San Diego Sets $80 Million Opening Bid for Utility Rights

After 50 years, San Diego Gas & Electric's franchise agreement is about to expire and as the county of San Diego embarks on a new agreement, exiting Mayor Kevin Faulconer has opened the bidding process for the next provider to pay at least $80 million dollars upfront - $70 million for rights to electric and $10 million for gas.

While announcing his formal "Invitation to Bid" on Tuesday, Faulconer said, "San Diego has the largest, most valuable electric franchise and second-largest gas franchise in the state, and we have a once-in-a-generation opportunity to get the most bang for our buck with this agreement".

The current San Diego Gas & Electric (SDG&E) franchise agreement expires on January 17, 2020. To date, three companies have expressed interest in bidding on the new 20-year San Diego franchise agreement, including: SDG&E, Indian Energy, and Bershire Hathaway Energy. The new agreement would allow the provider exclusive public right-of-ways for power transmission and distribution, as well as the right to install and maintain wires, poles, power lines, and underground gas and electric lines.

The new agreement also stipulates:

  • The elimination of a 0.35 percent surcharge that San Diego residents are currently paying on the electricity portion of their bill. The city says this equates to $110 million in decreased rates.
  • Performance audits of the new utility company every two years to ensure that they are doing a good job.
  • Should a company other than SDG&E win the agreement, the new provider would ensure that utility workers keep their jobs, and fairly negotiate salaries.
  • The upfront bid fee of $80 million should from the utility’s shareholders’ funds and not from ratepayers.
  • The utility will pay the city 3% franchise fees for electric and gas - which could generate about $1.4 billion in revenue for the city over the course of the 20-year agreement.

San Diego's franchise agreement was a point of much debate, that ended with the San Diego City Council being unable to reach a consensus on what it should include. The city hired consultant JVJ Pacific to assist in the process, and the company recommended an opening bid of $62 million for San Diego's franchise rights - $18 million less than the mayor decided upon.

The deadline to submit a bid is October 23, 2020 at 5:00 pm. Prospective bidders much prove that they are qualified to take on the responsibility of providing services to the region and paying the upfront cost. If the city receives no bids, Faulconer says he plans to call for the city to pursue forming its own utility company through municipalization, which has proved to be a more cost-effective approach for consumers in cities like Los Angeles and Sacramento.

Photo Credit: Getty Images

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