Environment Committee Meeting - July 16, 2020: Consultant Report on Gas and Electric Franchise Proposals

The San Diego City Council Environment Committee met on July 16, 2020, to discuss the city's upcoming gas and electric franchise agreements, which are set to expire in 2021. The committee received a detailed presentation from city staff and consultant Howard Goleb recommending terms for a new franchise, including a 20-year term, a $62 million minimum bid, and various provisions for city benefits. Over 78 public callers provided testimony, with opinions split between support for municipalization and support for renewing with San Diego Gas & Electric (SDG&E). After discussion, the committee voted 3-1 to draft a resolution of intention incorporating the consultant's recommended terms with additional amendments for worker protections, a climate equity fund, and performance metrics.

Consent Calendar

• The committee unanimously approved the actions from the meeting of February 13, 2020 (motion by Councilmember Moreno, second by Sherman, with Bree voting aye remotely).

Public Comments & Testimony

• Support for Municipalization: Many callers (e.g., Kara Powell, Alex Hahn, Michael Gaffney, John Hartley, Nathan from DSA, and others) argued that public ownership would lower rates, support the Climate Action Plan, keep profits in San Diego, and provide local accountability. They urged the committee to explore municipalization thoroughly and not rush into a long-term franchise.
• Support for Renewing with SDG&E: Several union members and community leaders (e.g., Alan Valenzuela, Myra Alvaro, Pete Perino, Nate Fairman, Arman King, Pastor G.A. Williams, Joyce Lane, and business representatives) emphasized SDG&E's reliability, safety record, community investments, and the importance of protecting 2,700 union jobs. They urged a long-term agreement (25-30 years) to provide certainty for workers and infrastructure investment.
• Concerns and Requests for Better Terms: Multiple callers (e.g., Michael Aguirre, Evelyn Andrade, Marie Chen, Libby Breidoff, Craig Rose, and the Coalition for Better Franchise Agreements) requested stronger accountability clauses, penalties for violations, a shorter term (5-10 years), a higher minimum bid (7% of gross receipts), and dedicated climate equity funding. They criticized SDG&E's past behavior and high rates.
• Other Speakers: A representative from Berkshire Hathaway Energy expressed interest in bidding on the franchise. Several callers also addressed non-agenda items later in the meeting regarding sea lion safety at La Jolla and a ban on gas-powered leaf blowers.

Discussion Items

• Consultant Presentation: Eric Caldwell (Deputy COO) and Howard Goleb (JVJ Pacific Consulting) presented an overview of the franchise history, valuation studies, and recommendations. Key proposals included:
  • Term: 20 years (instead of the previous 50 years), balancing investor interest and city flexibility.
  • Franchise Fee: 3% for electric (unchanged) and 3.5% for natural gas (an increase of 0.5%, generating ~$1.2M/year for sustainability programs).
  • Minimum Bid: $62 million for electric and $8 million for gas, to ensure fair value; bidders could pay lump sum or over 10 years.
  • Other Compensation: City to collect sales tax on utility purchases; free use of utility poles and unused land; right of first refusal on property sales.
  • Elimination of Surcharge: Require the utility to drop the 0.35% surcharge on city ratepayers, saving consumers ~$110M over 20 years, though costing the city ~$3.3M in franchise revenue.
  • Operational Improvements: Mandatory relocation at utility expense, biennial permit reviews, as-built diagram sharing, and a dispute resolution process.
  • Safeguards: Quadrennial performance audits and a right to purchase through an appraisal process.
  • Municipalization Alternative: Consultant Howard Goleb recommended pursuing a franchise first, but noted that municipalization is financially feasible and could be considered if franchise negotiations fail.
• Committee Deliberation:
  • Councilmember Campbell (Chair): Supported the $62M minimum bid as a safety net, agreed with the 20-year term, and emphasized protecting union workers. She made a motion to draft a resolution of intention with the consultant's terms, adding a provision requiring the prevailing bidder to make reasonable efforts to retain employees and maintain wages/benefits for 10 years post-sale, subject to existing collective bargaining agreements.
  • Councilmember Sherman: Seconded the motion and offered a friendly amendment to allow bidders to meet the minimum bid with a combination of cash and services (e.g., undergrounding, streetlights, EV chargers, sidewalk repair). The amendment was accepted.
  • Councilmember Moreno: Supported the motion with two additional amendments: (1) exploring a climate equity fund funded by an annual fee from the franchisee for infrastructure in low-opportunity areas, and (2) requiring staff to develop concrete metrics for performance audits before full council consideration. Both amendments were accepted.
  • Councilmember Bree: Expressed concern about the rushed timeline, lack of peer review, and absence of input from the Sustainable Energy Advisory Board. She voted no, stating more time was needed for analysis and public input.

Key Outcomes

• Motion Passed 3-1: The committee voted to direct staff to draft a resolution of intention for full council consideration, incorporating:
  • All terms from the consultant's term sheet (20-year term, 3% electric franchise fee, 3.5% gas fee, $62M minimum bid, etc.).
  • Worker protection clause (10-year retention and wage/benefit continuation).
  • Allowance for bidders to meet minimum bid with cash and in-kind services.
  • Exploration of a climate equity fund.
  • Development of concrete performance audit metrics prior to council hearing.
• Next Steps: The draft resolution will be brought to the full City Council for further debate and final action. The city aims to advertise the Invitation to Bid before the summer recess.
• Non-Agenda Public Comments: The committee heard testimony on sea lion safety at La Jolla (requesting stair closure and improved signage) and a proposed ban on gas-powered leaf blowers. No action was taken.

Additional: Non-Agenda Public Comments

• Several volunteers and docents (Carol Archibald, Robin Davidoff, Alan Shively) requested immediate measures to protect sea lions and visitors at La Jolla Point and Boomers Beach, including closing the stairway during pupping season (June-September) and improving enforcement of existing 2017 Coastal Management Plan recommendations.
• Patricia Kushner requested a citywide ban on gas-powered leaf blowers to reduce noise, emissions, and health risks, citing recent bans in nearby cities.