With me and we will be chairing together. On the lafco side, madam clerk, could you read the role, please . Yes, commissioner avalos . Present. Commissioner avalos present. Commissioner campos . Commissioner campos abseptember. Absent. Commissioner breed . Commissioner pimentel absent. Commissioner mar. Here. We have a quorum. Our clerk is Melissa Miller and we are broadcast by sfgovtv staff john ross and jonathan [speaker not understood]. And the Public UtilitiesCommission Clerk is donna hood. So, with that i welcome everyone to our joint meeting. This meeting is to get an update. Okay, lets do that first. Vice president caen . Here. Commissioner vietor . Here. Commissioner moran . Here. President courtney and commissioner torres are excused from todays meeting and we have a quorum. Very good. We have a quorum for both. So, colleagues, we welcome you to our meeting today. Really our meeting is a chance to have a long awaited joint Commission Meet tog hear about issues that are relative to both lafco and our work around cca and keeping that Program Going as well as issues within the puc of the power Enterprise Department. I know there has been a lot of discussion about where power enterprise is and is in need of some greater attention from the Public Utilities commission. And our, our goal with lafco is to make sure whatever resource he we might be able to help to understand with the power enterprise and also help with the Decision Making with the power enterprise we are available to provide that input. We will also hear a report today about the latest request for proposal that was issued earlier this month or now its was last month because its march, and then well go on to general Public Comment. Chair. I, too, greet everybody today. Its very nice that we have this meeting together. [speaker not understood] difficulty getting all the bodies in one place, so, im glad we do have a quorum and that we could move forward on it. As you know or perhaps youve heard, there are some very pressing issues facing the power enterprise. As part of our budgeting, we learned that our staff when they were going through things sorry . Can you hear me now . Now we have a complete picture of the current and projected financial demands on the agency. And the power enterprise is facing some especially significant issues that we need to address. We have found that we have some unanticipated costs ~. We have additional charges from pg e for transmission and distribution. We now have the mountain tunnel repairs, about 500 million, and we have some various regulatory problems that we will have to address. Were working very hard on developing these needs. I sit in the financial seat on the commission and ive done so now for 17 years. I want to emphasize the urgency of what the power enterprise is currently facing with regards to its Financial Health. Im glad that today we will have the opportunity to discuss these issues. So, lets move forward. Very good. Thank you, chair caen. So, madam clerk, if you can call we just did item number 3, our opening remarks. And im not sure we probably need to have Public Comment on item 3, opening remarks. Madam clerk . Mr. Chair, i need to call item number 31st. Item number 3 is opening remarks and discussion of expectations for the joint meeting. Yeah, i think we just did that. So, why dont we have well, weve called the item, weve already done it. Lets go on to Public Comment and opening remarks. ~ commissioner caen alerted us to that there are big Financial Issues at the s. F. Puc. That is precisely what makes cleanpowersf so important. When we use cleanpowersf to build renewable citywide infrastructure that will pay itself off in probably 7 to 15 years, after that it will be a massive revenue generator for the entire Energy System in the city. It will help s. F. P. U. C. In its future budget problems, not hurt them. So, we dont want to be penny wise and pound foolish and take away our ability to grow this program at a key time when it could provide the key to salvaging whats going on over at the s. F. P. U. C. , especially if the drought continues and hetch hetchy doesnt produce as much electricity, we need other electricity sources to fill in. So, i just want to put that point in there that this is the whole point of this program is to benefit the s. F. P. U. C. In its budget condition. Thank you. Are there any other members of the public who would like to comment . And seeing none, well close Public Comment. [gavel] and move on to our next item. Item number 4, power enterprise update. Okay, we have ms. Barbara harrell who will be providing the update and general manager harlan kelly as well who will probably tag team on it. So, first of all, im excited to be here and have an opportunity to give you the latest on our power enterprise and the Health Financial health of our enterprise. Over the last several months we have been working with the mayors office, weve been working with our commission, and weve been around taking to a lot of the supervisors about the challenges that we face and what the impacts would be. And, so, we met with supervisor avalos and he thought it was a great idea that we come and present here today about what our challenges are as it relates to the Financial Health of our power enterprise, and really illustrate how important it is to the city, and has been for decades. And, so, we just wanted to make sure that people are aware and informed about the power enterprise at hetch hetchy system. And, so, i would like to also, after the presentation, we can definitely talk about how it relates to cleanpowersf and have a very robust conversation about that. So, with that i would like to turn it over to barbara hale to go over the presentation. Thank you. Barbara hale, a sis tent january manager for power. Good afternoon. ~ assistant general manager as the general manager said, im going to go over the hetchy system and the benefits that have accrued to the city as a result of it. Our Customer Base and costs, challenges and consequences were currently facing, and the options we have in front of us for addressing those challenges, as well as what that means, the overall picture means for cleanpowersf as we see it. Skew me. So, clerk, im going to switch to the other microphone and the overhead. The powerpoint just disappeared. So, from these slides i should be able to go through fairly quickly. Its familiar for many of you. The hetch hetchy system, were very fortunate to have. Its a system constructed in National Park and in National Forest lands that allows us to store and convey our water for Drinking Water here in San Francisco and much of the bay area, but its also very key in providing us with the majority of the kilowatt hours we have in Greenhouse Gas regeneration. Specifically, we have 380. 5 megawatts of power up in the mountains. We augment that with our incity generation from solar, small hydro, and biogas facilities here in San Francisco, the biogas coming from the methane generated from San Franciscos wastewater system. Weve had the wonderful opportunity to have most of the system costs paid down. The kilowatt hours from the hetch hetchy system are quite cheap relative to the market today. And weve been able and willing to share those benefits with San Francisco over the many decades of its operation. And what you see before you here is a quick listing of those benefits. 677 million just in transfers between 1978 and excuse me, 1979 and 2001. And then, of course, being able to charge the general fund less than it costs us to actually generate and deliver the electricity, were saving the general fund 50 million a year on their electric bills relative to what pg e would charge them were we not in existence. And then many other benefits from incity solar, energy efficiency, street lights, just the work force, and operations of the hetchy power enterprise, really bringing lots of benefits to San Francisco. Ms. Hale, could you say it says here the first bullet after the hetch hetchy system also provides 100 clean power to Nongeneral Fund customers at pg e rates or less. Could you give an example . Yes, for example, the San Francisco airport, the ferry building, these are facilities that we serve. They are not on the general fund side of the citys budget ledger. They are our customers. So, tenants within city facilities like the ferry building, the airport. Very good, thank you. Youre welcome. And, of course, some of the largest consumers on the Nongeneral Fund side are puc utility, water and wastewater services. And, so, what were showing with this slide is just an outline on the left of the revenue sources. And on the right the costs. So, this shows you in order to get those benefits, you know, we incur certain costs and we charge for them and receive a revenue stream as a result of that. So, this is fiscal 201314, the year were in right now, where you can see that our operating and Capital Needs total 149 million. You can see that most of the revenue comes from those customers that you just asked me to highlight, commissioner avalos, our retail enterprise customers. You can see also that we are, in order to balance, we are dipping into our reserves and thats this light blue bar here. You can see were reaching into our bank account in order to meet our operating and Capital Needs. And the bank account is the fund balance, is that what youre referring to . This 43. 2 million, the reserve is the balance . Thats the thats what remains in the bank account, yes, the balance. So, breaking down where the money comes from, where the revenue comes from, you can see on this slide our current Customer Base. You can see on the left the megawatt hours that are generated by our system. And on the right, the dollars, what those megawatt hours are converted into. And i think its important to note here that 41 of our Customer Base creates 69 of our revenues. And you can see also that those customers are paying around 14 cents a kilowatt hour for on average for that power. Our general fund customers use just a little less than that in terms of the megawatt hours, but they provide substantially less in term of revenue to fund our operations. And then when we have when we have power in excess of our customer needs, we have the opportunity to sell that power on the wholesale market. Were also obligated under the raker act that allowed us to build the system on public lands to provide power to modesto and turlock irrigation district. Thats what you see in that red bar. So, were obligated to provide that power to them to the extent we have it available, up to their municipal and agricultural pumping demands. And we must under the raker act sell it to them at our cost. So, were not allowed to make money off of them because they had superior water rights on the tuolumne when we built the system. Does that fluctuate year to year what we provide to modesto and turlock . Yes, it is based purely on regeneration. But once we meet our own needs, if we have generation in excess of that, we are required to call them up every day and say, do you want power . And if they say yes, we give it to them we sell it to them if its available up to their municipal and agricultural pumping loads. And we have more beyond that, we can sell it in the open market for whatever the price is that day. So, has that changed, what we see year to year, is it dramatic or is it pretty relatively flat . Its very water dependent. It depends on the water system. It depends on whats going on with maintenance of the system. And then could you give examples of who some of the main wholesale customers are . So, over the years weve sold to various raker act eligible wholesale customers. Raker act eligible means there are other Public Utilities. So, for example, most recently we sold to the California Department of water, the folks who pumped water through the aqueduct system here in california. So, were selling to the state of california. Theyre nonprofit, theyre eligible. Weve sold also to other publicly owned utilities, but really cbwr has been a pretty steady counterparter of ours in recent years. For example, palo alto, alameda, the Northern California power authority, these are eligible entities that we can do business with. Thank you. And, so, just to drive home the idea here behind our Customer Base and where we receive our the lions share of our funding, this slide shows on the left that same set of retail general fund customers. But instead of showing it in the megawatt hour or revenue picture, this is showing it based on the rates that theyre charged. So, you can see that the general fund is charged 4. 75 cents a kilowatt hour right now typically, there are some that are charged less, but generally speaking its 4. 75 cents a kilowatt hour. You can see our Enterprise Department customers are charged on average around 14 cents. Then you see the black line on the bottom, shows the transmission and distribution costs that were charged by pg e that we pay today at 1. 8 cents a kilowatt hour. Thats one of the cost element that builds our cost profile. When you add all of our cost profile elements up, its around an average cost of about 10 cents. So, you can see that top black line shows that when were selling to a retail Enterprise Department customer, we have some contribution above our costs. On this slide its estimated at about 4 cents a kilowatt hour. When were selling to a general Fund Department customer, were selling well below our cost. We are expecting that transmission and distribution cost element to increase. We have been forecasting increases in our Budget Planning for a number of years now because we are seeing the end of our longterm agreement we had with pg e for distribution and transmission services. That agreement is referred to as the Interconnection Agreement or commonly its referred to the ia from 1978, expires in july of 2015. With that expiration, we expect to see our transmission and distribution rate rise to the red line, the red dash line you see here at about 3. 4 cents a kilowatt hour. We are in ongoing conversations, ongoing litigation, regulatory proceedings that influence what that number ultimately will be, but that is the number thats currently in effect. So, if we were to roll off of our Interconnection Agreement today, we would jump from a 1. 8 cent a kilowatt hour transmission distribution cost to a 3. 4. Im highlighting this because its one of the costs that, although we were anticipating a change, its coming in higher than we had anticipated. And, so, thats one of the factors thats a challenge as we look forward on our Financial Plan. You said that this rate, 3. 4, that will be in july 2015 is in effect . Does that mean there are plans in place thats what it would fall back to regardless of negotiation if negotiations arent settled . No, what i am referring to is the transmission rates that are charged on pg es system are set by the California Independent system operator and ferc. Those rates are known today and its a postage stamp rate that anyone would pay. So, we know that. We are exempt from paying those rates right now because we have this special agreement with pg e. But we know when that agreement rolls off, we could be subject to that same rate that everybody else is being charged. So, thats actually effective today. With respect to the distribution component hang on just a second. Im sorry. We wouldnt expect it to be higher because we wouldnt pay a rate higher than the independent operator says we should. Right, [speaker not understood], right now were estimating that to be component of it to be in this add up that gets to 3. 4 could it be less . Could we expect we would be able to negotiate something that is, you know, comparable to what weve already been paying so we wouldnt go up to 3. 4 . So, were not, were not giving up on that effort. [multiple voices] there is a rate setting process that would that indicates what the rate is thats paid by most people. Weve had a special arrangement historically. Yes, we would like to try to continue to have a special arrangement and were working with pg e to try to get there. Its the subject of negotiation. And a are there regulatory factors that would influence our hand . ~ to be stronger . So, can i jump in . So, one of the things that were trying to identify, one of the challenges, and some of the challenges are time sensitive and this is one because we know in 2015 it expire. So, were meeting with our commissioner, with the mayors office, with the City Attorney. We have a working task force to really dive in to see how we can minimize this impact. So, weve been actively pursuing this and its like all hands on deck. So, this is only one element, but we have looking at each one of those com poets, we have a team of folks trying to address it. ~ components thank you. And, so, thats with respect to the transmission component. The distribution component similarly, its in a contract now. You asked, commissioner, whether it was in effect. Pg e has gone to their regulator on distribution rates, the federal Energy Regulatory commission, and asked for a