A city-owned utility would not benefit San Diego, say municipalization opponents

Published on May 30, 2024 by Kim Riley

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A wide-ranging coalition of stakeholders oppose an effort to remove San Diego Gas & Electric (SDG&E) as the city’s main investor-owned utility and create a municipal electric utility to power the city, saying the transition would be more costly and it wouldn’t guarantee lower bills for consumers.

“We think that municipalization is dangerous for San Diego,” said Matt Awbrey, spokesman for Responsible Energy San Diego, a political action committee formed by groups opposed to the initiative, including SDG&E. 

“Taking over the electric grid and creating a government-owned electric utility would immediately run up $9.3 billion or more in debt,” Awbrey told Daily Energy Insider. “That’s a huge number — almost twice the entire city budget.”

One way or another, he added, everybody would be paying for that through higher taxes, higher electric bills, and/or cuts to essential city services. 

“If this initiative were to move forward, there is no turning back regardless of what the final price tag will be,” said Awbrey.

Power San Diego, a local activist effort launched in November 2023, has proposed a ballot initiative that would have San Diegans decide if the city will purchase SDG&E’s distribution assets and run a public-owned electric utility for the region.

The group says transitioning to a public-owned, not-for-profit utility would immediately reduce rates by approximately 20 percent when corporate profit, investor returns, and large political contributions are eliminated, and control would shift from SDG&E and the California Public Utilities Commission (CPUC) to a local entity controlled by qualified experts with citizen oversight and transparency.

“The City’s 2023 Phase 1 Public Power Study indicates San Diegans would save about $15 billion over 30 years if the city becomes a non-profit electric utility,” said Frances Yasmeen Motiwalla, a spokesperson for Power San Diego. “Since the council is unwilling to use common sense and end the franchise agreement themselves, they should allow San Diegans the chance to vote on it in November.”

Thus far, though, Power San Diego hasn’t convinced the majority to come over to its side.

Most recently, the group failed to meet its goal of collecting 80,000 verified signatures to put the proposition on the city ballot this fall, with Power San Diego supporters delivering roughly 31,000 signatures on May 14 to the San Diego County Registrar of Voters office.

“While we fell short of the 80,000 required to get on the ballot, we believe that we have turned in enough signatures to oblige the City Council to hold a public hearing and vote on the matter,” Motiwalla said, noting that the City Council must act within 10 days of the City Clerk verifying at least 24,006 registered voters have signed the referendum petition.

To date, two council committees previously declined to move forward on the Power San Diego proposal. 

“We San Diegans want the city to remain focused on its priorities, but this initiative takes us down the wrong track,” said Awbrey of Responsible Energy San Diego.

The coalition is made up of several business and labor leaders from organizations, including the San Diego & Imperial Counties Labor Council, the San Diego Regional Chamber of Commerce, and the Asian Business Association of San Diego. 

In addition to SDG&E, other members of Responsible Energy San Diego include San Diego Working Waterfront, which represents major industry on port tidelands; the International Brotherhood of Electrical Workers (IBEW) Local 465, the labor union that represents roughly 1,500 SDG&E employees; the Municipal Employees Association; IAFF Local 145; the County of San Diego Black Chamber of Commerce; and the San Diego County Hispanic Chamber of Commerce, among others.

Collectively, they say San Diego should address priorities such as road repairs, aging infrastructure, and housing affordability, rather than “a risky ballot measure that would require taxpayers to take on billions in debt to create a new government-run utility that has no plan for how the city would operate a utility, a defined budget, or verifiable cost estimates,” said Awbrey.

Alison Phillips, communications manager for the San Diego Regional Chamber of Commerce, said the chamber is opposed to creating a municipal utility in the City of San Diego for several reasons.

“Taking on the operation and ownership of the power utility would bring with it substantial logistical, legal, and financial burdens and risks for the city, as well as a great deal of uncertainty for our businesses and residents,” she told Daily Energy Insider. “Any benefits of San Diego taking control of the utility are far outweighed by the numerous and substantial costs and risks associated with such an undertaking.”

Awbrey says seizing the San Diego grid would run up $9.3 billion or more in new government debt, which then would be 100 percent funded through consumer electric bills. An assessment from an energy consulting firm released by SDG&E earlier this year estimates costs that would total $11.3 billion to $13.2 billion when including foregone city revenues.

The assessment also concluded that adding in the startup costs for financing a municipal utility would push up the total even higher.

Matthew Gonzales, the Southwest director for the Consumer Energy Alliance, agrees, and has written in a blog that in addition to expensive upfront costs, San Diegans should reject the proposed buyout because it smacks of highly speculative benefits and potential mismanagement that could cost ratepayers and taxpayers far into the future.

A government takeover, according to Gonzales, also poses a greater concentration of risk for a municipally owned utility that, unlike a larger IOU, would not be able to tackle challenges like natural disasters without upping rates.