Public Power for the City of San Diego - Now Is the Right Time - March 18, 2021 Bill Powers, P.E., Powers Engineering & Protect Our Communities ...
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Public Power for the City of San
Diego – Now Is the Right Time
March 18, 2021
Bill Powers, P.E., Powers Engineering
& Protect Our Communities Foundation
FINAL 1
City’s consultant, 2020 – go with public power
if no conforming franchise bids received
JVJ Report, June 22, 2020, p. 6: https://www.sandiego.gov/sites/default/files/jvj_6-22-20_report_to_the_city_of_san_diego.pdf.
City’s consultant, June 1970:
Current high interest rates make a (public) buy-out infeasible,
re-examination advisable in future if interest rates are lower.
City’s consultant, June 2020:
Today, interest rates are extremely low.
The “Base Case” City-owned electric distribution utility is
economically feasible.
If the new proposed franchises are not accepted without
material changes by a responsible bidder, then we
recommend that the City proceed to form community-owned
electric and gas distribution utilities.
FINAL 2
What are the potential advantages of public
power in San Diego?
Local control – California Public Utilities Commission does not
regulate public utilities, the local community sets policy.
Lower rates – On average, rates about 30% lower than SDG&E.
More accountability – Utility management answers to local
officials and citizens, not a statewide commission.
Higher reliability – Public power customers average less than 1
hour per year w/o power, less than half the national average.1
A stronger local economy – The public utility will focus project
development in the community.
1) American Public Power Association, Public Power for Your Community, 2016, p. 17:
https://www.publicpower.org/system/files/documents/municipalization-public_power_for_your_community.pdf.
FINAL 3Are public utilities common in SoCal? Yes.
source: California Energy Commission, California Electric Utility Service Areas (map), 2015:
https://images.landsofamerica.com/imgs6/cb/04/57/CAElectric_Service_Areas_Detail_d788.pdf
FINAL 4How big are public utilities in California?
source: California Energy Commission, California Electric Utility Service Areas (map), 2015:
https://images.landsofamerica.com/imgs6/cb/04/57/CAElectric_Service_Areas_Detail_d788.pdf
FINAL 5SDG&E net profit in City, > $1 million per day
source: https://investor.sempra.com/sec-filings; The gross receipts for electricity collected by SDG&E within the City in 2019 were
$1,637,838,721. See JVJ Report, June 22, 2020, p. 29, footnote 41.
FINAL 6Cents / kWh
0
5
10
15
20
25
San Diego Gas & Electric Co
Average Public Utility in CA
Pittsburg Power Company
City of Gridley - (CA)
City of Moreno Valley - (CA)
City of Pasadena - (CA)
City of Glendale - (CA)
LADWP
City of Alameda
Lathrop Irrigation District
City of Banning - (CA)
Plumas-Sierra Rural Elec Coop
City & County of San Francisco
City of Lodi - (CA)
Anza Electric Coop Inc
City of Healdsburg - (CA)
City of Biggs - (CA)
Modesto Irrigation District
City of Anaheim - (CA)
Lassen Municipal Utility District
City of Redding - (CA)
Merced Irrigation District
Truckee Donner P U D
FINAL
City of Shasta Lake - (CA)
City of Riverside - (CA)
Turlock Irrigation District
City of Palo Alto - (CA)
Rancho Cucamonga Municipal Utility
City of Burbank Water and Power
City of Roseville - (CA)
City of Colton - (CA)
City of Lompoc - (CA)
City of Ukiah - (CA)
Sacramento Municipal Util Dist
City of Corona - (CA)
Valley Electric Assn, Inc
City of Azusa
City of Santa Clara - (CA)
Imperial Irrigation District
City of Vernon
every public power provider in California
City of Needles - (CA)
Surprise Valley Electrification
City of Industry
U.S. Energy Information Administration, 2019 Residential Rates, Table 6: https://www.eia.gov/electricity/sales_revenue_price/.
Trinity Public Utilities Dist
SDG&E 2019 residential rate is higher than that of
Aha Macav Power Service
7Community Choice Energy and public utilities
source: 1) City of San Diego Climate Action Plan, 2015, p. 35; 2) San Diego City Attorney, Memorandum of Law - Gas and Electric Service Issues
in Light of Expiring Franchises, November 4, 2020, pp. 1-2.
The City’s Climate Action Plan identifies CCE an electricity
supply format to achieve 100% clean energy by 2035.1
City desires to focus on local clean power – however, CPUC/
SDG&E imposition of punishing exit fees on CCEs is undermines
the ability of SDCP to concentrate on local clean power.
As a public utility – owning the wires – the City’s grid would no
longer be under CPUC jurisdiction or SDG&E control.
As a municipal utility, the City . . . can contract with SDCP to buy
electricity for the customers it serves, but it would have to do so
at the wholesale level.2
CPUC: California Public Utilities Commission; IOU: investor-owned utility; SDCP: San Diego Community Power.
FINAL 8What are some examples of existing public utilities
operating in San Diego?
source: Public Power Fact Sheet, September 2020: https://www.publicpowersd.org/factsheet/.
The City’s Public Utilities Department – provides water and
wastewater service to City residents.
Metropolitan Transit System (MTS) – bus and trolley service –
is a joint powers authority public agency, composed of ten
cities and the County.
San Diego Community Power (SDCP) – electric power supply –
is a joint powers authority composed of five cities, San Diego,
Chula Vista, Imperial Beach, La Mesa, and Encinitas.
FINAL 9What are the governance structures used by
public power utilities in California?
source: Public Power Fact Sheet, September 2020: https://www.publicpowersd.org/factsheet/.
Sacramento Municipal Utility District (SMUD) is governed by
an elected seven-member board of directors. [local example of
this structure – San Diego Unified School District]
Imperial Irrigation District (IID) is governed by an elected five-
member board of directors.
LADWP is governed by a five-member Board of Water and
Power Commissioners appointed by the mayor of Los Angeles
and confirmed by the Los Angeles City Council.
Pasadena Water and Power is governed by the Pasadena City
Council.
FINAL 10What are franchise fees and what are they used
for? Use of City land to conduct business.
source: Public Power Fact Sheet, September 2020, p. 5: https://www.publicpowersd.org/factsheet/.
SDG&E base case: Provides franchise fees equivalent to 3
percent of its electric and natural gas sales, $63.7 million in
fiscal 2020, to the City’s General Fund.
SDG&E collects a comparable fee that is specifically
earmarked for undergrounding distribution lines in the City.
SDG&E collected $63.6 million in undergrounding fees in fiscal
2020.
SDG&E collects these fees from City residents and transfers
them to the City. These fees are not paid out of SDG&E
revenue.
FINAL 11How much revenue do communities with public
power utilities receive from their public utilities?
source: Austin Energy, 2018 Annual Report, p. 4 and p. 26: https://austinenergy.com/ae/about/reports-and-data-library/corporate-reports/;
Austin Energy General Fund Transfer (description), webpage accessed March 18, 2021: https://catalog.data.gov/dataset/austin-energy-
general-fund-transfer.
Austin Energy: The public electric utility of Austin, Texas,
contributed $109 million to Austin’s General Fund in 2018 on
sales of $1.2 billion. This amount is 9+ percent of Austin
Energy’s sales revenue.
“Austin Energy returns a dividend to its community. This
dividend is comparable to funds distributed to stockholders by
investor-owned electric utilities. The dividend (known as the
General Fund Transfer) returned by Austin Energy helps fund
other City services such as Police, Fire, EMS, Parks, and
Libraries.”
FINAL 12Public utility can direct percentage of sales to
General Fund, franchise fees would be eliminated
Recommendation: Direct 10 percent of public utility sales to
City’s General Fund, ~$150 million per year,1 following Austin
Energy practice (based on 20 percent reduction in rates).
Eliminate the ~$130 million per year in total franchise fees
currently collected from City residents by SDG&E.
Maintain General Fund contribution at $65 - $70 million per year.
Improve efficiency of Undergrounding Program – maintain
annual mileage at half the cost, $30 - $40 million per year.
1) Public Power Fact Sheet, September 2020, p. 5: https://www.publicpowersd.org/factsheet/. Assumes sales revenue in City declines from $1.8 billion per year to
$1.5 billion per year under public power, a 20% decline in sales revenue (and rates).
2) City Attorney Memorandum MS 59, Unpaid Utility Undergrounding Program Invoices and Documentation Dispute with SDG&E, June 3, 2020, p. 2; San Diego
Independent Budget Analyst, Analysis of the Initial Recommendations Concerning the Electric and Gas Franchise Agreements, August 4, 2020, p. 5, footnote 3.
$63.7 million per year (2019 fees collected) ÷ $4.5 million per mile (historic average) = 14.1 miles per year of undergrounding.
FINAL 13Undergrounding Program would be reformed, with
savings directed to expanded Climate Equity Fund
Representative public utility cost to underground urban
distribution lines is $2.8 million per mile.1
City is paying $4.5 - $6 million per mile.2 Undergrounding
program should maintain the historic 14 mile per year pace at
half the current cost. Budget $40 million per year.
Recommendation: Direct remaining available General Fund
revenue, ~$40 million per year, to Climate Equity Fund.
1) SMUD, SMUD SD-14, System Enhancement, PowerPoint, presented to Board Policy Committee and Special SMUD Board of Directors Meeting, April 18,
2018, p. 7: https://www.smud.org/-/media/Documents/Corporate/About-Us/Board-Meetings-and-Agendas/2018/Apr/2-Maria-Veloso-Koenig--SD14-System-
Enhancement-Board-Monitoring-Repo.ashx?la=en&hash=4E15D5DA1FEFBBCC6DF3676CE20673D249DAF803.
2) City Attorney Memorandum MS 59, Unpaid Utility Undergrounding Program Invoices and Documentation Dispute with SDG&E, June 3, 2020, p. 2; San
Diego Independent Budget Analyst, Analysis of the Initial Recommendations Concerning the Electric and Gas Franchise Agreements, August 4, 2020, p. 5,
footnote 3. $63.7 million per year (2019 fees collected) ÷ $4.5 million per mile (historic average) = 14.1 miles per year of undergrounding.
FINAL 14What is it worth? Market value of SDG&E electric
distribution assets in the City, ~$2.5 billion
Two independent assessments of market value of SDG&E
electric distribution assets in City of San Diego, at $2.0B
(PowerServices, 2017) and (NewGen, 2020) $2.1B.
Estimated separation cost from rest of SDG&E system, $390
million (PowerServices), $190 million (Advisian, low end).
Approximate market value of SDG&E electric distribution assets
in City, separated from rest of SDG&E system: $2.1 billion +
$400 million = ~$2.5B.
PowerServices July 2017 (summary table): https://protectourcommunities.org/wp-content/uploads/2021/03/2017-07-01-City-of-San-Diego-
municipalization-study-valuation-summary-table-only.pdf
NewGen/Advisian, April 2020 (Table 2, p. 4 and pdf pp. 94-95): https://www.sandiego.gov/sites/default/files/san_diego_electric-
gas_franchise_agmt_consultant_report_updated.pdf.pdf.
FINAL 15Why is separation needed at some substations? To
differentiate between City and non-City demand.
photo: Chicarita substation, Rancho Peñasquitos
FINAL 16How would the City pay for SDG&E’s assets?
Revenue bond(s) – customer bill payments pay-off the bond
over 30 years.1
JVJ Report (2020) – “The purchase price assumption does not
have significant effect on the cost customers would pay for
electric service. This is because fixed asset costs (debt service)
are a small portion of the total cost of service.”2
PowerServices (2017) – Estimated bill impact of debt service
on ~$2.7B purchase expense = ~$0.03 per kilowatt-hour.3
1) American Public Power Association, Public Power for Your Community, 2016, p. 30:
https://www.publicpower.org/system/files/documents/municipalization-public_power_for_your_community.pdf.
2) JVJ Report, June 22, 2020, p. 54: https://www.sandiego.gov/sites/default/files/jvj_6-22-
20_report_to_the_city_of_san_diego.pdf.
3) PowerServices July 2017 (summary table): https://protectourcommunities.org/wp-content/uploads/2021/03/2017-07-01-City-
of-San-Diego-municipalization-study-valuation-summary-table-only.pdf.
FINAL 17Who will run a City of San Diego public
electric and gas utility?
A private contractor or another public utility can staff and
manage the utility during the initial transition phase.1
Ultimately the public utility will hire its own senior managerial
staff.
Mid-level management – same (former SDG&E).
Operations and maintenance staff – same (former SDG&E,
union, existing Collective Bargaining Agreement honored).
1) American Public Power Association, Public Power for Your Community, 2016, p. 31:
https://www.publicpower.org/system/files/documents/municipalization-public_power_for_your_community.pdf.
FINAL 18Pushback - SDG&E’s claims against public
power and responses to those claims
source: E. Mitchell – SDG&E, (letter regarding) Special Environment Committee Meeting, July 16, 2020 – Consultant Reports on City of San Diego
Proposed Franchises for Gas & Electric Service, July 15, 2020.
SDG&E CLAIM: Potentially saddle San Diego taxpayers with
years of expensive litigation.
RESPONSE: Any litigation or delay would be driven by the
level of SDG&E’s obstruction.
SDG&E CLAIM: City could be burdened with billions of dollars
in new financial obligations.
RESPONSE: SDG&E’s assets would be purchased with a
revenue bond paid for with utility bill payments, not City of
San Diego funds.
FINAL 19SDG&E’s claims against public power and
responses - continued
SDG&E CLAIM: San Diego region has been largely protected
from (wildfires) because of SDG&E’s focus and execution of a
wildfire mitigation plan.
RESPONSE: The region was devastated by fires caused by
SDG&E in 2007, and heavy reliance on preventive fire
shutoffs now undercuts the obligation to serve all
customers, and in this case, when they most need that
power.
FINAL 20SDG&E’s claims against public power and
responses - continued
SDG&E CLAIM: The risks associated with the operation of a
natural gas utility are well illustrated by the deadly explosion
in 2010 of a PG&E natural gas line.
RESPONSE: PG&E mismanagement caused the explosion.
This is an example of private utility incompetence, not a
reason to trust a private utility.
FINAL 21SDG&E’s claims against public power and
responses - continued
SDG&E CLAIM: NewGen Report grossly undervalues SDG&E’s
assets and is not a proxy for a fair market value appraisal.
RESPONSE: NewGen’s independent valuation was similar to
the 2017 PowerServices, Inc. independent valuation of
SDG&E’s assets.
SDG&E CLAIM: The NewGen Report almost completely
discounts the time and cost for separation.
RESPONSE: The NewGen report estimates a range of costs for
separation, and dedicates a stand-alone report by sub-
contractor Advisian on this topic.
FINAL 22Conclusion – Now is the time for public power
There is no better time for the City of San Diego to move to
public power.
The preliminary public power feasibility studies that have
been done for the City are favorable to forming a public
power utility.
The City needs to develop a detailed, actionable public power
implementation plan.
FINAL 23You can also read
