A San Diego Solar Takeover — Episode 206 of Local Energy Rules

A lot of my free time here, since I’ve been living in San Diego, I’ve spent volunteering more in the urban planning, transportation sector of advocacy. But I was very lucky that I was told about this campaign and I was not a public power advocate. I didn’t know a lot about the energy space and about public power, but I was educated by people who I trusted and people who I respected with their environmental work. And I saw this opportunity and I wanted to jump in. It seems like a great cause and I’ve been very lucky to have learned a lot about public power since then. So it’s definitely a cause that I now care a lot about myself as well.

Bill, tell me a little bit about how you got here to be working on this public power campaign.

And fast forward, I think you and I met 10 or 12 years ago in California when it was a community choice aggregation conference in San Francisco. You had that wonderful opening slide of a hammer and sickle on a eastern European sedan to give a visual to all of us of what an investor-owned utility was all about, private monopoly. And so that one of the best images I’ve ever seen, John, so congratulations. But we were fighting for community choice aggregation, I know we’ll talk about it a little bit in this podcast, as maybe the holy grail. Maybe if we can get supply, then we can say we want rooftop or we want all these things that we think we should do and we’ll talk more about that. But community choice aggregation really hasn’t lived up to its promise out here in California. So I’ve been constantly engaged in pushing back not only on our local utility, San Diego Gas and Electric, other California investor-owned utilities, other investor-owned utilities in their holding companies around the country.

And yes, I agree with you a hundred percent. It’s basically the same story everywhere. And the same co-opted entities that are ostensibly regulating and looking out for the public are not doing it effectively. And so fast forward to last summer, it’s called exhausting your administrative remedies. I’ve done everything I can think of to try and change the bow of the boat with how the investor-owned utility is handling its infrastructure projects, rooftop solar. And I don’t think I’ve moved the bow of the boat much in all of those interventions. And so we have been talking for years out here about we have the fundamental right to provide utility services to our residents. We do have a public utility for water and wastewater. We don’t for electric, we don’t for gas, but we have a model here in town.

We also essentially, this relationship with our investor-owned utility San Diego Gas and Electric, not that different between you and your plumber, it’s a contractor. It’s just in a very elaborate contracting relationship, but it’s a contractor. And also in our city charter, we have the right to terminate that relationship at any time if we see it to be in the welfare of the residents to do so. And so at least last summer, paying the highest rates in the country, our utility has been relentlessly attacking rooftop solar for potential new owners. And it is now relentlessly attacking existing owners of rooftop solar with proposal for graduated fixed fees that would selectively hit existing rooftop solar owners. And so last summer it was, you know what? This is the right time. Our community is fed up with the utility. The utility is working in full daylight on all of these efforts to undercut everything we care about here. And this is a unifying issue for our community. Democrats, independents, Republicans, and we get a big election coming up, so we’re going to have everybody out. So over lunch at a restaurant, several of us who have been energy activists for a long time said, let’s just do it. Let’s just go for it. And that’s how it started. And that was Midsummer last summer and it’s picked up momentum from there.

And so though it sounds counterintuitive and our focus is our focus is primarily on commercial rooftop and parking lot or ground mounted solar in the city, not unlike those community solar arrays that you talk so much about in Minnesota, that kind of scale and as well as supporting residential rooftop, but those highest rates in the country that we’re paying have a big element of transmission and even distribution, but not distribution in the city, such that we can focus on solar to lower rates. And so our whole mantra is lower rates and how are we going to lower rates? We’re going to lower rates by maximizing solar and battery storage in the city, not because it’s a feel-good thing even though it is, but because that is the most effective way for us to lower rates. So our whole mantra is lower rates, lower rates.

And I think for the investor-owned utilities and holding companies, investors just like this bird in the hand is worth 10 in the bush. I mean, this is such a gravy train that we will never see a gravy train like this again, and we will defend it to the maximum extent in the right. This is an over the top gravy train, and I would expect this will be like the dinosaurs. There won’t be a negotiation where we sit around and intelligently talk about performance-based rate making and make that shift. This will be communities getting fed up that have the fundamental right to take this service back to the community as a public community-based operation. And they just do it.

We are going to take a short break. When we come back, I ask my guests how public power addresses problems that community choice energy cannot, we talk about the key moment recently when a 50 year franchise agreement was dramatically shortened, and the nature of their campaign’s opposition. You’re listening to a Local Energy Rules podcast with Bill Powers and Dorrie Bruggemann with the Power San Diego ballot initiative campaign.

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So now that I’ve taken a nice detour, bring me back home. Why public power instead of just community choice? What is so important about having ownership of the grid system in the context of the goals around reducing energy bills and the other things that are motivating the campaign?

And a lot of people say, well, really, I mean that’s all we’re getting out of all this drama about having this entity. And I’ll put that partly on the ability of the utilities to control the game and impose conditions on those community choice aggregators that make it very hard for them to do anything but status quo type work. But it’s also I think CCA myopic understanding of what their mission is, and if you just look at it as our mission is just to provide power supply at some incrementally lower rate than the utilities are providing. Okay, well what about the fact that if you’re buying New Mexico wind power and you’re a coastal Southern California CCA, or if you’re buying solar power in Arizona, how’s it going to get here If you sign a thousand megawatts of contracts, how does it get here? Somebody’s got to build a transmission line. Right. Do you think that may play into why the utility seemed quite comfortable with your role at this point? If all you’re doing is what they would’ve done anyway to facilitate multi-billion dollar transmission expansion, you’re welcome at the table.

And so I’ve also had conversations with them saying, since I was one of the promoters of this 10 years ago, what was our concept? We were clear about it that we would concentrate on massive build out of solar in the city. It doesn’t have to be rooftop, on residences or only that, but you can aggregate 10, a hundred, 500 kw or megawatt rooftops into huge projects just as big as those desert projects. And maybe they cost a penny more collectively than the desert project. That’s okay. That’s what we want. It’s not so much you knocking a percent or two off the power supply bill. It’s about implementing a vision that takes us in a different direction and that has not happened.

So I was part of a nonprofit effort to do a public power study. We contacted Boulder, Colorado, got a good consultant out in North Carolina, did a good study on public power. It said it’s a winner, especially distribution grid only. Great. We shopped that around to the city council, let everybody know, and just kind of built some anticipation as this became more of a political issue in the city. The city also commissioned a public power study. The consultant in that case said, look, public power is a winner for this city. And they gave us pricing on the grid, the assets, and said, you write the franchise agreement terms you want for electric, and if the bidders do not agree to exactly what you want, you go straight to public power. Interest rates are dirt cheap. This is the time to do it.

So that’s what we got from the consultant to the city. Then we had a change in administrations and we went from an R to a D, but it actually, as you know, doesn’t necessarily change anything. All depends on who was closest to whom. And so it actually got less favorable with that change for public power. And the new administration signed a very favorable agreement to San Diego Gas and Electric. However, there was a dog fight on the city council. We kind of had the votes briefly to stall that franchise and get a good public power off ramp, which is, let’s put some rigorous but doable requirements in the franchise agreement for clean energy, local rooftop power serving the underserved. We know this utility is going to trip over it. Sooner or later, they’re going to trip over a requirement. And let’s just say you trip over any requirement, we go straight to public power. That’s what the consultant was advising.

But that didn’t happen. I mean, SDG&E got basically a free pass. In fact, that’s one of the reasons why we have some strength going now on ballot initiatives. That happened very recently. That was only two to three years ago in that span. That was a marquee issue in this city in 2021. That was a big deal. Everybody remembers. And so we have somewhat educated populace about SDG&E basically getting its cake and getting to eat it too. And so there was a lot of public dissatisfaction with how that came down.

And so that’s really where we’re at. And you can see these relationships here now that we’d actually recommended to the city that the consultant that did the work in 2020 be rehired for yet another study. The third study that we’ve had in six years is mostly complete at this point. They did bring in that consultant, consultant has a good reputation, but it’s really what you do is dependent on what your client instructs you to do. There’s no reference in the new study that we’ve ever had prior public power study. We’re not looking at a distribution electric grid anymore. Now we’re looking at T&D. But what does T&D do? It involves a lot more actors and it greatly extends the review time. And so we’re in a position as a campaign to say, because now the utility is saying, well, let’s just wait. There are multiple phases to our municipalization study. Let’s circle back in 2025, we’ll have another chat. Then next phase will be done in 2040. We’ll circle back down, and I’m exaggerating when I say next phase in 2040, but you know what I mean. This is, I think, the analysis paralysis is what I call it. Is let’s throw the community a small bone. Let’s tell ’em we’re thinking about it and let’s just keep thinking about it until the cows come home.

And so what we’re saying is we’ve got plenty of studies, and unlike many communities, we pretty much know exactly what the assets cost. We know the different governmental structures we have available to us. We’ve chosen one. And just to underscore, and you can probably sense a little frustration in my voice this second phase, that first phase, which covered everything, finished in July of 2023, this next phase finishes in mid-summer 2025. What’s the primary happenings in that next phase? It’s consultations with the community. What should have happened before the first phase even started? Consultations with the community, consultations with the community choice aggregator. But the study says, we’ll just continue to take power from the community choice aggregator.

So what’s to consult? That’s what’s in the study. That’s what we’re assuming, but what are the bulk of the consultations? The consultant in the city will go out to get insights from San Diego Gas and Electric. The city will go out and get insights from the San Diego corporate electricians union, IBEW 465. Well, we’ve seen those insights at our meetings, which are hell no to any discussion of public power. And so it just gives you a sense of, insights when you’re talking about a hostile takeover, what insights do you anticipate getting from your opponent in the ring other than a knockout punch? And so just to give you the flavor of the politics, and Dorrie and I were just talking about this before the call, is that this could not have happened any other way, meaning the institutional players in the city have directly or indirectly some kind of tie with the investor-owned utility or its holding company. That makes inconvenient any significant discussion about a wholesale change out that the only way this could have gotten started is as grassroots. We’ve had enough initiative because if they’re too embedded, they’re too embedded in the political structure of the city to have been able to negotiate some kind of momentum to then get funding. And it just had to be, you know what, this is the moment and we’re not sure how we’re going to get it done, but this is the time to move.

And so it’s like, how can you possibly do this and not save money knowing that you’re going to cut that profit margin in half or more in terms of interest rates and cost of capital? And it really comes down to this issue I discussed with Scott Hempling, who has a long history in doing utility law and regulation has been an administrative law judge in this issue. And I think he covered it in his book, but in a podcast where we talked about it, that it’s essentially the utility is taking this public asset, the distribution grid that we’ve all paid for. So we’re renters, but it’s paid off, right? Sure. They’re doing some upgrades to it. We basically own it or we would own it if it was any kind of justice in the structure of the system. And then they’re selling it to us at a premium. That’s the only possible way that we could not get a good deal here is if they’re somehow being able to profit off holding this monopoly ownership of a system that we gave them. So it’s like we gave it to them as part of their operation and now they’re going to sell it back to us at a premium, which is the only plausible way. It couldn’t be cheaper to operate the system. I don’t know. That just drives me crazy.

So I don’t know if you have anything you want to say to that, but just I keep thinking about that every time I talk with folks like you who are working on these public power campaigns, everybody gets hung up on the economics when the truth is the utility is just making a buck off something we gave them in order to sell it back to us at a price premium. It’s ludicrous.

So we can just look down this voluminous list and say, well, this entity that represents lower income people of color gets $25 or $30k a year from utility, and now they’re writing about the nuances of income graduated fixed charges. And so what we focus on is just calling out that you see these op-eds from groups, one member of an earlier coalition that is earlier iteration of a coalition fighting for fixed charges was Meals on Wheels, for example. It’s like, well, how, one might ask, does Meals on Wheels have the chops to opine on how these fixed charges work? And they get quite a bit of money from the utility. And so what we’re doing is what we’ve done in past campaigns. I mean, this really should just be required that if you’re writing op-eds that at least acknowledge you can talk about your degrees and the good works that your entity does, and you probably do do good work, but also acknowledge that you’re a recipient of significant contributions from the electric utility to be fair to the reader. So the reader doesn’t assume that remarkably, you just got up one morning and felt compelled to write an op-ed about fixed charges even though it has nothing to do with your trajectory.

And I must say that no matter how it shakes out, I think it’s just given the community of bigger vision of what’s possible. I mean, until this campaign launched, it was like, in fact, I got that from many people that, hey, good luck to you, but you just can’t take on the investor-owned utility. I mean, it’s just too big a fight. Like you said, your training wheels were earned in 2020, and now you’re ready for the real political combat which is trying to knock out the investor-owned utility, which is in part true because it’s remarkable to see these interlocking relationships and webs. And I must acknowledge many people in the community stepping up despite that, despite being caught to a degree in those webs and still showing the courage to support us. But I’m glad we’re doing this for our community.

In fact, can I read when we’re among the faithful, can I read you a statement we read at all of our presentations? Can you tell me who it came from?

And we’re doing signature gathering with volunteers. We have paid signature gatherers in the area. People who do this for their income or for a side hustle, they want to carry our petition for free because when they have, they’re able to put forward, oh, I’ve got the Power San Diego petition. People are coming to them and they are approaching them and they want to sign. So what gives me hope is knowing that there is so much potential for massive organizing in this region. What we have seen with this campaign and how the work that we’ve done, whether we get on the ballot or not, whether it passes or not in the primaries, the way that elected hopefuls were talking about public power and really having to talk about it in a way that they would not have if we did not have this organizing over the past few years over the issue. So that’s what gives me hope is that to me, it’s inevitable. We want to make it happen as fast as we can because it needs to, because people are hurting now. But I just feel that SDG&E’s time is nigh. So it’s exciting to see, and that’s what gives me hope.