San Diego Considers Replacing SDG&E With Municipal Utility

San Diego may be on the verge of replacing its current investor-owned electric utility with a publicly operated municipal alternative, according to a new study released by a national consulting firm. The analysis concludes that establishing a city-run utility to take over service from San Diego Gas & Electric (SDG&E) is technically and financially feasible, potentially offering lower rates and greater local control over energy sourcing and infrastructure investments.

The study, conducted by Energy Strategies, a Utah-based firm specializing in energy policy and utility regulation, was commissioned by local advocacy groups pushing for public power in San Diego. It evaluated the financial, operational, and legal pathways for the city to acquire SDG&E’s infrastructure and assume responsibility for electricity generation, transmission, and distribution within municipal boundaries.

Study Finds Municipal Utility Could Reduce Rates and Increase Local Control

According to the report, a municipal utility could achieve cost savings by eliminating shareholder dividends, reducing executive compensation tied to profit margins, and accessing lower-cost financing through municipal bonds. The analysis estimates that residential customers might see electricity rates decrease by between 10% and 20% under a public power model, assuming efficient management and strategic procurement of renewable energy.

Beyond cost, the study highlights increased local autonomy as a key benefit. A city-run utility would allow San Diego to set its own energy priorities, including accelerating the transition to renewable sources, expanding rooftop solar incentives, and investing in grid resilience against wildfires and extreme heat — priorities that may conflict with the profit-driven decisions of an investor-owned utility.

Legal and Financial Pathways Examined

The report outlines two primary methods for the city to take over SDG&E’s assets: eminent domain or negotiated purchase. While eminent domain allows a government to seize private property for public use with just compensation, the study notes that such a move would likely trigger lengthy legal challenges. A negotiated acquisition, though potentially more complex in valuation, could avoid protracted litigation.

Energy Strategies determined that the city could issue revenue bonds to finance the purchase, with repayment sourced from utility revenues rather than general tax funds. The study emphasizes that under California law, cities have the authority to form municipal utilities and acquire existing infrastructure, provided they follow due process and compensate the current owner fairly.

Context: Growing Momentum for Public Power in California

The idea of replacing SDG&E with a public utility is not new in San Diego. Advocacy efforts have persisted for over a decade, driven by concerns over rate increases, wildfire liability costs passed to consumers, and the utility’s slow pace in adopting renewable energy. Similar movements have gained traction in other California cities, including Los Angeles and Sacramento, which already operate municipal utilities.

In recent years, rising electricity costs and public frustration over utility-led power shutoffs during fire season have renewed interest in public power alternatives. The study’s release comes amid ongoing scrutiny of SDG&E’s role in infrastructure-related wildfires and its requests for rate hikes to cover legal and safety expenses.

Next Steps and Challenges Ahead

While the study provides a feasibility framework, any move toward municipalization would require significant political will and voter approval. The city would need to conduct its own independent analysis, hold public hearings, and likely place the issue on a municipal ballot for voter authorization before proceeding with acquisition efforts.

SDG&E, a subsidiary of Sempra Energy, has not publicly responded to the study’s findings. The company maintains that its current structure ensures reliable service, substantial investments in grid modernization, and compliance with state clean energy mandates.

As of now, San Diego officials have not endorsed the proposal. The city’s sustainability office continues to work with SDG&E on joint initiatives related to climate goals and energy equity, but no formal steps have been taken toward pursuing public power.