CleanPowerSF Sfpuc Commission
January 20, 2022

San Francisco Public Utilities Commission
Budget Development FY 2022-23 and FY 2023-24 Operating & Capital Budget Requests Summary of Questions from Commission Meeting: January 14, 2022 Enterprise Ref Commissioner
Question Lead
Responder Response
Overview - Budget Development
OVR1 Please provide details on the unfunded portion of the ten-year Capital Plan ALL This has been provided separately to Commissioners and finance will go over the details as part of the meeting Wastewater
WWE1 Ajami How much does Wastewater spend or what resources are used to treat a gallon of wastewaster? What do you see is the volume of service demand and cost?
Norby For the period FY17-FY21 the cost to treat a gallon of wastewater (based on operation and mainenance expenses divided by the number of gallons treated) has been $0.004 in FY17, $0.006 in FY18, $0.005 in FY19, $0.007 in FY20, and $0.007 in FY21. Factoring in the expenses of debt service and revenue-funded capital those costs rise to $0.007 in FY17, $0.009 in FY18, $0.010 in FY19, $0.014 in FY20 and $0.016 in FY21.

Increased volume has, generally, meant reduced cost on a per gallon basis over the past five years.

1 San Francisco Public Utilities CommissionResponse to Commissioner Questions from January 14, 2022January 20, 2022 Jan. 14, 2022 Public Hearing Topics • FY23 Water/Wastewater 0% Rate Change• Capital Plan Development Approach • What is driving the “unfunded” portion of the plan?• What are we going to do about it?• Financial Plan Details2 FY23 0% Water/Wastewater Rate Change• Decision made last summer to pause retail water/wastewater rate change for FY23 as the agency works on 2023 Cost of Service Study• CFO Sandler presented this to Commission at 9/28 Budget Kickoff• Decision wasn’t made lightly; balanced issues of agency resource needs, public trust and ratepayer affordability• Expect FY24 rate increase to “catch up” with roughly double inflationary increase at 5%-6% for each enterprise• Allows GM Herrera to provide direction and guidance for PUC rate development, policy and strategy3 Capital Planning GoalsMeet investment needsPlan for investments needed to maintain our system and become a utility of the futureEfficient use of fundsBudget funds in the period they will be spentCustomer affordabilityConstrain long-term rate increases to keep cost of essential utilities affordable4 Capital Planning ChallengesAccumulated unspent fundsUncertainty on deliverabilitySignificant growth in capital plan costsPrioritize projects within constraints5 Capital Planning Competing Priorities
6 - Deliverability review- Rate affordability- Efficient budgeting- Growing needs- Inflation- Difficulty in prioritizing “Unfunded” Portion of Capital Plan10-Year Capital PlanFYE 2023-2032 UsesFYE 2023-2032 SourcesUnfunded amountUnfunded %Wastewater6,127,170,930 5,152,295,552 (974,875,378) 15.10%Water2,118,034,993 1,907,753,549 (210,281,444) 10.00%Hetch Hetchy Water974,442,212 974,442,212 - -Hetch Hetchy power611,055,026 506,567,646 (104,487,380) 17.10%CleanpowerSF62,388,446 62,388,446 - -Total9,893,091,607 8,603,447,405 1,289,644,202 13.00%7 Implication of “Unfunded” Portion of Capital Plan
8 • All capital plans are a snapshot in time; they change and evolve as needs change and cost estimates are refined• Reflects imbalance between available sources and spending; FY23 is balanced• Allows agency to describe important infrastructure needs on the planning horizon• Highlights project deliverability and affordability considerations as constraints to project planning• Capital Costs as the largest component of spending and growing, critical we flag areas that need attention Implication of “Unfunded” Portion of Capital Plan (Cont.) 9 • Project areas that may be scaled back or deferred as a result could be:• Wastewater:•Reduce biosolids scope or find efficiencies•Defer the start of new projects•Slow pace of R&R work• Water:•Reduction of main replacement in outer years of plan•Deferral of meter replacements• Power:•Reduction in retail distribution investments that connect new customers/expand services What will we do about Capital Plan “Unfunded” portion?During 2022, review and implement recommendations from recent consulting study on capital project planning improvements with Executive Team sponsorshipRollout agency workgroup to review and develop necessary policy and procedural changes effort Goal: refine agency capital plan and FY 2023-24 capital budget informed by:Prudent project prioritization and/or phasingProject deliverability reviewUnderstanding resources we have (or don’t have) to implement our planBringing down cost of debt (e.g. low cost loans) and pursuing alternative funding mechanisms10 Capital: Where Are We Now?• This is a snapshot of a capital planning process change that will optimize capital spending around project delivery capacity as well as ratepayer affordability• It ultimately means a more efficient use of ratepayer funds, and more affordable rates for our customers• What we are asking you to approve with this budget is an important step as we become a utility of the future through effective and efficient infrastructure planning and execution11 Water Sales VolumesHistorical and Projected
12 WaterFY23 10 YFP Draft 1.13.2022• 2.3% 10 yr average annual retail rate change 13 Wastewater Sales VolumesHistorical and Projected
14 WastewaterFY23 10YFP Draft 1.13.2022• 5.8% 10 yr average annual retail rate change 15 ($M)FYE 2023 FYE 2024 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032Beginning Fund Balance 160.3$ 124.6$ 125.9$ 115.4$ 126.8$ 131.1$ 131.2$ 118.6$ 114.4$ 114.2$ SourcesSewer Charges 368.3 428.5 467.8 513.2 549.3 585.5 617.5 654.7 687.7 730.4 Interest Income 0.8 0.6 0.6 0.6 0.6 0.9 0.9 0.8 1.1 1.1 Federal Bond Interest Subsidy 4.0 3.9 3.7 3.6 3.4 3.2 3.1 2.9 2.7 2.5 Other Miscellaneous Income10.4 10.5 10.5 10.6 10.7 10.8 10.9 10.9 11.0 11.1 Total Sources 383.5$ 443.5$ 482.7$ 527.9$ 564.0$ 600.3$ 632.3$ 669.3$ 702.5$ 745.0$ UsesOperations & Maintenance 217.0 223.6 229.3 235.8 242.5 249.3 256.4 263.7 271.2 279.0 Debt Service 113.5 119.8 135.6 149.9 184.0 215.0 250.1 268.7 287.6 311.2 Revenue-Funded Projects88.7 98.7 128.4 130.8 133.3 135.9 138.5 141.1 143.8 146.6 Total Uses 419.2$ 442.1$ 493.3$ 516.5$ 559.7$ 600.2$ 645.0$ 673.5$ 702.6$ 736.8$ Net Revenues (35.7)$ 1.4$ (10.6)$ 11.4$ 4.3$ 0.1$ (12.6)$ (4.2)$ (0.1)$ 8.2$ Ending Fund Balance 124.6$ 125.9$ 115.4$ 126.8$ 131.1$ 131.2$ 118.6$ 114.4$ 114.2$ 122.5$ Retail Rate Increase0.0% 8.0% 7.0% 7.0% 7.0% 6.0% 6.0% 6.0% 5.0% 6.0%Fund Balance as % of Op. Expenses57% 56% 50% 54% 54% 53% 46% 43% 42% 44%Debt Service Coverage (Current)1.60 2.06 2.07 2.14 1.89 1.75 1.60 1.60 1.58 1.55 Debt Service Coverage (Indenture)3.16 3.24 3.10 2.99 2.64 2.41 2.16 2.07 2.00 1.94 Revenue-Funded % of Capital20%Billed Discharge Volumes (MGD) 44.1 45.5 46.5 47.7 47.8 47.9 47.8 47.8 47.8 47.8 Projected Combined Water and Wastewater Utility Costs Within Current SFPUC Affordability Goals 16 Projected Combined Water & Wastewater Bill Growth Significant 17 Hetch Hetchy Power Sales VolumesHistorical and Projected 18 19
Hetch Hetchy Water & Power FY23 10 YFP Draft 1.13.2022

CleanPowerSF Power Sales VolumesHistorical and Projections 20 21
CleanPowerSFFY23 10 YFP Draft 1.13.2022
Discussion22