San Diego City Council updates part of its franchise deal with SDG&E
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SAN DIEGO, May 16, 2025 – The San Diego City Council has approved several revisions to its energy cooperation agreement with San Diego Gas & Electric (SDG&E), though a proposed increase in funding for a popular solar installation program was not included in the final updates.
The energy cooperation agreement, which operates alongside the franchise agreement signed between the city and SDG&E in 2021, outlines how the utility will assist San Diego in achieving its clean energy, electrification, safety, and equity goals.
In Tuesday's City Council meeting, the council voted 5-2 to approve a series of updates to the agreement, with Councilmembers Sean Elo-Rivera and Henry Foster voting against the revisions. Council President Joe LaCava and Councilmember Marni von Wilpert were absent from the vote.
Solar Equity Program Funding Holds Steady
A key point of contention during the meeting was Councilmember Elo-Rivera's proposal to increase SDG&E's annual contribution to the San Diego solar equity program from $1 million to $1.15 million, citing inflationary pressures since the original agreement was established in 2021.
"To me, this is a very modest request to account for inflationary pressures," Elo-Rivera argued, pointing to SDG&E's reported $891 million in profits for 2024.
The solar equity program, which uses SDG&E shareholder funds rather than ratepayer dollars, covers most or all installation costs for rooftop solar systems for 30-40 income-qualified San Diego homeowners annually.
SDG&E representatives opposed the increase, with Brittany Applestein Syz, vice president of external affairs and communications, stating that "inflationary concerns have not affected the program" and asserting that the utility can "continue to hit the same number of homes" without additional funding.
New Commitments in the Revised Agreement
The approved revisions include several new requirements for SDG&E, such as:
- Assisting city staff with measures to help meet San Diego's climate action plan goals
- Supporting efforts to reduce greenhouse gas emissions in municipal buildings
- Helping San Diego Community Power with the launch of the San Diego Regional Energy Network, which aims to make energy efficiency and electrification more accessible and affordable
Randy Wilde, senior policy adviser for Mayor Todd Gloria, described the updated agreement as "improved and more specific," noting that it "gets more benefits for the city," particularly when considering the eventual renewal of the franchise agreement itself.
Looking Ahead to the Franchise Agreement
The current franchise agreement, which allows SDG&E to use public right-of-way for its infrastructure, was approved in June 2021 and can run for up to 20 years – an initial 10-year term with an automatic 10-year renewal.
However, the city maintains the option to void the automatic renewal with a two-thirds vote of the City Council if it becomes dissatisfied with SDG&E's performance. The agreement can also be nullified if the city decides to create its own municipal power company or determines that a breach of the agreement has occurred.
The revisions to the energy cooperation agreement are seen by city officials as strengthening San Diego's position as it looks toward the potential franchise agreement renewal decision in the coming years.
Comparing San Diego's Agreement with Other Communities
San Diego's franchise agreement with SDG&E is notable compared to other utility agreements across the country in several ways:
Term Length and Structure
San Diego's current 10+10 year agreement structure (with a mid-term review option) represents a newer approach compared to older agreements that often spanned 20-50 years with few exit options. The city's previous agreement with SDG&E had lasted 50 years (1970-2021), which was unusually long compared to more modern arrangements.
Financial Considerations
When bidding for the 2021 franchise agreement, SDG&E paid $80 million ($70 million for electric and $10 million for gas) to secure the franchise rights. This upfront payment, along with the ongoing 3% franchise fee on gross receipts, represents a significant financial arrangement that helps fund the city's general fund and environmental initiatives.
Climate and Energy Goals Integration
The Energy Cooperation Agreement that accompanies San Diego's franchise agreement reflects a growing trend where cities leverage these contracts to advance clean energy goals. Similar to partnerships in Minneapolis, Salt Lake City, and Denver, San Diego's agreement includes specific climate action commitments, showing how these traditionally narrow agreements are evolving to address modern priorities.
Community Benefits
The Solar Equity Program represents an innovative element of San Diego's agreement, providing direct benefits to income-qualified residents. While utility partnerships to promote energy equity exist in other cities, San Diego's program stands out for its direct funding commitment ($1 million annually) from shareholder, not ratepayer, funds.
Municipal Option
San Diego maintained the possibility of municipalization (creating a city-owned utility) as leverage during negotiations and as an option if SDG&E fails to meet agreement terms. This approach parallels other cities that have used this strategy to secure more favorable terms from private utilities.
Sources
- San Diego Union-Tribune. (2025, May 15). "San Diego City Council updates part of its franchise deal with SDG&E." Retrieved from https://www.sandiegouniontribune.com
- City of San Diego. (2021). "SDG&E Electric Franchise Agreement." Retrieved from https://www.sandiego.gov/sustainability/electric-and-gas-services
- City of San Diego. (2021). "Energy Cooperation Agreement - May 25, 2021." Retrieved from https://www.sandiego.gov/sustainability/electric-and-gas-services
- San Diego Union-Tribune. (2021, April 17). "Again, SDG&E turns in only bids for San Diego electric and gas franchise agreement." Retrieved from https://www.sandiegouniontribune.com/business/story/2021-04-16/franchise-bids-unsealed
- National Renewable Energy Laboratory. (2019). "Municipal Franchise Agreements and Energy Objectives." Retrieved from https://www2.nrel.gov/solar/market-research-analysis/municipal-franchise-agreements
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