By Matthew Hirsch

A majority of the San Francisco Board of Supervisors supports renegotiating the city's 65-year-old franchise agreement with Pacific Gas and Electric Co. in order to significantly raise city revenue and eliminate a key barrier to public power, according to a recent Bay Guardian survey.

Six supervisors, including board president Aaron Peskin, told us they favor the following changes: renegotiating the agreement to add a procedure for setting up a public power system so the city can deliver retail electricity and gas, and raising the franchise fee to 5 percent of PG&E's local sales.

Sups. Tom Ammiano, Chris Daly, Sophie Maxwell, Jake McGoldrick, and Ross Mirkarimi joined Peskin in voicing support for the changes. Three other supervisors expressed interest in looking more closely at the franchise agreement, while Sup. Gerardo Sandoval and Sup. Fiona Ma declined to answer our questions.

Without committing to any changes in the PG&E contract, Sups. Michela Alioto-Pier and Bevan Dufty told us in separate e-mails they're receptive to renegotiating terms of the deal. Both also suggested they would consider buying out the PG&E system. Sup. Sean Elsbernd said he wanted to explore the agreement in more detail, but he added, "Far more information needs to be collected before I can answer affirmatively or negatively."

The board is taking a closer look at the PG&E franchise fee as part of an effort to close a $97 million budget gap. Raising the fee to 5 percent would net an estimated $38 million in additional annual revenues, which would account for more than one-third of the spending cuts the supervisors would otherwise have to make.

Renegotiating the agreement would also bring San Francisco more in line with what other cities charge electric companies for access to the public right-of-way. Right now San Francisco sets its franchise fee at 0.5 percent, which led to a $3 million payment for electricity services in 2003. That year PG&E paid $13.5 million to San Jose, and further down the coast, San Diego Gas and Electric Co. paid San Diego about $40 million. Why the discrepancy? Because the terms of their franchise agreements are more favorable than the one San Francisco signed (see "Power Politics," 12/15/04).

The supes are now awaiting an opinion from City Attorney Dennis Herrera on how to break open the franchise agreement. Ammiano requested Herrera's advice back in November, and though he hasn't yet issued a formal opinion, Herrera has a record of taking on PG&E, first during the PG&E bankruptcy and again when major service outages hit last year.

Meanwhile, PG&E has already contacted Peskin to discuss the franchise agreement. "In short ..." PG&E vice president Dan Richard wrote in a letter to Peskin, "the existing electric franchise fee percentage paid by PG&E to the City cannot be increased for a variety of independent reasons."

Go here for a copy of the 1939 franchise agreement and here for the Jan. 5, 2005, letter Richard sent to Peskin.

E-mail Matthew Hirsch