San Diego study says municipal utility feasible but finance, worker protections, and exit costs remain contentious

San Diego City Council on June 22 received a Phase 2 feasibility study that concludes a municipal electric utility (MEU) based on acquiring SDG&E delivery assets could be both technically and economically feasible over a 30‑year modeling horizon, but the report and public testimony left major questions unresolved.

NewGen Strategies partner Scott Burnham told the council the analysis shows savings in most modeled scenarios but that results hinge on two big variables: the price the city would pay for SDG&E assets and the long‑term growth rate for SDG&E retail rates. "The analysis for developing and creating a MEU from the SDG&E assets was both economically and technically feasible," Burnham said, adding the report used bookend valuation approaches (original cost less depreciation and replacement cost new less depreciation) and ran sensitivities at different rate growth assumptions.

The study presented a wide acquisition range — NewGen modeled low‑end book values and high‑end replacement values and estimated that, depending on the assumptions, cumulative savings could range from modest to substantial over 30 years. Burnham said some model runs showed a crossover to net savings after about 11–12 years under higher assumed SDG&E rate growth; the city would not likely see immediate savings if it paid high replacement valuations.

Why it matters: council members and dozens of speakers said the decision could affect union jobs, city finances and regional electricity reliability. Labor representatives and several SDG&E employees urged the council not to proceed without concrete guarantees for workers’ jobs, pensions and retiree medical benefits. "Don't gamble with good union jobs," Matthew Fish of IBEW Local 465 said during public comment. Conversely, affiliates of Public Power San Diego and rate‑payers called municipal control a path to lower bills and local accountability.

Council reaction and next steps: Council members framed the presentation as an information item and asked staff for follow‑up work. Council Member Elo Rivera, chair of the Environment Committee, said the debate exposed a near‑consensus frustration: residents are paying some of the highest electricity rates in the nation while executives collect outsized compensation. Staff and the independent budget analyst described the study as materially refined from Phase 1 but reiterated the largest uncertainty is the acquisition valuation and potential just‑compensation or "exit fee" liabilities to other cities and ratepayers. The council requested continued monitoring of the San Francisco/CPUC proceedings and additional analysis on governance structure and worker protections. The Phase 2 report does not establish any council action; it was presented as informational.

What we don’t know yet: the city has not committed to an acquisition price; a timetable for formal next steps would depend on legal, regulatory and political developments (including CPUC precedent), and several council members said they want stronger, specific proposals to protect workers before any formal campaign toward municipalization advances.

The council closed the item without a vote; staff said more work on options, implementation pathways and coordination with labor would follow in coming months.