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Utility Undergrounding Process

Who Starts the Utility Undergrounding Process?

One or more property owners can initiate the investigation of an underground utility project.  The proponents act as the neighborhood liaison between their neighbors and the undergrounding process.  The proponents informally survey the property owners in the area to determine if there is sufficient support for undergrounding.  The City will facilitate this process by providing preliminary GIS information and in the creation of a preliminary boundary map for the project based on the proponents’ survey.

Defining the Project Area

The boundary map defines which properties are specially benefited from having the utility poles removed and wires placed underground.  Once the boundary is defined, the City will verify the proposed boundary with the utility companies, including Southern California Edison or San Diego Gas & Electric Company, Cox Communications, and Frontier Communications.

The Methods

Undergrounding projects can be initiated by following the Rule 20 guidelines adopted by Southern California Edison and San Diego Gas & Electric as required by the California Public Utilities Commission (CPUC).  The SCE and SDG&E Rule 20 has three common sections: A, B and C which are briefly described directly below.

RULE 20A:  Rule 20A projects are paid for and constructed by the utility through annually allocated credits to each City.  The annual credit allocation is relatively small, and it takes many years to accrue enough credits for a small undergrounding project.  The City selects projects with a public benefit and within the budget of the accrued annual credits.  To qualify as a Rule 20A project, the location should have a heavy concentration of overhead facilities, be heavily traveled, be an arterial or major collector road, or must be located within or pass through a civic, recreational or scenic area.

RULE 20B:  If a project location does not qualify for Rule 20A, the City or residents may propose a Rule 20B project which may be City-funded or formed as an Assessment District.  The boundaries of Rule 20B projects must be agreed to by the applicant and the utility company.  The majority of the undergrounding costs are paid for by the City or the residents who receive a benefit from the project.  The utility company is responsible for contributing the cost of building a new equivalent overhead system.  The Assessment District formation process is discussed in more detail below.  

RULE 20C (PRIVATE PROJECT):  A privately financed undergrounding project is handled exclusively by property owners and the utility companies.  This approach can save financing and administration costs associated with an assessment district.

The City generally does not participate in this type of project since it is funded and managed by one or more residents.  However, the project design must be submitted to the Community Development Department for Design Review.  The underground construction requires a Public Works permit, and the conversion of individual meters to underground service requires electrical permits from the City’s Building Division.

The utility companies are paid directly by property owners to prepare plans for the conversion of the overhead facilities to underground facilities.  Property owners then arrange to receive bids from contractors on these plans.  Engineering, construction and incidental fees must be paid directly by one or more property owners.  This method of undergrounding allows for any number of parcels to be included; however, all affected properties are required to participate at some level.

Property owners are also responsible to pay for the cost of connecting to the underground system from the street to the house.  A licensed electrical contractor can do this work. Alternatively, property owners may choose to contract with the engineering contractor doing the work in the street.  This aspect of the private project requires that every affected property owner agree to at least pay for their on-site underground service connection, or to allow others to do the private connection work.

Assessment District

To initiate the undergrounding of utilities through the Rule 20B assessment district process, the following minimum requirements must be satisfied:

  • At least five parcels must be included.
  • 600 linear feet of overhead wire or one block, whichever is less, must be placed underground.
  • The owners of at least 60% of the properties within the proposed boundary and subject to the assessment of the proposed improvements must sign a written petition indicating support for the project.  Additionally, the property owners must own lands constituting more than 50% of the area of all assessable lands within the proposed assessment district.
  • Property owners who sign the petition must deposit an initial fee of $500 to cover a portion of the assessment engineering and utility design costs; the deposit will be credited to the assessment if the district is ultimately formed.

The City will assist in the formation of an assessment district by providing project management, administrative and financial coordination, and if necessary, advancing funds for a portion of the initial assessment engineering and utility design cost.  If sufficient interest exists to proceed with a district based on petition response, then the City will coordinate the design, financing and construction of the project.  The primary benefit of this method is that the improvements can be financed over time.  The main drawback is that the process can take up to six years to complete.

If property owners are interested in proceeding with the formation of an assessment district, then the following, more detailed, information regarding procedures is provided.

Forming an Assessment District

PROJECT PLANNING:  The first step in forming an assessment district is to determine which poles and wires the neighborhood is interested in placing underground.  Typically, a property owner, acting as the neighborhood liaison, will seek the assistance of other neighbors to canvas the area to gauge neighborhood interest and to identify potential boundaries for the project.  An alternative would be to arrange a neighborhood meeting to present the project and receive input from meeting attendees.  City staff can be available to attend community meetings to describe the assessment district process in greater detail.  Holding such meetings is also a good way to enlist the assistance of members of the neighborhood.

BOUNDARY CONFIRMATION AND PETITIONING:  The preliminary boundary of the assessment district is defined by the interest level of the petitioners.  Ultimately, the boundary of the district will need to be coordinated and modified with the requirements of the utility companies and the desires of the petitioners in mind.  City staff will meet with the utility companies to coordinate the boundary with the utilities and the petitioners.

Formal petitioning begins after the boundary is confirmed.  Staff will provide the official petition for circulation by the property owners.  Every property owner within the district boundary should be given the opportunity to sign the petition.  In addition to signing the petition, each property owner who signs will be required to deposit a non-refundable initial fee of $500 that will cover a portion of assessment engineering and utility design costs.  The City will act as the collection agent after signatures from at least 60% of the property owners have been submitted.  Upon final approval of the assessment district, the fees collected will be credited against the assessments of those who paid the initial fee.  If the assessment district fails due to a majority protest through the balloting process, then the fees will not be returned to the property owners.

ENGINEERING AND DESIGN:  After the City Council has confirmed that a sufficient number of signatures have been filed and deposits have been received, City staff will recommend that the City Council support the engineering and design phase of the proposed district.  Staff will recommend that a fund be established for assessment engineering, utility design, legal fees, bid document preparation, and financial services to support this phase of the project.

After the City Council approves the request for funding, City staff will forward the boundary map to the utility companies, so design of the underground systems can begin.  Southern California Edison or San Diego Gas & Electric, depending on which utility provides service to your neighborhood, will prepare the initial design of the underground system.  Those plans are then forwarded to Frontier Communications and Cox Communications for their respective designs.  This phase of the process can take two years or more to complete depending on the size of the project and the existing workload of the utility companies.

The development and design of the utility plans can be expensive, and the petitioners’ deposits cover only a small portion of the full design costs.  The City Council can elect to front the funding of the design costs and these public funds are at risk if the project is not successful in its formation, and ultimately, its construction.

The locations for riser poles and proposed transformers, where applicable, may have impacts to properties located outside of the district.  The affected neighbors will be noticed and shall have the opportunity to provide input.  Easements for above-ground transformers and/or trenching may also be required.  The locations of potential easements shall be identified during the design phase of the project to allow for communication and coordination with the affected property owners.

The final step in the design process is for the project to be submitted to the Design Review Board for review and approval of above ground transformers, retaining walls, new riser poles and guy wires, and possibly other structures.  This process allows all property owners to understand and have input on the impacts of the project before the balloting process.

During the design phase of the project, the City will solicit proposals and hire an assessment engineer to prepare the Engineer's Report.  This comprises another significant cost to the project. The assessment engineer is responsible for developing the methodology and a detailed breakdown of all costs associated with the formation of the undergrounding district.  The report lists the estimated amounts proposed to be assessed to individual property owners.  After the utility designs are complete, the City will open the project to competitive bidders for construction.  These costs will be incorporated into the Final Engineer’s Report.  The report will list the actual costs and individual assessments that will be used for the formal balloting.  Petitioners will have the opportunity to review the methodology and the proposed assessment amounts and provide their input prior to the ballot process.

CITY COUNCIL ACTION:  State law (Proposition 218) requires that the City Council conduct a public hearing and balloting process for determining assessment district approval.  The purpose of the hearing is to review the project and to provide property owners an opportunity to show support for, or to protest against, the formation of the district.

All property owners who are subject to proposed assessments are mailed a Notice of Public Hearing with an assessment ballot as required by Proposition 218.  The mailed ballots allow all affected property owners to express their support for or opposition to the proposed assessment.  If a majority of the assessment ballots cast are in favor of the project, as weighted by each assessment amount, the City Council must proceed with formation of the assessment district.  If a majority of the ballots cast are in opposition to the project, then the district must be abandoned. 

Project Costs and Construction

SPECIAL BENEFITS:  Individual assessments may vary substantially depending on the special benefit received from utility undergrounding.  The benefits for each assessment district can be unique, but some of the common special benefits are:

  • Neighborhood Aesthetic:  Enhanced aesthetics for the assessment district which include the removal of physical and visual impediments such as overhead lines and power poles.  The removals of such obstructions may also enhance the views enjoyed by the affected parcels.
  • Safety:  The threat to structures by downed overhead utility lines and poles caused by earthquakes, high winds, and interactions with vehicles and trees are reduced by undergrounding the utilities.  Also, emergency vehicles can respond to emergencies in a timely manner without potential delays caused by downed lines and poles in the public right-of-way.
  • Reliability:  The underground facilities reduce the frequency of service interruptions due to acts of nature, traffic collisions with power poles, and interactions with trees as compared to overhead facilities.
  • Other benefits as deemed appropriate by the assessment engineer.

GENERAL BENEFITS:  In many cases, parcels outside of the district would also receive safety and reliability benefits resulting from the undergrounding of the utilities.  The costs for the general benefit are not included in the individual assessments and must be paid by other means.

ASSESSMENTS:  Assessments for a single-family dwelling in 2018 may range from $6,000 to $100,000 The wide range of cost is attributed to the variation of the special benefits listed above and construction variations such as steeply inclined roads and limited public right-of-way for staging and traffic control.  The average assessment for projects constructed between 2015 and 2018 is $48,000.

PRIVATE PROPERTY WORK:  Property owners must retain a contractor to connect their home to the underground system.  There is a wide range for the conversion costs depending on the length of trenching required and construction obstacles such retaining walls and hardscape.  The cost of this conversion work generally ranges from $5,000 to $15,000 and is not included in the assessment.

CASH PAY-OFF PERIOD:  All costs relating to the district formation and underground system construction are typically financed by the sale of municipal bonds that are paid off over a 15 or 20-year period through assessments included with property tax bills.  After the City Council has taken action to officially form the district, property owners will have an opportunity to pay off their assessment before it is placed on the property tax bill.  The “Cash Collection” period is typically 30 days from the date of the Public Hearing.  Paying the assessment during the cash collection period allows one to receive a discount of approximately 8% to 10% of the assessment amount, by avoiding costs associated with the issuance of bonds, bond interest over the period of the bonds, and bond administration costs.

BOND SALES AND EASEMENT ACQUISITION:  Assessment districts are financed through the sale of municipal bonds.  The sale of bonds can occur within two months after approval of the district.  However, the sale of bonds will normally be delayed until all necessary easements have been acquired.  If easements through private properties or private streets are needed, the easements must be obtained prior to the bond issuance.

CONSTRUCTION PROCESS:  The time frame for a typical utility undergrounding project, from initial planning to the end of construction, is four to six years.  This range considers the size of the project and construction complexities.  After the City Council has approved the project at the public hearing, awarded a construction contract, obtained all easements necessary to construct the facilities, and the bonds issued, then construction to convert the overhead facilities to underground facilities can begin.  After the underground work has been completed, including private service undergrounding work by property owners (which are not included in individual assessments), the utilities will then install wires, transformers, cabinets and connect homes to the new underground facilities.  After all this work has taken place and all homes are connected to the new underground systems, the poles and overhead wires can be removed.

DISTRICT CLOSEOUT:  If there are any surplus funds after all work to remove the overhead utilities has been completed, then those funds will be refunded in cash to property owners who paid off their assessment during the cash collection period, or will be credited against future assessment obligations, thereby reducing the term of the improvement bonds.


UTILITY COMPANY CONTACTS:
Southern California Edison 
14155 Bake Parkway
 Irvine, CA 92718 
(949) 458-4436 

San Diego Gas & Electric 
662 Camino de los Mares 
San Clemente, CA 92672 
(949) 369-4721