San Diego Gas & Electric says the purchase of the city of San Diego’s electric distribution system could cost between $7.4 and $9.3 billion.
The utility said costs could climb above $11 billion if franchise agreement fees and property tax revenue are factored into the equation.
SDG&E only shared the executive summary of the report, making it difficult to evaluate the complete estimates.
Even so, the utility numbers are much higher than the valuation in two city-funded studies. A report from 2020 and an ongoing study from 2023 put the value of the grid between $1.6 and $4.3 billion.
The investor-owned utility asked Concentric Energy Advisors to analyze the distribution system. NewGen Strategies & Solutions headlined the latest city analysis.
SDG&E said the value of the distribution system could add a huge bill to any effort aimed at taking over the system.
“When you look at the actual costs of the assets themselves, the wires and the meters and the poles that we have today,” said Scott Crider, an SDG&E vice president and a chief officer in the Responsible San Diego Political Action Committee fighting the Power San Diego proposal. “That is a value that they would have to purchase.”
Crider cited other costs, like separating the electricity grid from other municipalities and paying for costs linked to wildfire prevention.
The utility is sensitive to customer backlash because of the company’s rapidly rising rates. SDG&E recently reported record profits of $936 million in 2023.
The company said prices will eventually come down, just not right away.
The utility predicts once electrification boosts electricity consumption, that will then change the equation and spread fixed costs over a larger customer base.
But for now, the California Public Advocates Office said electricity rates are currently rising well above the rate of inflation. And utility filings to regulators show more than a quarter of the company’s customers are behind on their bills.
“We remain laser-focused on trying to cut costs making sure that we are investing in our infrastructure the smartest way, the most efficient, the most cost-effective way on behalf of our customers so we can get to and chip away at a more affordable energy bill really going forward,” Crider said.
Municipal power backers said taking the system away from the power company would mean city residents would pay lower electricity rates, even if the new entity would have to pay billions to buy the infrastructure from SDG&E.
The Power San Diego Initiative’s backers hope to convince city voters to let them fire SDG&E so rates can be lowered.
The group argued the utility is overestimating the financial hit the city would take.
“The numbers that we’re using are the city’s numbers. This is the city's consultant that did this on behalf of the city to evaluate the viability of municipalization,” said Bill Powers, executive director of Power San Diego. “So we’re simply referencing what the city has paid a few million dollars to acquire.”
The purchase price of SDG&E’s distribution system in the city of San Diego will be important if voters approve the creation of a public utility. Those costs would be calculated into the cost of setting up a city run utility.
A transfer would also be tough on the utility’s finances.
“This would be a major setback for SDG&E. It’s all hands on deck to discredit public power as a good and viable option for the city of San Diego. And they’ll do what they have to do,” Powers said.
Backers of the Power San Diego initiative have until the middle of May to gather 80,000 valid signatures in order to put the measure on the November ballot.
