Cities, county looking to team up on public alternative to SDG&E

The San Diego County Board of Supervisors approved a plan to study a government-run electricity program called community choice aggregation on Tuesday, Feb. 26, 2019.
(Staff / The San Diego Union-Tribune)

Elected officials throughout the San Diego region are ramping up efforts to form a public alternative to San Diego Gas & Electric, with the city of San Diego leading the way and even the county Board of Supervisors now looking at signing up.

California’s three large investor-owned utilities have since 2010 seen more than 8 million customers defect to so-called community choice aggregation programs, from Humboldt to Los Angeles to Solana Beach.

However, SDG&E is now facing the largest displacement of a utility’s customer base in the state — raising question about everything from grid reliability to whether the public alternative can deliver more renewable energy as promised.

“It’s potentially a very big experiment,” said Matthew Freedman, staff attorney with The Utility Reform Network.

“The people who have been pushing for (community choice) in the San Diego area are genuinely looking to create a better model and push for superior environmental results,” he added. “But the reality is difficult. You need to do a lot of long-term contracting. We’ve see a disconnect in some cases between the desires of the local activists and the performance of the (program) once it’s been created.”

When elected officials vote to form a community-choice program, the local investor-owned utility continues to operate the poles and wires needed to deliver energy. However, a publicly controlled agency takes over buying and selling power for a jurisdiction. Customers can opt out of the program if they would rather receive the utility’s rates.

After several years of indecision throughout the San Diego region, momentum has in recent months shifted quickly in favor of adopting community choice.

Just last February, county elected officials declined to study the issue of forming a government-run alternative to SDG&E.

The utility’s parent company, Sempra Energy, had just started a lobbying blitz to raise doubts about the idea, and San Diego Mayor Kevin Faulconer had yet to make up his mind.

Today that lobbying effort has been disbanded, and the city of San Diego is spearheading an effort to form a joint powers authority that would buy and sell electricity in collaboration with other cities.

The movement got its latest boost on Tuesday, Feb. 26, when the San Diego Board of Supervisors voted unanimously to draft a blueprint for joining the regional community choice effort.

“Many of these (programs) have been able to offer highly competitive rates compared to the big utilities,” said Supervisor Dianne Jacob, who championed the idea a year ago. The program “brings choice and competition to the energy market pure and simple. It allows communities to band together to buy and sell electricity and opens the door to competition.”

Supervisors Jim Desmond and Kristin Gaspar voted to draft the plan but expressed skepticism about whether it should ultimately be adopted.

“Despite extensive research, (community choice programs) have left me with more questions than I have answers because this is an ever-evolving construct,” said Gaspar, who was opposed to studying the issue a year ago.

“I support clean energy,” she added. “I support lower prices, but what I can’t support is getting into the energy business without a plan.”

Desmond said he was concerned about the county’s ability to purchase electricity in the most cost-effective manner.

“Government is not always the most efficient implementor when it comes to business decisions,” he said. “You know the post office and DMV, even filling potholes is sometimes a challenge. I’m just wondering if this could be contracted out to a separate entity that would be part of the (joint powers authority) that wouldn’t have to have county employees or maybe just limited county employees.”

However, with vocal support from newly elected Supervisor Nathan Fletcher, the county is now committed to delivering a blueprint for community choice by October, with updates to the public every two months.

“We have a mountain of data and evidence that this works, that it provides greater choice, that it has the potential to lower utility rates,” Fletcher said at Tuesday’s meeting.

SDG&E officials said they would back the county’s efforts.

“Our highly trained experts stand ready to support the county should you decide to move forward,” SDG&E spokesman Joe Gabaldon said at the hearing.

At the same time, formal negotiations between a number of cities are in the works.

The San Diego City Council voted on Monday, Feb. 25, to kick off talks with places such as Solana Beach, Chula Vista, La Mesa, Del Mar, Encinitas, Carlsbad, and Oceanside. Officials said the Port of San Diego, the San Diego International Airport, and the County Water Authority, as well as cities in Orange County that are within SDG&E’s service territory have also expressed interest.

“I’m so excited about the prospect of this,” said Encinitas Mayor Catherine Blakespear of recent developments in favor of community choice. “It’s a sea change. The perspective is 100 percent different.”

The political landscape around community choice shifted in October when Faulconer announced his support despite the ongoing opposition campaign funded by SDG&E shareholders, which included many of the Republican Mayor’s traditional allies.

Faulconer touted the government-run program as the best way to ensure the city’s pledge to run on all green power by 2035, and said it would lower customer bills. The council’s liberal majority was instantly on board.

By January SDG&E had seemed to accept that at least 40 percent of its customers would be enrolled in a publicly run electricity program. The utility said the change wouldn’t hurt its bottom line as long as a few technical issues were squared away.

Utility officials have even started talking about getting out of the business of buying and selling energy altogether. While it will likely continue to operate the electrical grid that services San Diegans, utility executives have approached energy regulators and the Legislature about the somewhat radical idea.

Under the current rules, investor-owned utilities are the provider of last resort, meaning they keep the lights on in the event a community choice program fails. SDG&E has been in talks with officials in Sacramento about having the state take over that burden.

— Joshua Emerson Smith is a reporter for The San Diego Union-Tribune