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Attachment: Franchise Agreements - Questions and Answers Mayor Gloria Announces New Invitations to Bid on Gas and Electricity Franchises


Friday, March 19, 2021


Franchise Agreements - Questions and Answers

SAN DIEGO Building on the progress of the recent launch of San Diego Community Power and following through on his commitment to identify an energy partner that will help further the Citys climate action goals, Mayor Todd Gloria today announced that he has formally invited prospective bidders to compete for the exclusive right to provide gas and electricity services to city residents and businesses.

With these invitations to bid on gas and electricity services, we are ensuring franchise agreements that meet the needs of residents, make financial sense for the City, advance our climate goals and provide equitable access to environmental benefits for all our communities, Mayor Gloria said. 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.

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. The proposed franchise agreements also contain strong accountability measures compelling the franchisee to be a good partner and protect the Citys use of the public right-of-way.

Also included in the solicitations is support for San Diegos new Climate Equity Fund, which will finance new green infrastructure in communities of color that have historically not received their fair share of investment and been disproportionately plagued by pollution.

With Mayor Glorias leadership, the City is on a much better path than what the previous administration left for the new Council, said City Council President pro Tem Stephen Whitburn. The Mayors invitations to bid give the City the ability to hold the utility much more accountable by providing the City with the means to exit the contract after 10 years, rather than the previous administrations guaranteed 20-year contract. I look forward to the continued public process with the residents of San Diego.

Thank you, Mayor Gloria, for your open and transparent leadership on the issue of the franchise agreements, said City Councilmember Raul Campillo, who represents District 7. Now that the ITBs have been released, we are looking forward to continuing to work hard to secure gas and electric franchise agreements that San Diego ratepayers want and deserve. 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.

San Diego Gas & Electric (SDG&E) has held exclusive franchises with the City to provide gas and electric service since 1920. The agreements allow the franchisee to use the public right-of-way to install and maintain the infrastructure, such as pipes, poles and wires, necessary to provide energy to San Diegos residents and businesses.

The current franchise agreements, signed in 1970, were set to expire on Jan. 17, 2021. Under a process created by the previous administration, SDG&E was the lone bidder for new franchises.

However, Mayor Gloria, in consultation with City Attorney Mara Elliott, determined that the bid was unresponsive to the minimum requirements set forth in the Invitations to Bid (ITB). Mayor Gloria cancelled the ITB process and reached an agreement with SDG&E to extend the current agreements through June 1, 2021.

In January, Mayor Gloria initiated a robust public-outreach effort to educate city residents about the franchise agreements and solicit opinions about San Diegos energy future. The process included partnering with all nine members of the City Council to hold 13 virtual community forums, which we attended by hundreds of people, and an online survey that drew nearly 1,400 responses. The Councils Environment Committee held several hearings on the franchises, provide additional opportunities for San Diegans to make their voices heard. The results of this effort showed that City of San Diego residents value environmental protection, including reducing pollution and combatting climate change.

The subsequent ITBs require minimum bids of $70 million for electricity service and $10 million for gas.

The ITB includes a number of terms that were not included in the flawed ITBs that the previous administration crafted, including:

  • A cooperative agreement that contains 14 different desired terms and commitments that, among other things, support the Citys climate-action efforts, advance climate equity, make San Diego more resilient to the impacts of climate change, modernize the local energy grid and boost clean-energy resources.
  • A 10-year term, plus an additional 10 years if the franchisee has been a good partner and complied with the terms of the franchise and cooperative agreement. If the franchisee has not complied, the City may cancel the agreement on the recommendation of the Mayor and six votes of the City Council.
  • A requirement that the franchisee support the Citys Climate Equity Fund.
  • A requirement for the franchisee to have extensive experience in renewable-energy integration and smart-grid innovation.
  • The right of the City to negotiate or change bid terms or negotiate with the franchisee to renew, extend or amend the franchise agreement.
  • Eminent-domain and condemnation language consistent with state law allowing the City to create a municipal energy utility.

The ITBs also include several improvements over the current agreement, including:

  • Strong worker-protection and -retention language.
  • A tiered dispute resolution process allowing for mediation between the City and the franchisee to avoid costly litigation.
  • Strong remedies such as a $30-million performance bond to protect the City from contract breaches.

Among other things, the cooperative agreement in the ITBs include desired commitments to:

  • Work collaboratively with San Diego Community Power, the community-choice alliance under which San Diego and four other cities purchase energy on the open market that SDG&E distributes, to help the City achieve renewable energy goals
  • Climate-proof the energy grid, including implementing new fire-protection and -prevention measures.
  • Cooperate in a move toward to a green economy by transitioning away from natural gas and training gas workers in green-energy jobs, as well as taking steps to create a more diverse workforce.
  • Provide opportunities for low- and moderate-income residents to reduce their bills through energy efficiency.
  • Provide ratepayer relief during the pandemic, conduct a thorough review of customer service in underserved communities and create a plan to improve service in those areas.

All bids for the gas and electricity franchises will be opened on April 16, after which the City may initiate negotiations with the responsive bidders to ensure the final agreements provide the best value to the City. Tentatively, the franchises will be awarded in May.