what’s called municipalization.
Let’s see, city streets, city sewage, city street lights, city pension program, city real estate, city homelessness. Is there anything on this list that would lead a reasonable person to think the city can manage its way out of a wet paper bag?
Now they want to take over our power?? Really???
Right?! This is insane.
I am reasonable. And I like having city streets and bike lanes. City parks. Public transit. Municipal water. Police. Firefighters. Teachers. Public health. Public schools. City colleges. These services are not perfect but they provide great value to me and my community. And they are available to all.
I do not like paying the highest electricity rates in the nation. I do not like a rate structure that discourages conservation and planet saving local renewable energy production.
Nothing against private business and corporations but the essentials should be controlled by ‘we the local people’ and not distant shareholders only interested in ever increasing quarterly profits.
The time for public power is now!
Contrary to Tom’s statement, I’m a San Diego county native who owns stock of Sempra, the SDG&E parent, and I’m not solely interested in an ever-increasing quarterly profit.
Don’t know if the math is right, but article says “…the savings to ratepayers could eventually top $180 million over 30 years of the sale….”
i.e. $180 million / 30 years = $6 million/yr. divided by 511,662 San Diego households = $11.73 per year per household or ~$1/month?
Building on the economics discussion…what if the City were to buy $6B of Sempra stock. This investment could yield ~$190M/yr in dividends. Seems like a better investment & return for City of SD taxpayers than a return of $6M/yr on the same $ outlay.
$190M/yr. on $6B investment is 3.2% return on the investment (T-Bills are higher) … for which you can’t get sued for starting brush fires or injuring people etc.?
Also the city would have to pay it’s own franchise fee 😉
The City can’t manage to fix potholes in the streets, read and install water meters correctly, or replace a backlog of 6,000 broken street lights.
Does anyone actually think they can maintain and run an energy delivery network efficiently or within a set budget?
Dumbest article with no valuable info and lack of numbers to support or back this up with.
I too would like an alternative to the outrageous pricing by SDG&E, however like others, I have reservations as to whether or not the City of San Diego can manage such an undertaking. They can not seem to manage the public responsibilities they presently have adequately. Pot holes, homelessness, street lights, policing, etc. Seems like the Mayor and his ilk are only interested in installing bike lanes by removing traffic lanes and parking spaces, ensuring that there is diversity equity and inclusion in city hiring and generally thumbing their nose at City taxpayers.
There is potential to save much more than suggested in this article. In part because, as some of you may know, the CPUC is advancing new rules, proposed by investor owned utilities, that will allow for fixed rate electricity charges based on income for investor owned utilities. For families with six figure incomes this will cost you an extra $1500/year (link below). This will be inescapable, even if you install solar power, batteries and use zero electricity. However this extra charge WILL NOT apply to non-profit locally controlled utilities.
The proposal is to create a non-profit power company that would be independently managed but accountable to the citizens of San Diego rather than distant shareholders. Many cities in California and the USA have these. They have been shown to provide electricity more reliably and at lower cost than investor owned utilities. More information can be found at the link below. This San Diego organization is still getting off the ground so please check back if you are interested in the topic.
https://wearepowersandiego.com
https://www.cnet.com/home/energy-and-utilities/electricity-bills-in-california-will-soon-be-based-on-income-heres-how-it-could-work/
If I remember correctly. The San Diego City council studied buying SDGE around 1990. Look it up. I think it was during Mayor OConner term.
How about we demand that the guarantee of a certain percentage of profit making be deleted out the contract between the state and the Gas & Electric companies. At least lower that percentage. And, stop the greed of raising profit margins by the Gas & Electric companies. The world has changed because the climate is changing. We need new standards.
The Sunday Union Tribune (6AUG23) Business section surveyed 10 economists about
“Should San Diego create its own municipal power company?”
It’s not often you can get 10 economists to agree on anything, but the city council almost managed.
9 out of 10 said NO