Should San Diego Be Its Own Power Company?

RADIO INTRO: San Diego’s 50- year energy contract with San Diego Gas & Electric expires in January. The city needs a new franchise agreement - a new contract. Mayor Kevin Faulconer says he plans to put the agreement up for bid to private utilities. A bid that the current utility, SDG&E is likely to win. But KPBS science and technology reporter Shalina Chatlani says some San Diegans are calling for a different energy future: A public city-owned utility. --- PODCAST INTRO: Cities around the country are reconsidering how they get their energy, including San Diego. For about a century, San Diegans have been buying their electricity from the same service provider: San Diego Gas & Electric. And that happened because the city, just like many others, has signed a contract - a franchise agreement. But in January, a 50 year old franchise agreement will expire, and the city needs a new contract. Mayor Kevin Faulconer says he plans to put the agreement up for bid to private utilities. But community activists want a new energy future: public power. And they’re willing to fight for it. AMBI: PUBLIC POWER NOW! PUBLIC POWER NOW! In this story, for the KPBS Investigates Podcast, I take a deep dive into what public power means and the struggles many cities have faced when they’ve asked for it. Stay with me. MIDROLL 1 AD PART 1: San Diego Fighting for a Utility It was a scorching hot August afternoon. Over a dozen activists, equipped with signs, charts and graphs of California electricity rates, lined the stairs of the tall brown skyscraper at 101 Ash st downtown. The building was once occupied by San Diego Gas and Electric’s parent company, Sempra Energy. Activists gathered here to announce a new coalition. AMBI: Public Power, Public Power Now! San Diego public power. BEAT, MUSIC BEGINS… underlay the chanting The city bought this building in 2016 for hundreds of millions of dollars. But for the last three years, it’s been empty, because, it turns out, it’s filled with asbestos. Activists brought their demonstration to this building because they say it’s symbolic of wasted money, just like the high rates San Diegan’s pay for electricity. ROSE: We’re paying $18,000 a day to pay for this uninhabitable building, the current franchise with SDG&E is delivering A million dollars a day in profits, fifty times bigger.. :15 That’s Craig Rose, a former energy journalist. Rose explains San Diego Gas & Electric customers pay the highest rates in the state, while cities that own their own public utilities - like Sacramento - have among the lowest rates in the state. Another coalition member, engineer Bill Powers, says there’s an even more important reason - a public utility could help the city better reach its ambitious climate change goals. POWERS: We can finally start crafting our own destiny which is solar power for all, battery power for all and we can do it as one big family. :09 Another activist, Sonja Robinson of the NAACP points out there are also .. issues of inequity, saying low-income people can’t afford SDG&E’s high rates. Robinson: We’re asking for a more just, relatable cost-effective rate for utilities for San Diegans. :09 AMBI: clapping fade outs. Then there’s another reason these activists want public power now: timing. Even though the city faces a deep budget deficit because of the pandemic, Still, Interest rates are at historic lows, and now - some say - is a good time for a big infrastructure investment. BEAT…. But, city leaders don’t are not on board. The mayor and key members of the city council say breaking away from a contract with a private utility, like with SDG&E, at this time would be too hard and cost too much money. Activists pledge to continue their fight for public power, now. Part 2: What is municipalization and what does it entail? BEAT Of course, the backing of city leaders is key..but we’ll get to that later. The first question for most San Diegans -- who’ve only ever paid SDG&E bills-- is: How exactly would public power -- known as ...municipalization - work? And hard would it be to make it happen? MUSIC Let’s go back a hundred or so years --- with energy consultant Robert McCullough. At the turn of the last century, we had a number of technological geniuses who revolutionized the world. And they brought electricity to the markets in North America. :13 Those entrepreneurs became utility moguls, turning the invention of electric power generation into investor-owned profit-making businesses. By the 1920s less than a dozen investor-owned utilities sold the majority of electricity in the nation and secured decades of profits by convincing cities to sign franchise agreements …. with some local regulation. Well, that worked well into the Great Depression. But in the Great Depression, people couldn't buy electricity, so there was a wave of bankruptcy :10 The stock market crashed and those massive conglomerates collapsed, ruining investor livelihoods and leaving the energy grid in complete disarray. People began demanding a shift away from the corporations MCCOLLOUGH: a desire for public power passed through the country. City governments took control...for example, on the West Coast...Vancouver, British Columbia, Seattle is power, La the largest public :13 Today, thousands of other U.S. cities have public power. Around 45 provide power in California. Other major cities, like San Diego and San Francisco, still operate with those relic franchise agreements with investor-owned utilities. from the turn of the last century. But… McCollough believes the investor-owned utility model won’t last, as more people opt for technology like solar panels and cities form community energy programs. MCCOLLOUGH: People are much more efficient electricity, we now conserve faster than we grow. That means sustaining the cash flow from these investor owned utilities is a real challenge. :13 5:30 \END MUSIC These days many cities are re-considering their franchise agreements, including places like Boulder, Colorado and Chicago and even San Francisco has considered the idea of buying out PG&E’s local grid for around 2.5 billion dollars. MOLINE: It sort of boils down to: we can control our own reliability :07 Barry Moline, is executive director of the California Municipal Utilities Association. He says reliability and meeting aggressive environmental goals are two of the main reasons cities opt for public power. And, public utilities are just like private ones -- they keep the lights on--- but they’re run through local utility boards, which work closely with the community. It’s just that we have a different motive. They're focused on profits. Our focus is on controlling costs and meeting all of our goals for reliability, affordability and sustainability :10 He brings up the Sacramento Municipal Utility District or SMUD as one example. The utility formed in the 40s and offers residents among the lowest rates in the state, with nearly half of its energy mix coming from renewable sources. MOLINE: I've lived in other public power communities and they've been pretty good, but this one is just on steroids when it comes to engaging with the community there :10 BEAT Part 3: But not all that great/ other cities But some utility experts say, public power isn’t a panacea for all our energy woes. For example, when much of California experienced planned rolling blackouts during a heat wave, SMUD also had power outages, They weren’t because of a lack of power, however, but were likely caused by overheated transmission lines. Also, public utilities CAN make poor decisions and waste money - just like private ones. In the 1960s, SMUD purchased a nuclear power plant. Ratepayers voted in 1989 to decommission it, but it still cost the utility and ratepayers millions. Energy lawyer Michael Wara says despite all that, Sacramento is still a good example where public power works, but that’s... because the management is also good. WARA: Municipalization just changes who is in charge. ….What we want is good, responsive, attentive management . :12 But getting public power in the first place isn’t exactly a piece of cake. The city has to buy the private utility’s poles and wires, which can cost billions of dollars. WARA: you can't just take them for free. You have to pay the owners of those assets. And it is wildly complicated to arrive at a number and it creates an opportunity to fight :13 It took Sacramento two decades of court fights with Pacific Gas and Electric for the right to buy the infrastructure. Other cities now are finding themselves in years of litigation. Like those in the South San Joaquin Irrigation District. BEAT: SCENE AMBI: Meeting At a June 2019 meeting, the discord between the city of Manteca in the irrigation district and PG&E is palpable. Here’s a PG&E representative explaining why they have to shut off wide swaths of power during fire season.. 52:57 PG&E: Having to turn off the lights…. is not something we take lightly. And Mayor Benjamin Cantu responding Mayor: Well let me be a little crude. The people in this town are pissed. Cheers… I put a notice out. And I got 68 thousand hits from people who didn’t know what to do… how do you address a person who has a freezer full of food and it’s going to spoil in a couple days? Fade out… :30 Manteca and other cities in the district have been trying to separate from PG&E since the early 2000s, says Peter Rietkerk (Ree-kirk). He’s general manager of the Irrigation District. 00:04:47.320 they weren't seeing the level of investment and care in the facilities that they were hoping to receive from PG&E at the time :07 It took nearly a decade before the district’s application to take over the utility was finally approved. And then, when they sued to condemn PG&E’s infrastructure and try to take it over, Right away, PG&E sued the district back. Between 2008 and 2018, South San Joaquin spent 27 million dollars on the project. 18 million of that went to legal costs. Today, the region is still caught in litigation limbo. SHALINA: would you go through that process again? RIETKERK: the answer is yes. And it's primarily because of the value that we think we can bring to our local constituents. :13 But even with widespread community support, municipalization is often an uphill battle. Take Boulder, Colorado. In 2010 the city council voted NOT to extend the city’s franchise agreement with its investor-owned utility, Xcel Energy. Jonathan Koehn (Ko-En) is the chief sustainability officer with the city of Boulder. [04:28] We had just passed our climate action plan and our carbon tax and our electricity supply was the big issue that we needed to wrestle with in terms of meeting our emission reduction requirements. The city wanted more control over its energy mix and, on several occasions the public voted in favor of a public utility that would prioritize clean energy sources. But 10 years later, in 2020, they are still fighting. Now the city is back to considering another 20 year franchise agreement with Xcel. But, Koehn says the fight for municipalization was worth it. Because the utility has made commitments to meet climate change targets. If they're not hitting them, we can by a vote of the people or super majority of council vote, exit our franchise and be done and go right back to municipalization. BEAT Part 4: Where are we at with city leaders AMBI: PUBLIC POWER, PUBLIC POWER NOW! Back in San Diego, as the protest at 101 Ash St. showed, there’s some community activists who are still motivated to go into battle for public power. But, there are also forces of resistance, namely among the bulk of current city leadership. BRY: for me, it's a no right now. Councilmember Barbara Bry has consistently said public power isn’t on the table right now. BRY: It is not free to take over those transmission lines. We have to issue billions of dollars worth of bonds and pay that money back. Second, I have no confidence in the city to operate anything. :20 San Diego hired consultants earlier this year to look into the feasibility of public power. They estimate the cost for taking over SDG&E’s electricity infrastructure ranging from around $2 billion to just under $5 billion. In all low to medium cost scenarios, the reports say the city would save money with a public power option. The report also says these scenarios are most likely to happen if the city attempts a take over. But the report says in the highest cost scenario, public power wouldn’t be worth it. The report says the high cost is the least likely... but that’s the advice Mayor Kevin Faulconer took. His office is moving ahead with an auction to take bids from private utilities to take over the franchise. As for SDG&E, the utility did not have a comment for this story. But in an email statement about the franchise negotiations, a company spokeswoman said the company has been a good partner with the city and plans to submit a competitive bid. AMBI: Outside 101 ASH ST. But, on the sidewalk outside the 101 ash st. skyscraper, Cody Petterson, of the San Diego Democrats for Environmental Action, said activists aren’t giving up. He says the city consultant reports overestimate the costs of taking over the grid, and that it’s not difficult to find good managers for a city-owned utility. It’s just a matter of getting the ball rolling… 9:24 Petterson: Yes we do need a city that works for its residents more broadly. But this can be done, and we are already working on a path to do that. :06 That path is trying to work with councilmembers to stop any vote at city council when the mayor presents a franchise agreement. And if that isn’t successful, activists say…. They’ll continue to build community and political support for a city-owned utility. Petterson: Our target is to have municipal power in 3 to 7 years. The path there is going to be bumpy one way or another. As bumpy as losing a million dollars a day? No, I don’t think it is. :11 Petterson says as franchise negotiations move on and the option of public or private power comes up for debate, it’s important that San Diegans never lose sight of their rights to have reliable, clean and affordable electricity. Shalina Chatlani, KPBS news.