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How to Stop SDGE Rate Hikes in San Diego? Establish Non-Profit Power and Build Local Solar.

San Diego Gas & Electric (SDGE) is a private monopoly electric and gas utility regulated by the California Public Utilities Commission (Commission).

The City of San Diego has no direct control over SDGE’s operations or the rates it charges customers. The Commission regulates SDGE’s operations and rates.¹ Based on the authorities defined in the City’s charter, San Diego has the right to provide utility service itself, which it does for water and wastewater through its Public Utilities Department, or to contract for these utility services with a third-party provider through franchise agreements. SDGE is the City’s “franchisee” providing electric and gas service to residents.

The only leverage San Diego has over SDGE is: 1) the terms and conditions in the franchise agreements, or 2) to show SDGE the door, as authorized in the City’s charter, and convert the private monopoly franchise into a public enterprise. A non-profit power agency would own and operate the electric grid in the City. Major benefits of non-profit power include local accountability, lower rates, and keeping energy dollars local.

How could a San Diego non-profit power agency reduce rates in the face of mandates to convert the energy supply into 100% clean energy? Simply by building solar and battery storage (SPS) capacity on the lower-voltage distribution system within the city itself – as a fundamental mission of the public utility – to reduce high and rising SDGE transmission costs that are currently spread across all SDGE customer bills.

California Non-Profit Power 101: It’s Everywhere and Has Momentum

There are many public electric utilities in California. These include Los Angeles Department of Water and Power (LADWP), Sacramento Municipal Utility District (SMUD), Imperial Irrigation District, City of Anaheim, City of Riverside, and many others. They have all been operating for many years. Collectively, public electric utilities in California serve about 25% of the state’s electricity demand. The hallmark of public utilities has been lower rates than private monopoly utilities and higher levels of reliability.

Non-profit power is gaining momentum in California. For the first time in decades, the prospects for a new public utility in the state is strong. The South San Joaquin Irrigation District (SSJID), located in the Central Valley with 40,000 customers, is making the move to non-profit power. SSJID passed a major hurdle in its fight to break away from Pacific Gas & Electric (PG&E) in March 2022 when the California Supreme Court denied PG&E’s efforts to thwart SSJID. SSJID is now in the process of determining the value of the poles and wires it must purchase from PG&E to provide electric service to its customers. San Francisco is also renewing its fight to provide electric service to its residents as a public electric utility.

The Transmission Charge: A Strong Cost Incentive for Public Utilities to Double-Down on Local Solar

Figure 1 shows the relationship between the high voltage transmission grid and the lower-voltage distribution grid. The distinction between the transmission grid and the lower-voltage grid system matters. SDGE customers pay the transmission charge on all grid power consumed, whether it comes from local solar generation or remote generation.

Public utilities, on the other hand, pay the transmission charge only on power that is delivered over the transmission grid. Locally generated power is exempt from the transmission charge. This makes common sense. The local power is interconnected at the distribution grid level and stays on the distribution grid to reach the end user.

Under the current “cost allocation” system, a $0.06 per kilowatt-hour transmission charge is imposed on local rooftop solar in SDGE territory, even though rooftop solar flows only over the lower-voltage distribution system. This inequitable treatment of rooftop solar is being contested. A non-profit representing commercial rooftop solar owners, Clean Coalition, has fought against the inequity of applying the transmission charge to rooftop solar generation for years. However, the inequitable treatment of local solar interconnected to the low-voltage distribution grid continues.

SDGE transmission delivery charges of $0.06 per kilowatt-hour are highest in the state by far.² The charge has been rising at a rate of more than 10 percent per year and is projected to continue to rise rapidly as SDG&E spends heavily on transmission for renewable energy and wildfire hardening.³ For the typical residential SDGE customer, the transmission charge is now approaching the cost of the electricity being delivered.⁴

There are a handful of substations in the San Diego area where the transmission system, carrying electricity produced at distant generation sites, meets the lower-voltage distribution system for delivery to San Diego customers. This flow pattern is analogous to arteries in the human body that transition to fine networks of capillaries in the hands and feet. These “points of interconnection” between the transmission grid and lower-voltage distribution grid are shown as blue, green, purple, and red squares in Figure 2.  

However, if the City was a public electric utility, it would only pay the transmission charge on the power it purchases from afar.⁵ Power generated locally would pay no transmission charge. This is the current procedure applied to public utilities in California. They pay a transmission charge, or toll, for power delivered over the transmission grid. They pay no toll for power generated on the local distribution grid in their territories.  

Local Solar Production Cost is Less Than the Transmission Charge

The local solar production cost is less than the transmission charge. This is a potential game changer for local solar power in a non-profit power context. The average cost-of-production for new commercial rooftop solar is about $0.05 per kilowatt-hour,⁶ less that the SDG&E transmission charge of ~$0.06 per kilowatt-hour.⁷ The production costs of commercial and residential rooftop solar are projected to decline further, to $0.03 and $0.04 per kilowatt-hour respectively, by 2030.⁸ The City of San Diego has many 1,000s of megawatts of commercial and residential solar potential available to be developed.⁹

A public utility focused on rooftop and parking lot solar will produce many jobs in San Diego. Rooftop solar is local. Solar installer jobs pay well.¹ᵒ The cost of labor is a relatively small part of the cost of a solar installation. That said, rooftop solar utilizes about two times the labor per megawatt of installed capacity as remote utility-scale solar.¹¹ Commercial and industrial rooftop and parking lot solar utilize about one-and-a-half times the labor of utility-scale solar per megawatt.¹² More jobs are created with rooftop solar, and those solar jobs will be in San Diego if the City is a public utility.

Local solar power would be the low-cost power alternative if the City of San Diego had a public utility. Every new kilowatt-hour of local solar power added to the local distribution grid would back-out a kilowatt-hour of power imported over the transmission system. That power is inherently higher cost than local solar power because it comes with the high and growing transmission charge. 

Conclusion: With Non-Profit Power, Local Solar Drives Down Rates

A San Diego non-profit power agency would drive down rates by developing local solar power as the go-to, low-cost source of new, green power.   

The Protect Our Communities Foundation is a nonprofit organization prioritizing the defense of communities and nature by advancing clean energy solutions and promoting affordable electricity rates for Californians.

Board of Directors
Lori Saldaña, President
Michael Pinto, VP/Treasurer
Bill Powers, Secretary
Dianne Jacob
Denis Trafecanty