Fantasy or a New Reality? How This Group Plans to ‘Fire SDG&E’

Imagine this: Solar panels on every rooftop within the city of San Diego, sucking up energy from the sun and storing some for use at night. 

The city powers itself like an independent island in a sea of cities served by a for-profit utility, San Diego Gas & Electric. Lower electric delivery charges. No franchise fees.  

That’s how proponents for Power San Diego envision a future not-for-profit electric utility to replace SDG&E. Their foot soldiers are the clipboard-bearing activists patrolling outside Petco Park, Target stores and San Diego farmers markets this year, asking residents to “fire SDG&E,” in other words, join the island. 

The group needs 80,000 signatures to put the decision before voters in November. If it gets 24,000 by May 14, they could force a vote at the City Council to put it on the ballot. Without major funding, it will be a monumental volunteer undertaking and prospects already aren’t looking good.  

Some of its same champions tried to push San Diego into creating a public utility back in 2020 when the city considered renewing its contract with SDG&E, but it was largely ignored by the major players. This time around, the opposition doubled down. SDG&E executives formed a political action committee to fight the ballot measure. Labor unions that contract with the company turned out to condemn the public power movement at a City Council committee, which obliged to kill the measure. 

Power San Diego’s main beef? SDG&E made almost $1 billion in profit last year, a record-breaking number for the business owned by Sempra, an electric and natural gas company headquartered in San Diego. Instead of investors’ pockets, Power San Diego says that profit should be reinvested in the community to build renewable energy and drive down ever-growing energy prices. The decisions about how San Diegans power their community should be left to the people, they say, not the corporate boardroom. 

That might sound attractive to residents of a city with record-breaking electricity prices,  some of the highest in the country. But what would this proposed power company owned by the people actually look like? And what would it take to get there? 

Buying Power Tools 

To pull it off the city of San Diego would have to buy SDG&E’s expensive system of poles, wires, gas lines and other assets — among other hurdles. Just how much all that would cost is the source of significant debate. The city studied it multiple times. Each consultant came to a similar conclusion: San Diego’s energy costs would be cheaper, eventually, under a public company.  

How? The state guarantees profit to SDG&E and the other investor-owned utilities in California – called a rate of return – on top of the cost of anything they build. These companies recoup those costs on customers’ bills (here’s a good breakdown of every charge on an SDG&E bill.) Under the public model, that rate of return goes away.  

“On day one, we’re not paying for the gross profit of SDG&E. Boom, our rates go down,” said Bill Powers, arguably one of the most vocal public power advocates in the county, and a backer of Power San Diego. 

So the city has to buy SDG&E’s equipment to go public, which can go one of two ways: SDG&E says, sure, no problem, here’s the price and the city pays it. There’s no way it would be that simple. San Diego is SDG&E’s largest and therefore most lucrative customer base and it would not give it up easily. The city would likely use its power of eminent domain – when the government takes private property for public use. The fight would probably end up in the courts which would determine the value of SDGE’s assets.  

Power San Diego and SDG&E disagree on how much the city’s grid is worth. The city’s consultants estimated the price tag falls between $2 billion to $6 billion. Power San Diego estimates it would cost about $3 billion because the city should only purchase the smaller poles and wires called distribution lines – not the towering structures that run through the backcountry called transmission. SDG&E, which had been mum on the price tag through the city’s 2020 contract negotiations, recently hired their own consultant amid the Power San Diego ballot measure challenge, which estimated their grid was actually worth $8 billion or more. Let’s say the city somehow successfully bought the grid it wants. How does San Diego island itself from the rest of SDG&E’s empire? 

The utility and the public power movement disagree on how that would work, too. 
Scott Crider, a senior executive at SDG&E and a principal officer of the PAC Responsible Energy San Diego fighting the ballot measure, claimed the city would have to build or reconstruct dozens of substations and sever distribution lines between cities to make the split. That’d cost about $3 billion to $4 billion, he said.  

Powers, from Power San Diego, claims San Diego wouldn’t have to do any of that.  

Substations are large industrial plots of land where electrical wires meet and split off to send power in other directions. It’s where big power lines carrying lots of energy come to transmit power to smaller utility lines, the kind that run align city streets. You’ve probably walked by one and never noticed. Filled with swirling metal power transformers that plug into switches and eventually electrical towers, they look like something NASA might build on Mars.  Sometimes they occupy city blocks; some sprawl across whole mountain foothills.  

Powers, a mechanical engineer, says nothing has to be built or reengineered. The public utility could add a sort of metering device to count what power gets sent through that same equipment to the inner circle of the San Diego energy island, and what energy passes to the rest of SDG&E’s network.  

“These would act more like a toll booth. From day one, the power flows are the same as the day they were before,” Powers said.  

How Could San Diego Afford This 

Responsible Energy San Diego, set up to fight Power San Diego, warns the city against the sticker price of purchasing its equipment, plus ongoing maintenance costs and shouldering the risks of sparking wildfires. All those burdens the city of San Diego would bear instead of a corporation, they say. 

“But if this initiative were to pass, there is no turning back, regardless of how many questions are left unanswered or what the final price tag would be,” wrote Matt Awbrey, a spokesperson for Responsible Energy San Diego. “This is why it’s encouraging that City Council committees have twice declined to advance proposals from Power San Diego.”

Powers says that shouldn’t scare the city. Setting up a public utility like this would be little different than setting up a water utility. The city would not be financially exposed, Powers says, because public power would operate as its own self-funded entity.  

Let’s say the courts determine a price for SDG&E’s assets, the board or city department set up to take over the electric utility would secure what’s known as a revenue bond to cover the purchase. That process is already written into Power San Diego’s ballot measure, so if the voters approve it, the city wouldn’t have to take any more votes to scrap together funds, Powers said.  

A revenue bond allows the city to take out a loan for this big purchase based on the fact that they’ll have steady money coming in as customers paying electric bills to pay it off.  

Crider of SDG&E warned that on top of their estimate of the billions in debt it would take to seize the power grid, the city would be out over $100 million per year in property taxes and fees the company pays in exchange for the right to be the monopoly owner of the city’s grid – called franchise fees. (SDG&E doesn’t pay those fees, its customers do via their energy bill.) 

That’s a cost Powers argues would also, poof, go away under public ownership. And the loss in property taxes could be covered by any surplus revenues the public utility collects – those could be transferred to the city’s general fund. Los Angeles Department of Water and Power, for instance, has transferred around 8 percent of its gross revenue to the city each year. 

“In a sense, (San Diegans) already have that debt because the investor-owned utility acquired all these assets to run power,” said Dan Aschenbach, a consultant with AGVP Advisors and a municipal bond expert who used to work at Moody’s Investor Service. “Corporate debt is much more expensive than municipal, which is tax-exempt.”  

No Transmission Payments 

Power San Diego wants out of paying for the biggest power lines that transport energy across the backcountry: Transmission lines. The city doesn’t need them, Powers said, if the city can transition to mostly rooftop solar. Powers fought the Sunrise Power Link transmission project back in the early 2000s. Transmission expansion like this is super expensive and therefore lucrative to SDG&E, Powers says. And it encourages building large solar farms in the desert instead of on local San Diego rooftops, he said.  

San Diego needs lots of renewable energy if it’s going to nix planet warming emissions from its economy, as it’s pledged to do. The fastest and cheapest way to do that, according to consultants hired by the county of San Diego to study the issue, is developing renewable projects in Imperial County and shipping that energy westward. 

Powers argued the county’s math inflated the cost of rooftop solar against what it would cost residents to build 100-mile-long transmission lines to transport that energy. Companies like SDG&E make a guaranteed 10 percent profit on top of the price it costs them to build anything in the state of California.  

“The more we generate inside our own island and reduce the amount we bring in from the grid we’re just avoiding having to pay these punitive transmission charges,” Powers said. 

Who’s in Charge? 

Then there’s who’s in charge: CEOs and a board of investors or elected residents? Both choices have pros and cons. Business-as-usual leaves San Diego’s grid operator beholden to the demands of investors to turn a profit, which is already guaranteed by the state of California. A publicly owned company means elected leaders would be charged with managing billions of dollars’ worth of equipment and reinvesting money back into the community.  

There’s politics involved in both. But public power advocates tout the accountability and transparency that public utilities are beholden to. Only investors are privy to the decisions made in corporate board rooms. SDG&E and other privately-owned utilities are regulated by the state California Public Utilities Commission, however, which has the power to approve or deny almost every utility expense. Public power is regulated by its appointed board.  

There are more individual public electric utilities than privately-owned ones in the United States, according to the U.S. Energy Information Administration. But the privately-held companies serve a much larger customer base, capturing 72 percent of the country’s population say 2019 data. Rates tend to be cheaper by publicly-run utilities than private ones.  

Cities like Los Angeles, Sacramento and Imperial Valley are served by public power companies. San Francisco has toyed with the idea. And the South San Joaquin Irrigation District has been trying to takeover its electric grid from Pacific Gas & Electric since 2004.  

The water utility has an eminent domain court date set for June, said general manager Peter Rietkerk. I asked him why a small utility that serves around 100,000 residents and 72,000 acres of farmland fought this hard to leave PG&E. He pointed to a double-digit rate increase this year. 

“It put more pain on local residents and businesses,” Rietkerk said. “We think we can bring that economic value, that savings, back to customers.”