San Diego formally opened up the city's natural gas and electric service franchise to bidders on Friday.
San Diego Gas & Electric has held exclusive agreements to provide gas and electric service in the city since 1920.
Though the city has also discussed taking over the power system, the focus right now is on selecting an energy partner to further the city’s climate action goals, according to Mayor Todd Gloria's office.
“To win the exclusive right to use the taxpayers’ land to provide energy to San Diegans, bidders will have to be a good partner in our effort to create a sustainable future, for all of us,” Gloria said in a statement.
The current franchise agreements, established in 1970, were set to expire on Jan. 17, but the City Council voted on Dec. 31 to approve Gloria's request to extend the franchise through June 1.
In a franchise agreement, a utility is granted the exclusive use of public rights of way for transmission and distribution, as well as the right to install and maintain wires, poles, power lines and underground gas and electric lines within the city limits of a municipality.
Under a process created by former Mayor Kevin Faulconer, SDG&E, a subsidiary of Sempra Energy, was the only bidder for a new 20-year franchise, meeting the minimum $80 million bid last summer. Indian Energy and Berkshire Hathaway, both of which had expressed interest, did not bid.
Gloria, in consultation with City Attorney Mara Elliott, determined that the bid was unresponsive to the minimum requirements set forth in the Invitation to Bid. He then cancelled the process and initiated talks with SDG&E that resulted in the current contract being extended through June.
Since then, the city has held community forums and informally spoken to Indian Energy and Berkshire Hathaway to find out what in the previous process discouraged them from bidding, according to the mayor’s office.
The new agreement would include a 10-year-deal with a 10-year option and an $80 million minimum from potential bidders. The $80 million would be split between $70 million for the electric franchise agreement and $10 million for the gas franchise agreement.
The city also launched San Diego Community Power on March 1, a five-city community choice energy program that will provide an alternative to SDG&E when it comes to purchasing sources of power. The CCE had lined up school district and fire station accounts and organizers had estimated it could have 700 municipal customers by the end of March.
All bids for the gas and electricity franchises will be opened for review on April 16, after which the city may initiate negotiations with the bidders. The City Council is expected to vote on the agreement in May.
"We have taken significant public input over the course of this process, and we feel ready to advocate for the kind of agreements that San Diegans need in order to receive excellent gas and electric service for their homes and businesses at a reasonable rate," said Councilmember Raul Campillo.
The mayor also emphasized the process will be transparent and competitive and “provide equitable access to environmental benefits for all communities, and include the flexibility to explore all options for how the city supplies energy in the future.”
The terms of the invitations include the requirement for a cooperative agreement that will help the city achieve its climate action and environmental equity goals, according to the mayor’s office.
The agreement would also provide support for San Diego’s new Climate Equity Fund, a $5 million annual fund that will build parks, plant trees and improve public transit in low income areas. About 10% of the fund’s budget would come from electric and gas franchise fees.
