DATE: January 15, 2002
TO: Board of Supervisors
SUBJECT: Stop the City of San Diego's Electric Rate Increase

SUMMARY:
On December 11, 2001 the City of San Diego approved a renegotiated franchise agreement with San Diego Gas and Electric. The agreement included a 4.5 percent surcharge on electric bills to pay for the undergrounding of SDG&E utility wires. The surcharge will add an additional $3 to $3.50 to the monthly bill of the typical residential
ratepayer living within the City of San Diego. It will cost the County an additional $450,000 annually. There are serious concerns about the City's need to levy a surcharge on its homes, schools and businesses. The City estimates it will receive $41.8 million this year from its existing agreement with SDG&E. Of this, $10 million is slated toward undergrounding. The rest is shifted into the City's general fund. Before the City levies a tax on municipal ratepayers, the City should use revenues from its existing franchise agreement to pay for undergrounding.

Today's action expresses the Board's opposition to the 4.5 percent surcharge negotiated by the City of San Diego and San Diego Gas and Electric.

Recommendation:
SUPERVISOR DIANNE JACOB AND CHAIRMAN RON ROBERTS
1. Direct the Chief Administrative Officer to draft a letter to the California Public Utilities Commission expressing the Board's opposition to the 4.5 percent surcharge on power bills within the City of San Diego as part of the renegotiated franchise agreement with San Diego Gas and Electric.

Fiscal Impact:
These actions can be preformed within the existing budget.

Background:
On December 11, 2001 the City of San Diego approved a renegotiated franchise agreement with San Diego Gas and Electric. The agreement included a 4.5 percent surcharge on power bills to pay for the undergrounding of SDG&E utility wires. According to SDG&E the surcharge will add an additional $3 to $3.50 to bills of the typical residential ratepayer living within the City of San Diego. It will cost the County an additional $450,000 annually.

Safety officials, property owners and utility companies agree that undergrounding is worthwhile because it increases the reliability of service, improves property values, and minimizes the health and safety risks associated with electromagnetic fields. However, there are serious concerns about the City's need to levy a surcharge on its homes, schools and businesses. The City estimates that revenues from the existing franchise agreement with SDG&E will total $41.8 million this year. Of this, the city has set aside $10 million for the purpose of undergrounding. The rest is shifted into the City's general fund. The city should devote these revenues toward undergrounding instead of an additional surcharge.

There are additional reasons to oppose the surcharge. First, the City has yet to investigate alternative funding sources for undergrounding such as expected future electric rate decreases. Second, the City has yet to present a cost analysis or conduct a comprehensive review of its infrastructure needs to justify such surcharge. Third and most importantly, the City did not provide for adequate public review, hearings or discussion prior to the approval the renegotiated franchise agreement.

From fixed-income seniors to large scale businesses, the region's electric customers cannot afford to shoulder yet another electric rate increase, especially in today's volatile economic climate. Ratepayers large and small are already saddled with high electric bills because of expensive power contracts entered into by the State's power-purchasing agency, the Department of Water Resources. As San Diego ratepayers face yet another sizable increase over the next 13 months to pay for these costly contracts, businesses say they will be forced to compensate by raising prices on goods and services. The City must explore any and all options to steady the region's electric rates, not increase them.

Today's action expresses the Board's opposition to the 4.5 percent surcharge negotiated by the City of San Diego and San Diego Gas and Electric. It would lend support to our region's businesses and ratepayers who are already struggling to pay for the lifeblood commodity of electricity. We urge your support.

Respectfully submitted,

DIANNE JACOB
Supervisor, Second District

RON ROBERTS
Chairman, Fourth District