Annual Audited Financial Statements — CleanPowerSF Sfpuc Commission, March 8, 2022 (part 2 of 2)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Net Position
June 30, 2021 and 2020
(In thousands)
CleanPowerSF CleanPowerSF Elimination*

35 See accompanying notes to financial statements.

Hetchy Hetchy 2021 Hetchy Hetchy 2020
Water Power Total Water Power Total
Operating revenues:

Charges for services $ 46,979 136,247 207,698 390,924 34,797 140,680 245,460 420,937 Rents and concessions 111 136 — 247 156 191 — 347 Total operating revenues 47,090 136,383 207,698 391,171 34,953 140,871 245,460 421,284 Operating expenses:

Personnel services 19,871 40,756 7,641 68,268 16,304 40,712 7,920 64,936 Contractual services 2,415 8,726 7,028 18,169 1,642 7,742 7,557 16,941 Transmission/distribution and other power costs — 36,711 1,012 37,723 — 41,405 220 41,625 Purchased electricity — 5,982 189,977 195,959 — 7,426 174,550 181,976 Materials and supplies 1,272 1,990 26 3,288 1,337 2,260 57 3,654 Depreciation and amortization 6,009 15,627 — 21,636 5,276 15,723 — 20,999 Services provided by other departments 2,517 6,137 3,928 12,582 1,853 6,426 2,728 11,007 General and administrative and other 18,433 29,709 3,104 51,246 18,461 26,433 2,994 47,88 8 Total operating expenses 50,517 145,638 212,716 408,871 44,873 148,127 196,026 389,026 Operating income (loss) (3,427) (9,255) (5,018) (17,700) (9,920) (7,256) 49,434 32,258 Non-operating revenues (expenses):

Federal and state grants 1,349 1,483 — 2,832 2,859 1,885 — 4,744 Interest and investment (loss) income (232) 24 51 (157) 1,932 5,746 1,771 9,449 Interest expenses — (1,970) (18) (1,988) — (2,740) (69) (2,809) Amortization of premium and discount — 219 — 219 — 228 — 228 Net gain from sale of assets — — — — 4 5 — 9
Other non-operating revenues 3 17,790 927 18,720 998 23,116 1 24,115 Other non-operating expenses (63) (902) — (965) (11) (1,060) — (1,071) Net non-operating revenues 1,057 16,644 960 18,661 5,782 27,180 1,703 34,665 Change in net position before transfers (2,370) 7,389 (4,058) 961 (4,138) 19,924 51,137 66,923 Transfers from the City and County of San Francisco 16,000 — — 16,000 14,000 — — 14,000 Transfers to the City and County of San Francisco — (532) — (532) — (32) — (32) Net transfers 16,000 (532) — 15,468 14,000 (32) — 13,968 Change in net position 13,630 6,857 (4,058) 16,429 9,862 19,892 51,137 80,891 Net position at beginning of year 211,035 465,607 91,138 767,780 201,173 445,715 40,001 686,889 Net position at end of year $ 224,665 472,464 87,080 784,209 211,035 465,607 91,138 767,780

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Revenues, Expenses, and Changes in Net Position Years ended June 30, 2021 and 2020
(In thousands)
CleanPowerSF CleanPowerSF

36 (Continued)

Hetchy Hetchy 2021 Hetchy Hetchy 2020
Water Power Total Water Power Total
Cash flows from operating activities:

Cash received from customers, including cash deposits $ 46,176 120,981 223,325 390,482 34,843 142,063 245,843 422,749 Cash received from tenants for rent 116 142 — 258 127 157 — 284 Cash paid to employees for services (19,597) (40,236) (5,344) (65,177) (15,959) (39,924) (4,401) (60,284) Cash paid to suppliers for goods and services (20,967) (81,743) (212,085) (314,795) (21,185) (77,267) (184,310) (282,762) Cash paid for judgments and claims (563) (4,361) (153) (5,077) (343) (1,572) (208) (2,123) Net cash provided by (used in) operating activities 5,165 (5,217) 5,743 5,691 (2,517) 23,457 56,924 77,864 Cash flows from non-capital and related financing activities:

Cash received from grants 3,345 2,860 — 6,205 3,195 842 — 4, 037 Cash received for license fees — 3,151 — 3,151 — 5,712 — 5,712 Cash received from miscellaneous revenues 3 13,427 927 14,357 998 16,252 1 17,251 Cash received from settlements — 797 — 797 — — — — Cash paid for rebates, program incentives, and other (63) (902) — (965) (11) (1,060) — (1,071) Cash paid for Hetchy Power loan interest — — (235) (235) — — — — Transfers from the City and County of San Francisco 16,000 — — 16,000 14,000 — — 14,000 Transfers to the City and County of San Francisco — (53 2) — (532) — (32) — (32) Net cash provided by non-capital financing activities 19,285 18,801 692 38,778 18,182 21,714 1 39,897 Cash flows from capital and related financing activities:

Acquisition and construction of capital assets (16,981) (62,461) — (79,442) (19,075) (66,390) — (85,465) Proceeds from sale of capital assets — — — — 4 5 — 9 Principal payments on long-term debt — (3,674) — (3,674) — (2,894) — (2,894) Proceeds from commercial paper borrowings — 51,136 — 51,136 — 12,811 — 12,811 Interest paid on long-term debt — (2,970) — (2,970) — (3,096) — (3,096) Interest paid on commercial paper borrowings — (132) — (132) — (805) — (805) Federal interest income subsidy — 511 — 511 — 467 — 467 Net cash used in capital and related financing activities (16,981) (17,590) — (34,571) (19,071) (59,902) — (78,973) Cash flows from investing activities:

Interest Income 739 1,986 802 3,527 1,816 5,847 1,187 8,850 Proceeds from sale of investments outside City Treasury — 3,968 — 3,968 — 5,028 — 5,028 Purchases of investments outside City Treasury — (3,968) — (3,968) — (5,028) — (5,028) Net cash provided by investing activities 739 1,986 802 3, 527 1,816 5,847 1,187 8,850 Increase (decrease) in cash and cash equivalents 8,208 (2,020) 7,237 13,425 (1,590) (8,884) 58,112 47,638 Cash and cash equivalents:

Beginning of year 88,068 202,285 83,527 373,880 89,658 211,169 25,415 326,242 End of year $ 96,276 200,265 90,764 387,305 88,068 202,285 83,527 373,880 Reconciliation of cash and cash equivalents to the statements of net position:

Cash and investments with City Treasury:

Unrestricted $ 89,373 190,719 90,838 370,930 79,172 191,687 84,192 355,051 Restricted 6,990 5,241 — 12,231 9,768 8,060 — 17,828 Less: Unrealized gain on investments (88) (149) (74) (311) (873) (1, 409) (665) (2,947) Cash and investments outside City Treasury:

Unrestricted 1 611 — 612 1 1 — 2
Restricted — 3,843 — 3,843 — 3,946 — 3,946 Cash and cash equivalents at end of year on statements of cash flows $ 96,276 200,265 90,764 387,305 88,068 202,285 83,527 373,880

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash Flows
Years ended June 30, 2021 and 2020
(In thousands)
CleanPowerSF CleanPowerSF

37 See accompanying notes to financial statements.

Hetchy Hetchy 2021 Hetchy Hetchy 2020
Water Power Total Water Power Total
Reconciliation of operating income (loss) to net cash provided by (used in) operating activities:

Operating income (loss) $ (3,427) (9,255) (5,018) (17,700) (9,920) (7,256) 49,434 32,258 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 6,009 15,627 — 21,636 5,276 15,723 — 20,999 Provision for uncollectible accounts — 667 3,675 4,342 — 572 1,225 1,797 Write-off of capital assets 51 8,333 — 8,384 1,062 11,175 — 12,237 Changes in operating assets and liabilities:

Receivables:

Charges for services (413) (16,724) 2,772 (14,365) 50 2,265 (1,148) 1,167 Prepaid charges, advances, and other 114 (12,172) 576 (11,482) (46) 1,994 (216) 1,732 Due from other City departments 104 2,437 — 2,541 (104) (1,627) — (1,731) Inventory (4) (211) — (215) 11 (192) — (181)
Accounts payable 3,304 8,724 (6,047) 5,981 358 65 5,696 6,119 Accrued payroll 154 298 91 543 243 494 41 778
Other post-employment benefits obligations (2,409) (2,945) 1,242 (4,112) (277) (337) 1,889 1,275 Pension obligations 1,972 2,411 855 5,238 45 56 1,509 1,610 Accrued vacation and sick leave 539 660 109 1,308 258 314 80 652 Accrued workers’ compensation (67) (82) — (149) (51) (61) — (112) Damage claims liability (33) (1,114) (100) (1,247) 334 169 99 602 Due to other City departments (240) (231) (1,592) (2,063) 240 250 (1,991) (1,501) Unearned revenues, refunds, and other liabilities (489) (1,640) 9,180 7,051 4 (147) 306 163 Total adjustments 8,592 4,038 10,761 23,391 7,403 30,713 7,490 45,606 Net cash provided by (used in) operating activities $ 5,165 (5,217) 5,743 5,691 (2,517) 23,457 56,924 77,864 Noncash transactions:

Accrued capital asset costs $ 9,057 15,393 — 24,450 3,279 8,459 — 11,738 Payables to Hetchy Power — — — — — — 1,800 1,800 Receivables from CleanPowerSF — — — — — 1,800 — 1,800 Receivables from Wastewater — 739 — 739 — 847 — 847 Unrealized gain on investments (88) (149) (74) (311) (873) (1,409) (665) (2,947) CleanPowerSFCleanPowerSF

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash Flows
Years ended June 30, 2021 and 2020
(In thousands)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

38 (Continued)

(1) Description of Reporting Entity

San Francisco Hetch Hetchy Water and Power (Hetch Hetchy or the Enterprise) was established as a result of the Raker Act of 1913, which granted water and power resources rights-of-way on the Tuolumne River in Yosemite National Park and Stanislaus National Forest to the City and County of San Francisco (the City). CleanPowerSF, launched in May 2016, provides green electricity from renewable sources to residential and commercial customers in San Francisco and was reported as part of Hetch Hetchy starting fiscal year 2016. He tch Hetchy is a stand-alone enterprise comprised of three funds, Hetchy Power (the Power Enterprise), CleanPowerSF and Hetchy Water, the portion of the Water Enterprise’s operations, specifically the upcountry water supply and transmission service.

Hetch Hetchy accounts for the activities of Hetch Hetchy Water and Power and is engaged in the collection and conveyance of appr oximately 85% of the regional sy stem’s water supply and in the generation and transmission of electricity from that resource, as well as the City Power services including energy efficiency and renewable.

Approximately 81% of the electricity generated by Hetchy Power is used to provide electric service to the City’s municipal customers (including the San Francisco Municipal Transportation Agency, Recreation and Parks Department, the Port of San Francisco, the San Francisco International Airport and its tenants, Zuckerberg San Francisco General Hospital and Trauma Center, streetlights, Moscone Convention Center, and the Water and Wastewater Enterprises). The majority of the remaining 19% balance of electricity is sold to CleanPowerSF and the wholesale electric market. As a result of the 1913 Raker Act, energy produced above the City’s Municipal Load is sold first to the Districts to cover their agricultural pumping and municipal load needs and any remaining energy is either sold to other m u n i c i p a l i t i e s a n d / o r g o v e r n m e n t a g e n c i e s ( n o t f o r r e s a l e ) o r s o l d i n t o t h e C A I S O . H e t c h H e t c h y operation is an integrated system of reservoirs, hydroelectric power plants, aqueducts, pipelines, and transmission lines.

Hetch Hetchy also purchases wholesale electric power from various energy providers that are used in conjunction with owned hydro resources to meet the power requirements of its customers. Operations and business decisions can be greatly influenced by market conditions, state and federal power matters before the California Public Utilities Commission (CPUC), the CAISO, and the Federal Energy Regulatory Commission (FERC). Therefore, Hetch Hetchy serves as the City’s representative at CPUC, CAISO, and FERC forums and continues to monitor regulatory proceedings.

Until August 1, 2008, the San Francisco Public Utilities Commission (SFPUC) consisted of five members, all appointed by the Mayor. Proposition E, a City and County of San Francisco Charter amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the SFPUC, changed the process for appointing new members, and set qualifications for all members. Under the amen ded Charter, the Mayor continues to nominate candidates to the SFPUC, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four-year terms for SFPUC members and requires them to meet the following qualifications:

 Seat 1 must have experience in environmental policy and an understanding of environmental justice issues.
 Seat 2 must have experience in ratepayer or consumer advocacy.  Seat 3 must have experience in project finance.
 Seat 4 must have expertise in water systems, power systems, or public utility management.  Seat 5 is an at-large member.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

39 (Continued)

The SFPUC is a department of the City, and as such, the financial operations of Hetch Hetchy, Wastewater, and the Water Enterprises are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial stat ements are intended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of Hetch Hetchy. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2021 and 2020, and the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).

(2) Significant Accounting Policies

(a) Basis of Accounting and Measurement Focus
The accounts of Hetch Hetchy are organized on the basis of proprietary fund types and are included as enterprise funds of the City. The activities of Hetch Hetchy and each fund are accounted for with a separate set of self-balancing accounts that comprise Hetch Hetchy’s and each fund’s assets, deferred outflows, liabilitie s, deferred inflows, ne t position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity ’s costs of providing services, including capital costs (such as depreciation or de bt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pr icing policies of the activity establish fees and charges designed to recover its costs, includin g capital costs (such as depreciation or debt service).

The financial activities of Hetch Hetchy are accounted for on a flow of economic resources measurement focus, using the accrual basis of a ccounting in accordance with U.S. GAAP. Under this method, all assets and liabilities associated with operations are included on the Statements of Net Position, revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operat ing revenues are defined as ch arges to customers and rental income.

Hetch Hetchy applies all applicable Govern mental Accounting Standards Board (GASB) pronouncements.

(b) Cash and Cash Equivalents
Hetch Hetchy considers its pooled deposits and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non-pooled cash and invest ments for the Enterprise. Non-pooled restricted deposits and restricted deposits and investments held outside the City Treasury with original maturities of three months or less are considered to be cash equivalents.

(c) Investments
Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based upon quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues.

(d) Inventory
Inventory consists primarily of construction materials and maintenanc e supplies and is valued at average cost. Inventory is expensed as it is consumed.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

40 (Continued)

(e) Capital Assets
Capital assets are defined as assets with an in itial individual cost of more than $5 and an estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an independent professional appraisal, or at cost, if known. All subs equent acquisitions have been recorded at cost. All donated capital assets are valued at estimated fair value at the time of donation. Depreciation and amortization are comp uted using the straight-line method over the estimated useful lives of the related assets, which range from 1 to 100 years for equipment and 1 to 200 years for buildings, structures, and improvements. No depreciation or amortization is recorded in the year of acquisition, and depreciati on or amortization is recorded in the year of disposal.

(f) Intangible Assets
Under GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, intangible assets are defined as identifiable, non-financial assets capable of being separated, sold, transferred, or licensed, and include contra ctual or legal rights. Examples of intangible assets include rights-of-way easements, land use rights, water rights, licenses, and permits. The accounting pronouncement also provides guidance on the capitalization of internally generated intangible assets, such as the development and installation of computer software by or on behalf of the reporting entity.

According to the standard, Hetch Hetchy is required to capitalize intangible assets with a useful life extending beyond one reporting period. He tch Hetchy has established a capitalization threshold of $100. GASB Statement No. 51 also requires amortization of intangible assets over the benefit period, except for certain assets having an indefinite useful life. Assets with an indefinite useful life generally provide a benefit that is not constrained by legal or contractual limitations or any other external factor and, therefore, are not amortized (see Note 4).

(g) Construction Work in Progress
The cost of acquisition and construction of major plant and equipment is recorded as construction work in progress. Costs of construction projects that are discontinued are recorded as expenses in the year in which the decision is made to discontinue such projects.

(h) Capitalization of Interest
A portion of the interest cost incurred on capital projects is capitalized on assets that require a period of time for construction or to otherw ise prepare them for their intended use. Such amounts are amortized over the useful lives of the assets (see Note 4).

(i) Bond Discount, Premium, and Issuance Costs
Bond issuance costs related to prepaid insurance costs are capitalized and amortized using the effective interest method. Other bond issuance costs are expensed when incurred. Original issue bond discount or premium are offset ag ainst the related debt and are also amortized using the effective interest method.

(j) Accrued Vacation and Sick Leave
Accrued vacation pay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non-vesting and may be accumulated up to six months per employee.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

41 (Continued)

(k) Workers’ Compensation
The Enterprise is self-insured for workers’ compensation claims and accrues the estimated cost of those claims, including the estimated cost of incurred but not reported claims (see Note 12(b)).

(l) General Liability
The Enterprise is self-insured for general li ability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover claims attributed to loss from earthquake, contaminat ion, pollution remediat ion efforts, and other specific naturally occurring contam inants such as mold. The liability represents an estimate of the cost of all outstanding claims, including adverse loss development and estimated incurred but not reported claims (see Note 12(a)).

(m) Arbitrage Rebate Payable
Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements of the Clean Renewable Energy Bonds (CREBs), the Qualified Energy Conservation Bonds (QECBs), and the New Clean Renewable Energy Bonds (NCREBs) stipulate that the first payment of excess investment earnings, if any, is required to be rebated to the federal government, no later than 60 days after the end of the fifth bond year of the agreement. Hetch Hetchy did not have any arbitrage liability as of June 30, 2021 and 2020.

(n) Income Taxes
As a department of a government agency, the Enterprise is exempt from both federal income taxes and California State franchise taxes.

(o) Revenue Recognition
Water and power revenues are based on wate r and power consumption and billing rates.

Generally, customers are billed monthly. Revenues earned but unbilled are accrued as charges for services receivables on the Statements of Net Position. The unbilled amounts for the fiscal years ending June 30, 2021 and 2020 are as follows:

(p) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses duri ng the reporting period. Actual results could differ from those estimates.

Hetchy Hetchy
Water Power CleanPowerSF Total
2021 $ — 13,823 12,600 26,423
2020 — 350 15,730 16,080

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

42 (Continued)

(q) Eliminations
Eliminations for internal activities between the Hetchy Power and CleanPowerSF are made in the Statements of Net Position. There were activities requiring eliminations during the fiscal year ended June 30, 2020. There were no activities requiring eliminations for fiscal year ended June 30, 2021.

(r) Accounting and Financial Reporting for Pollution Remediation Obligations According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations , a government would have to estimate its expected outlays for pollution remediation if it knows a site is pollute d and any of the following recognition triggers occur:
 Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
 A government has violated a pollution prevention-related permit or license;  A regulator has identified (or evidence indicate s it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
 A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
 A government begins or legally obligates itself to begin cleanup or post-cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the Design Phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include, but are not limited to, asbestos or lead paint removal; leaking of sewage in underground pipes or neighboring areas; chemical spills; removal and disposal of known toxic waste; harmful biological and chemical pollution of water; or contamination of surrounding soils by underground storage tanks (see Note 13(d)).

(s) Other Post-employment Benefits (OPEB)
As prescribed under GASB Statement No. 75, Accounting and Financial Reporting for Post- employment Benefits Other than Pensions , net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB expense are actuarially determined on a citywide basis.

Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Trust Fund investments measured at fair value.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

43 (Continued)

(t) New Accounting Standards Adopted in Fiscal Year 2021 1) In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. GASB Statement No. 84 establishes criteria for state and local governments to identify fiduciary activities and how those activities should be reported. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.

2) In August 2018, the GASB issued Statement No. 90, Accounting and Financial Reporting for Majority Equity Interests. GASB Statement No. 90 provides clarification when a government s h o u l d r e p o r t a m a j o r i t y e q u i t y i n t e r e s t i n a l e g a l l y s e p a r a t e o r g a n i z a t i o n a s e i t h e r a component unit or an investment. The new stan dard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.

3) In June 2020, the GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32. GASB Statement No. 97 clarifies rules related to reporting of fiduciary activities under Statements No. 14 and No. 84 and enhances the accounting and financial reporting of IRS Code section 457 plans that meet the definition of a pension plan. The new standard is effective for periods beginning after June 15, 2021.

The Enterprise adopted early the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.

4) In October 2021, the GASB issued Statement No. 98, The Annual Comprehensive Financial Report. GASB Statement No. 98 updates existing accounting standards by changing the name of the Comprehensive Annual Financial Report to the Annual Comprehensive Financial Report. The new standard is effective for periods ending after December 15, 2021. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.

(u) GASB Statements Implemented in Fiscal Year 2020
In May 2020, the GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance. The primary objective of this St atement is to provide temporary relief to governments and other stakeholders in light of the COVID-19 pandemic. That objective is accomplished by postponing the effective da tes of certain provisio ns in Statements and Implementation Guides that first became effective or are scheduled to become effective for periods beginning after June 15, 2018. The Enterp rise adopted the provisions of this Statement in fiscal year 2020.

(v) Future Implementation of New Accounting Standards
1) In June 2017, the GASB issued Statement No. 87, Leases. GASB Statement No. 87 establishes a single model for lease accounting and requires reporting of certain lease liabilities that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. The Enterprise will implement the provisions of Statement No. 87 in fiscal year 2022.

2) In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period . GASB Statement No. 89 establishes accounting

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

44 (Continued)

requirements for interest cost incurred before the end of a construction period. The new standard is effective for periods beginning after December 15, 2020. The Enterprise will implement the provisions of Statement No. 89 in fiscal year 2022.

3) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the compatibility and consistency of conduit debt obligation reporting and reporting of related transactions by State and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The Enterprise will implement the provisions of Statement No. 91 in fiscal year 2023.

4) In January 2020, the GASB issued Statement No. 92, Omnibus 2020. GASB Statement No. 92 addresses practice issues that have been identified during implementation and application of certain GASB Statements. The new standard is effective for periods beginning after June 15, 2021. The Enterprise will implement the provisions of Statement No. 92 in fiscal year 2022.

5) In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The new standard is effective for periods beginning after June 15, 2021. The Enterprise will implement the provisions of Statement No. 93 in fiscal year 2022.

6) In March 2020, the GASB Issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements . The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 94 in fiscal year 2023.

7) In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements . This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) by a government. The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 96 in fiscal year 2023.

(3) Cash, Cash Equivalents, and Investments

Hetch Hetchy’s cash, cash equivalents, and investme nts with the City Treasury are invested in an unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of priority, preservation of capital, liquidity, and yield.

The policy addresses soundness of financial institutio ns in which the City will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio, which may be invested in certain instruments with longer terms to maturity. The City Treasurer allocates income from the investment of pooled cash at month-end in proportion to Hetch Hetchy’s average daily cash balances. The primary objectives of Hetch Hetchy’s investment policy are consistent with the City’s policy.

Restricted assets are held by an independent trustee outside the City’s investment pool. The assets are held for the purpose of paying future interest and principal on the bonds and for eligible capital project expenditures. The balances as of June 30, 2021 and 2020 were $3,843 and $3,946, respectively. The Enterprise held all investments in guaranteed investment contracts, treasury and

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

45 (Continued)

government obligations, commercial paper, corpor ate bonds, and notes, as well as money market mutual funds consisting of treasury and government obligations. The balance as of June 30, 2021 included 2015 Series A bonds proceeds of $2,193, certificates of participation proceeds of $1,115, $612 held at a commercial bank in a non-interest-bearing checking account that is covered by depository insurance, 2015 Series B bonds proceeds of $516, and commercial paper of $19. The balance as of June 30, 2020 included 2015 Series A bonds proceeds of $2,193, certificates of participation proceeds of $1,220, 2015 Series B bonds proceeds of $516, commercial paper of $17, and $2 held at a commercial bank in a non-interest-bearing checking account that is covered by depository insurance.

Hetch Hetchy did not have any unrealized gain and loss in the restricted cash and investments outside City Treasury as of June 30, 2021 and 2020.

Hetch Hetchy categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indi cation of risk associated with investing in those securities.

The following is a summary of the Hetch Hetchy restricted and unrestricted cash and investments outside City Treasury and the fair value hierarchy as of June 30, 2021 and 2020.

Credit Ratings
Investments (S&P/Moody's) Maturities Fair Value
Hetchy Water
Cash and Cash Equivalents N/A $ 1 1 — — —
Total Cash and Cash Equivalents outside City Treasury $ 1 1 — — — Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 3,824 3,824 — — — Cash and Cash Equivalents N/A 19 19 — — —
Total Restricted Cash and Investments outside City Treasury $ 3,843 3,843 — — — Cash and Cash Equivalents N/A $ 611 611 — — —
Total Cash and Cash Equivalents outside City Treasury $ 611 611 — — — Hetch Hetchy Cash and Investments outside City Treasury Fair Value Measurements Using
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)

Unobservable
Inputs
(Level 3)
June 30, 2021
Investments
exempt from
fair value

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

46 (Continued)

For fiscal years 2021 and 2020, proceeds from 2015 Series A and B bonds held as restricted cash and investments outside City Treasury in the amount of $2,709 were invested in U.S. Treasury Money Market with maturity date less than 90 days. The credit ratings of the U.S. Treasury Money Market as of June 30, 2021 and 2020 were “AAAm” by S&P and “Aaa-mf” by Moody’s.

Hetch Hetchy’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as of June 30, 2021 and 2020:

The following table shows the percentage distribution of the City’s pooled investment by maturity:

Credit Ratings
Quoted
prices in
active
markets for
identical
assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value (Level 1) (Level 2) (Level 3)

Hetchy Water
Cash and Cash Equivalents N/A $1 1 — — — Total Cash and Cash Equivalents outside City Treasury $1 1 — — —

Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 3,929 3,929 — — — Cash and Cash Equivalents N/A 17 17 — — — Total Restricted Cash and Investments outside City Treasury $ 3,946 3,946 — — — Cash and Cash Equivalents N/A $1 1 — — — Total Cash and Cash Equivalents outside City Treasury $1 1 — — —

Hetch Hetchy Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2020
Investments
exempt from
fair valueInvestments
Hetchy Hetchy
Water Power CleanPowerSF Total 2021
Current assets:

Cash and investments with C ty Treasury $ 89,373 190,719 90,838 370,930 Cash and investments outside City Treasury 1 611 — 612 Restricted cash and investments outside C ty Treasury — 153 — 153 Non-current assets:

Restricted cash and investments w th City Treasury 6,990 5,241 — 12,231 Restricted cash and investments outside C ty Treasury — 3,690 — 3,690 Total cash, cash equivalents, and investments $ 96,364 200,414 90,838 387,616 Hetchy Hetchy
Water Power CleanPowerSF Total 2020
Current assets:

Cash and investments w th City Treasury $ 79,172 191,687 84,192 355,051 Cash and investments outside C ty Treasury 1 1 — 2 Restricted cash and investments outside C ty Treasury — 151 — 151 Non-current assets:

Restricted cash and investments with City Treasury 9,768 8,060 — 17,828 Restricted cash and investments outside C ty Treasury — 3,795 — 3,795 Total cash, cash equivalents, and investments $ 88,941 203,694 84,192 376,827 Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2021 14.5% 27.6% 29.7% 28.2%
2020 30.1% 32.4% 15.6% 21.9%
Investment maturities (in months)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

47 (Continued)

(4) Capital Assets

Capital assets with a useful life of 50 years or greater include buildings and structures, reservoirs, dams, power stations, certain water mains and pipelines, transmission and distribution systems, tunnels, and bridges.

a) Hetch Hetchy capital assets as of June 30, 2021 and 2020 consist of the following:

* Decrease in construction work in progress is greater than in crease in capital asse ts being depreciated explained by $8,384 in capital project write-offs, mainly related to Bay Corridor Project, Transmission and Di stribution System Project, and Treasure Island Capital Improvement Project. Th e remaining difference of $701 was offset by direct additions to machinery and equipment.

* Decrease in construction work in progress is greater than increase in capital assets being de preciated explained by $12,237 i n capital project write-offs, mainly related to Transmission and Distribution System Imp rovement Project, Transbay Cable Project, Treasure Island Submarine Project and Alternative Transmission Project. The remaining difference of $1,019 was offset by direct additions to machinery and equipment.

2020 Increases Decreases 2021
Cap tal assets not being depreciated and amortized:

Land and rights-of-way $ 5,181 — — 5,181
Intangible assets 1,437 — — 1,437
Construction work in progress 189,077 92,645 (75,214) * 206,508 Total cap tal assets not being depreciated and amortized 195,695 92,645 (75,214) 213,126 Cap tal assets being depreciated and amortized:

Facilities and improvements 723,182 59,781 — 782,963 Intangible assets 45,715 — — 45,715
Machinery and equipment 136,573 7,750 — 144,323 Total cap tal assets being depreciated and amortized 905,470 67,531 *— 973,001 Less accumulated depreciation and amortization for:

Facilities and improvements (389,294) (16,152) — (405,446) Intangible assets (21,759) (461) — (22,220) Machinery and equipment (83,901) (5,023) — (88,924) Total accumulated depreciation and amortization (494,954) (21,636) — (516,590) Total capital assets being depreciated and amortized, net 410,516 45,895 — 456,411 Total capital assets, net $ 606,211 138,540 (75,214) 669,537 2019 Increases Decreases 2020
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 5,181 — — 5,181
Intangible assets 1,437 — — 1,437
Construction work in progress 159,610 87,794 (58,327) * 189,077 Total cap tal assets not being depreciated and amortized 166,228 87,794 (58,327) 195,695 Capital assets being depreciated and amortized:

Facilities and improvements 679,362 43,820 — 723,182 Intangible assets 45,715 — — 45,715
Machinery and equipment 133,377 3,289 (93) 136,573 Total cap tal assets being depreciated and amortized 858,454 47,109 * (93) 905,470 Less accumulated depreciation and amortization for:

Facilities and improvements (374,449) (14,848) 3 (389,294) Intangible assets (21,298) (461) — (21,759) Machinery and equipment (78,304) (5,690) 93 (83,901) Total accumulated depreciation and amortization (474,051) (20,999) 96 (494,954) Total capital assets being depreciated and amortized, net 384,403 26,110 3 410,516 Total capital assets, net $ 550,631 113,904 (58,324) 606,211

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

48 (Continued)

b) Hetchy Water capital assets as of June 30, 2021 and 2020 consist of the following:

* Decrease in construction in progress incl uded $51 in capital project write-offs, main ly related to Hetchy Water’s share of ro ad improvement projects and 2018 Moccasin Strom project. The rema ining difference of $173 was offset by direct additions to machinery and equipment.

* Decrease in construction work in progress is greater than in crease in capital asse ts being depreciated explained by $1,062 in capital project write-offs, mainly related to Hetchy Water’s share of 2018 Moccasin Storm Project and Lower Cherry Aqueduct Project. The remaining difference of $345 was offset by direct additions to machinery and equipment.

2020 Increases Decreases 2021
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 3,232 — — 3,232
Intangible assets 6 — — 6
Construction work in progress 24,328 22,586 (11,581) * 35,333 Total capital assets not being depreciated and amortized 27,566 22,586 (11,581) 38,571 Capital assets being depreciated and amortized:

Facil ties and improvements 284,480 11,488 —    295,968 Intangible assets 20,522 —    —    20,522
Machinery and equipment 27,303 215 —    27,518
Total capital assets being depreciated and amortized 332,305 11,703 *—    344,008 Less accumulated depreciation and amortization for:

Facil ties and improvements (169,874) (4,821) — (174,695) Intangible assets (9,739) (208) — (9,947) Machinery and equipment (19,476) (980) — (20,456) Total accumulated depreciation and amortization (199,089) (6,009) — (205,098) Total capital assets being depreciated and amortized, net 133,216 5,694 — 138,910 Total capital assets, net $ 160,782 28,280 (11,581) 177,481 2019 Increases Decreases 2020
Cap tal assets not being depreciated and amortized:

Land and rights-of-way $ 3,232 — — 3,232
Intangible assets 6 — — 6
Construction work in progress 37,625 17,669 (30,966) * 24,328 Total capital assets not being depreciated and amortized 40,863 17,669 (30,966) 27,566 Cap tal assets being depreciated and amortized:

Facil ties and improvements 254,630 29,850 — 284,480 Intangible assets 20,522 — — 20,522
Machinery and equipment 26,932 399 (28) 27,303 Total capital assets being depreciated and amortized 302,084 30,249 *( 2 8 ) 332,305 Less accumulated depreciation and amortization for:

Facil ties and improvements (166,017) (3,860) 3 (169,874) Intangible assets (9,532) (207) — (9,739) Machinery and equipment (18,295) (1,209) 28 (19,476) Total accumulated depreciation and amortization (193,844) (5,276) 31 (199,089) Total cap tal assets being depreciated and amortized, net 108,240 24,973 3 133,216 Total cap tal assets, net $ 149,103 42,642 (30,963) 160,782

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

49 (Continued)

c) Hetchy Power capital assets as of June 30, 2021 and 2020 consist of the following:

* Decrease in construction work in progress is greater than incr ease in capital assets being depreciated explained by $8,333 in capital project write-offs, mainly related to Bay Corridor Project, Transmission and Di stribution System Project, and Treasure Island Capital Improvement Project. Th e remaining difference of $528 was offset by direct additions to machinery and equipment.

* Decrease in construction work in progress is greater than increase in capital assets bein g depreciated explained by $11,175 in capital project write-offs, mainly related to Transmission and Distribution System Improvement Project, Transbay Cable Project, Treasure Island Submarine Project and Alternative Transmission Project. The remaining difference of $674 was offset by direct additions to machinery and equipment.

GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 Financial Accounting Standards Board (FASB) and American Institute of Certified Public Accountants (AICPA) Pronouncements , requires that interest expense incurred during construction of assets be capitalized.

2020 Increases Decreases 2021
Cap tal assets not being depreciated and amortized:

Land and rights-of-way $ 1,949 — — 1,949
Intangible assets 1,431 — — 1,431
Construction work in progress 164,749 70,059 (63,633) * 171,175 Total cap tal assets not being depreciated and amortized 168,129 70,059 (63,633) 174,555 Cap tal assets being depreciated and amortized:

Facilities and improvements 438,702 48,293 — 486,995 Intangible assets 25,193 — — 25,193
Machinery and equipment 109,270 7,535 — 116,805 Total cap tal assets being depreciated and amortized 573,165 55,828 *— 628,993 Less accumulated depreciation and amortization for:

Facilities and improvements (219,420) (11,331) — (230,751) Intangible assets (12,020) (253) — (12,273) Machinery and equipment (64,425) (4,043) — (68,468) Total accumulated depreciation and amortization (295,865) (15,627) — (311,492) Total cap tal assets being depreciated and amortized, net 277,300 40,201 — 317,501 Total cap tal assets, net $ 445,429 110,260 (63,633) 492,056 2019 Increases Decreases 2020
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 1,949 — — 1,949
Intangible assets 1,431 — — 1,431
Construction work in progress 121,985 70,125 (27,361) *1 6 4 , 7 4 9 Total cap tal assets not being depreciated and amortized 125,365 70,125 (27,361) 168,129 Capital assets being depreciated and amortized:

Facilities and improvements 424,732 13,970 — 438,702 Intangible assets 25,193 — — 25,193
Machinery and equipment 106,445 2,890 (65) 109,270 Total cap tal assets being depreciated and amortized 556,370 16,860 *( 6 5 ) 573,165 Less accumulated depreciation and amortization for:

Facilities and improvements (208,432) (10,988) — (219,420) Intangible assets (11,766) (254) — (12,020) Machinery and equipment (60,009) (4,481) 65 (64,425) Total accumulated depreciation and amortization (280,207) (15,723) 65 (295,865) Total cap tal assets being depreciated and amortized, net 276,163 1,137 — 277,300 Total capital assets, net $ 401,528 71,262 (27,361) 445,429

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

50 (Continued)

Interest included in the construction work in progress and total interest expense incurred during the years ended June 30, 2021 and 2020 are as follows:

(5) Restricted Assets

Pursuant to the Hetchy Power Trust Indenture (the “Indenture”), established in fiscal year 2015, net revenues of the Hetchy Power are pledged first to the 2015 Series AB Bonds, and have a priority lien on the pledge of net revenues to the outstanding CREBs, QECBs, and NCREBs (the “Subordinate Obligations”). The Lease/Purchase Agreements for the Subordinate Obligations pledge the net revenues of the Hetchy Power to these bonds, and such pledge is subordinate in lien to the net revenues pledge for the 2015 Series AB Bonds (the “Bonds” or “Bond”).

In the Indenture, the SFPUC covenants and agrees that it will pay into the Revenue Fund as received all Revenues of Hetchy Power
and shall be used and applied, as provided by the Indenture, solely for the purposes of operating and maintaining Hetchy Power and paying all costs, charges, and expenses in connection therewith and for the purpose of making repairs, renewals, and replacements to Hetchy Power and constructing additions, betterments, and extensions thereto.

The Indenture provides that Revenues deposited in the Revenue Fund shall be disbursed in the following order of priority:

1. The payment of operation and maintenance expenses;

2. Any priority reconstruction and replacement fund deposits;

3. Deposit in the interest account of each Bond Fund;

4. Deposit in the bond retirement account of each Bond Fund;

5. Deposit in the reserve fund;

6. (i) Payment of principal and premium, if any, and interest on any Subordinate Obligations; (ii) deposit into a reserve fund securing any Subordinate Obligations; (iii) Swap Agreement payments pursuant to Swap Agreements entered into by the SFPUC with respect to any Subordinate Obligations; and (iv) payment to any financial institution or insurance company providing any letter of credit, line of credit, or ot her credit or liquidity facility, including municipal bond insurance and guarantees, that secures th e payment of principal or interest on any Subordinate Obligations; in each case in any orde r of priority within this paragraph which may be hereafter established by the SFPUC resolution;

7. Any additional reconstruction and replacement fund deposits into the reconstruction and replacement fund;

8. Any necessary or desirable capital additions or improvements to the Hetchy Power;

9. Any payment under a Take-or-Pay Power Purchase Agreement that does not constitute an operation and maintenance expense;

10. Any payment under a Swap Agreement that does not constitute a Swap Agreement payment; and

11. Any other lawful purpose of the SFPUC.

In the Indenture, the SFPUC covenants and agrees to transfer to the Trustee for deposit in the Interest Account of each applicable Bond Fund all Refundable Credits received by the SFPUC.

Hetchy Power 2021 2020
Interest expensed $ 1,970 2,740
Interest included in construction work in progress 1,083 1,127 Total interest incurred $ 3,053 3,867

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

51 (Continued)

In accordance with the Agreements, Hetch Hetchy maintains certain restricted cash and investment balances in trust.

(a) Hetchy Water has the following restricted assets held in trust as of June 30, 2021 and 2020:

(b) Hetchy Power has the following restricted assets held in trust as of June 30, 2021 and 2020:

Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Hetch Hetchy Revenue Fund.

(6) Short-Term Debt

Effective March 2019, under Charter Sections 9. 107(6) and 9.107(8), and 2018 Proposition A, the Commission and Board of Supervisors authorized the issuance of up to $250,000 in commercial paper notes for the purpose of reconstructing, repl acing, expanding, repairing or improving power facilities of Hetchy Power. Interest rates for the commercial paper ranged from 0.1% to 0.2% and

0.2% to 4.0% in fiscal years 2021 and 2020, respectively. The Enterprise had $114,671 and $63,535 commercial paper outstanding as of June 30, 2021 and 2020, respectively. The Enterprise had $135,329 and $186,465 in unused authorization as of June 30, 2021 and 2020, respectively.

In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , Significant Events of default as specified in the Reimbursement Agreements include 1) non-payment, 2) material breach of warranty, representation, or other non- remedied breach of covenants as specified in the respective agreements and 3) bankruptcy, which may result in all outstanding obligations to be immediately due and payable (unless waived by the respective Bank, if applicable); or issuance of a No-Issuance Notice, reduction in credit to outstanding amount plus interest coverage, and/or termination of the respective agreement. As of June 30, 2021, there were no such events described herein.
2021 2020
Cash and investments with City Treasury:

Hetch Hetchy bond construction fund $ 6,990 9,768
Interest receivable:

Hetch Hetchy bond construction fund — 24
Total restricted assets $ 6,990 9,792
2021 2020
Cash and investments with City Treasury:

Hetch Hetchy bond construction fund $ 5,241 8,060
Cash and investments outside City Treasury:
2009 Series C Certificates of participation - 525 Golden Gate 223 247 2009 Series D Certificates of participation - 525 Golden Gate 892 973 2015 Series A Revenue Bonds 2,193 2,193
2015 Series B Revenue Bonds 516 516
Commercial Paper 19 17
Total restricted cash and investments outside City Treasury 3,843 3,946 Interest and other receivables:

Hetch Hetchy bond construction fund 11,800 168
Total restricted assets $ 20,884 12,174

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

52 (Continued)

(7) Changes in Long-Term Liabilities
a) Hetch Hetchy’s long-term liability activities for the years ended June 30, 2021 and 2020 are as follows:

Interest Maturity Due within
rate (Calendar Year) 2020 Additions Reductions 2021 one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 1,265 — (422) 843 422 Qualified Energy Conservation Bonds 4.74 2027 4,229 — (542) 3,687 549 New Clean Renewable Energy Bonds 2012 4.74 2020 130 — (130) — — New Clean Renewable Energy Bonds 2015 4.62 2032 3,190 — (1,411) 1,779 142 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 — — 32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 5,335 — (785) 4,550 815 Less issuance discount (34) — 14 (20) — Add issuance premiums 3,668 — (220) 3,448 — Total bonds payable 49,808 — (3,496) 46,312 1,928 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 1,214 — (384) 830 405 2009 Series C COPs issuance premiums 21 — (13) 8 — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 — — 12,593 — Other post-employment benefits obligations 38,530 5,646 (9,170) 35,006 — Net pension liability 49,531 28,918 (16,230) 62,219 — Accr
ued vacation and sick leave 4,894 2,932 (1,624) 6,202 3,041 Accrued workers’ compensation 3,387 113 (262) 3,238 575 Damage claims liability 2,886 4,843 (6,090) 1,639 633 Due to other City departments 840 — (471) 369 369 Unearned revenues, refunds, and other 9,117 28,750 (21,708) 16,159 6,191 Total $ 172,821 71,202 (59,448) 184,575 13,142
Interest Maturity Due within
rate (Calendar Year) 2019 Additions Reductions 2020 one year Bonds:

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

53 (Continued)

b) Hetchy Water’s long-term liability activities for the years ended June 30, 2021 and 2020 are as follows:

c) Hetchy Power’s long-term liability activities for the years ended June 30, 2021 and 2020 are as follows:

Due within
2020 Additions Reductions 2021 one year
Other post-employment benefits obligations $ 16,350 1,818 (3,724) 14,444 — Net pension liability 21,477 12,119 (6,951) 26,645 — Accrued vacation and sick leave 1,646 1,034 (495) 2,185 1,059 Accrued workers’ compensation 1,187 18 (85) 1,120 197 Damage claims liability 558 478 (511) 525 218 Due to other City departments 240 — (240) — — Unearned revenues, refunds, and other 627 629 (1,118) 138 22 Total $ 42,085 16,096 (13,124) 45,057 1,496
Due within
2019 Additions Reductions 2020 one year
Other post-employment benefits obligations $ 15,404 2,206 (1,260) 16,350 — Net pension liability 20,390 5,611 (4,524) 21,477 — Accrued vacation and sick leave 1,388 653 (395) 1,646 911 Accrued workers’ compensation 1,238 75 (126) 1,187 201 Damage claims liability 224 550 (216) 558 274 Due to other City departments — 240 — 240 240 Unearned revenues, refunds, and other 623 24 ( 20) 627 18 Total $ 39,267 9,359 (6,541) 42,085 1,644 Interest Maturity Due within
rate (Calendar Year) 2020 Additions Reductions 2021 one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 1,265 — (422) 843 422 Qualified Energy Conservation Bonds 4.74 2027 4,229 — (542) 3,687 549 New Clean Renewable Energy Bonds 2012 4.74 2020 130 — (130) — — New Clean Renewable Energy Bonds 2015 4.62 2032 3,190 — (1,411) 1,779 142 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 — — 32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 5,335 — (785) 4,550 815 Less issuance discount (34) — 14 (20) — Add issuance premiums 3,668 — (220) 3,448 — Total bonds payable 49,808 — (3,496) 46,312 1,928 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 1,214 — (384) 830 405 2009 Series C COPs issuance premiums 21 — (13) 8 — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 — — 12,593 — Other post-employment benefits obligations 19,983 2,223 (4,553) 17,653 — Net pension liability 26,249 14,812 (8,495) 32,566 — Accrued vacation and sick leave 2,957 1,763 (1,103) 3,617 1,777 Accrued workers’ compensation 2,200 95 (177) 2,118 378 Damage claims liability 2,222 4,212 (5,326) 1,108 409 Due to other City departments 600 — (231) 369 369 Unearned revenues, refunds, and other 7,642 8,560 (10,209) 5,993 5,141 Total $ 125,489 31,665 (33,987) 123,167 10,407

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

54 (Continued)

d) CleanPowerSF’s long-term liability activities for the years ended June 30, 2021 and 2020 are as follows:

GASB Statement No. 88 Implemented in Fiscal Year 2019

In March 2018, the GASB issued Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements . GASB Statement No. 88 establishes additional financial statement note disclosure requirements related to debt obligations of govern ments, including direct borrowings and direct placements. This Statement applies to all Hetchy Power bonds and is discussed in each bond hereafter.

Interest Maturity Due within
rate (Calendar Year) 2019 Additions Reductions 2020 one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 1,687 — (422) 1,265 422 Qualified Energy Conservation Bonds 4.74 2027 4,765 — (536) 4,229 542 New Clean Renewable Energy Bonds 2012 4.74 2020 713 — (583) 130 130 New Clean Renewable Energy Bonds 2015 4.62 2032 3,422 — (232) 3,190 236 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 — — 32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 6,090 — (755) 5,335 785 Less issuance discount (48) — 14 (34) — Add issuance premiums 3,892 — (224) 3,668 — Total bonds payable 52,546 — (2,738) 49,808 2,115 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 1,580 — (366) 1,214 384 2009 Series C COPs issuance premiums 39 — (18) 21 — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 — — 12,593 — Other post-employment benefits obligations 18,826 2,697 (1,540) 19,983 — Net pension liability 24,920 6,858 (5,529) 26,249 — Accrued vacation and sick leave 2,643 1,474 (1,160) 2,957 1,596 Accrued workers’ compensation 2,261 261 (322) 2,200 384 Damage claims liability 2,053 9,182 (9,013) 2,222 705 Due to other City departments 350 14,090 (13,840) 600 231 Unearned revenues, refunds, and other 7,789 5,815 (5,962) 7,642 4,852 Total $ 125,600 40,377 (40,488) 125,489 10,267
Due within
2020 Additions Reductions 2021 one year
Other post-employment benef ts obligations $ 2,197 1,605 (893) 2,909 — Net pension liabil ty 1,805 1,987 (784) 3,008 — Accrued vacation and sick leave 291 135 (26) 400 205 Damage claims liabil ty 106 153 (253) 6 6 Unearned revenues, refunds, and other 848 19,561 (10,381) 10,028 1,028 Total $ 5,247 23,441 (12,337) 16,351 1,239 Due within
2019 Additions Reductions 2020 one year
Other post-employment benef ts obligations $ 1,242 2,206 (1,251) 2,197 — Net pension liabil ty 1,070 2,052 (1,317) 1,805 — Accrued vacation and sick leave 211 114 (34) 291 175 Damage claims liabil ty 7 307 (208) 106 53 Unearned revenues, refunds, and other 542 13,376 (13,070) 848 848 Total $ 3,072 18,055 (15,880) 5,247 1,076

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

55 (Continued)

(a) Clean Renewable Energy Bonds
In November 2008, Hetchy Power issued $6,325 of taxable CREBs to finance the installation of solar energy equipment on City-owned facilities , including Chinatown Branch Library, Maxine Hall Medical Center, City Distribution Division Warehouse, North Point Wastewater Plant, Chinatown Public Health Center, Municipal Transportation Agency Woods, and Municipal Transportation Agency Ways and Structures. Th e CREBs were non-rated and privately-placed with Banc of America Leasing. The net effective interest rate on the CREBs, after the federal tax subsidy, is 0% through 2022. Hetchy Power began making principal payments in the amount of $422 on December 15, 2008 and will continue annual payments for 15 years until December 15, 2022. Funding for these payments will be guaranteed by net power revenues. Interest payments are not required, since the effective equivalent of interest on the bonds is paid in the form of federal tax credits in lieu of interest paid by the issuer.

Significant events of default as specified in the Equipment Lease/Purchase Agreement, include 1) payment defaults, 2) material breach of warranty, representation, or covenants of the Equipment Lease/Purchase Agreement (not cured within applicable grace periods) and 3) bankruptcy and insolvency events, which could cause acceleration of all Rental Payments.

Assets constructed by the projects funded from proceeds of this debt obligation are pledged as collateral. As of June 30, 2021, there were no such events described herein. The future annual debt service relating to the CREBs outstanding as of June 30, 2021 is as follows:

(b) Qualified Energy Conservation Bonds
In December 2011, Hetchy Power issued $8,291 of taxable QECBs. The QECBs were issued to fund certain qualified green components for the SFPUC’s 525 Golden Gate Headquarters project. The QECBs were non-rated and privately placed with Banc of America Leasing. The net effective interest rate on the QECBs, after the federal tax subsidy, is 1.2% through 2028.

Significant events of default as specified in the Equipment Lease/Purchase Agreement, include 1) payment defaults 2) material breach of warranty, representation, or covenants of the Equipment Lease/Purchase Agreement (not cured within applicable grace periods) and 3) bankruptcy and insolvency events, which could cause acceleration of all Rental Payments. Assets constructed by the projects funded from proceeds of this debt obligation are pledged as collateral. As of June 30, 2021, there were no such events described herein.

Fiscal years ending June 30: Principal
2022 $ 422
2023 421
843
Less: Current portion (422)
Less: Unamortized bond discount (20)
Long-term portion as of June 30, 2021 $ 401

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

56 (Continued)

The future annual debt service relating to the QECBs outstanding as of June 30, 2021 is as follows:

* The SFPUC received IRS notice dated June 29, 2021 that the federal interest subsidy is reduced by 5.7% or a total reductio n of $26 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same.

(c) New Clean Renewable Energy Bonds 2012
In April 2012, Hetchy Power issued $6,600 of taxable NCREBs. The NCREBs were issued to fund certain qualified facilities that provide clean, renewable energy at Davies Symphony Hall, City Hall, and University Mound Reservoir. The NCREBs were non-rated and privately placed with Banc of America Leasing. The net effective interest rate on the NCREBs, after the federal tax subsidy, is 1.5% through 2021. $288 and $2,523 of principal were prepaid in fiscal year 2017 and 2016, respectively. There was no prepayme nt thereafter. 2012 NCREBs have been fully repaid as of June 30, 2021.

Assets constructed by the projects funded from proceeds of this debt obligation are pledged as collateral. As of June 30, 2021, there were no such events described herein. (d) New Clean Renewable Energy Bonds 2015
In October 2015, Hetchy Power issued $4,100 of taxable 2015 NCREBs. The 2015 NCREBs were issued to fund certain qualified clean, renewable energy solar generation facilities at the Marina Middle School and the San Francisco Police Academy. The 2015 NCREBs were non- rated and privately placed with Ba nc of America Leasing. The net effective interest rate on the 2015 NCREBs, after the federal tax subsidy, is 1.4% through 2033. $1,272 and $0 of principal were prepaid in fiscal years 2021 and 2020, respectively.

Assets constructed by the projects funded from proceeds of this debt obligation are pledged as collateral. As of June 30, 2021, there were no such events described herein.

Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2022 $ 549 168 (119) 49
2023 555 142 (100) 42
2024 562 116 (82) 34
2025 569 89 (63) 26
2026 576 62 (44) 18
2027-2028 876 42 (28) 14
3,687 619 (436) 183
Less: Current portion (549)
Long-term portion as of June 30, 2021 $ 3,138

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

57 (Continued)

The future annual debt service relating to the 2015 NCREBs outstanding as of June 30, 2021 is as follows:

* The SFPUC received IRS notice dated June 29, 2021 that the fede ral interest subsidy is reduced by 5.7% or a total reduction of $20 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same.

(e) Power Revenue Bonds 2015 Series A (Green) and Series B In May 2015, Hetchy Power issued tax-exempt revenue bonds, 2015 Series A (Green) in the amount of $32,025 with interest rates ranging from 4.0% to 5.0% and 2015 Series B in the amount of $7,530 with interest rates ranging from 3.0% to 4.0%. Proceeds from the bonds were used to finance reconstruction or replacement of existing facilities of the SFPUC’s Hetch Hetchy project, to fund capitalized interest on the 2015 Series AB Bonds, to fund a debt service reserve account for the 2015 Series AB Bonds, and to pay costs of issuance of the 2015 Series AB bonds. The bonds were rated “A+” and “AA-” by S&P and Fitch, respectively. Final maturity for 2015 Series AB are November 1, 2045 and November 1, 2026, respectively. The true interest cost is 3.95%. As of June 30, 2021 and 2020, the outstanding principal amounts were $36,575 and $37,360, respectively.

Significant events of default as specified in th e Power Enterprise Indenture (applicable to Power Revenue Bonds) include 1) non-payment, 2) mate rial breach of warranty, representation, or indenture covenants (not cured within applic able grace periods) and 3) bankruptcy and insolvency events, which may result in the Trustee (upon written request by the majority of the owners (by aggregate amount of the bond obligations), declare the principal and the interest accrued thereon to be due and payable immediately. As of June 30, 2021, there were no such events described herein.

Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2022 $ 142 81 (53) 28
2023 146 74 (49) 25
2024 148 67 (44) 23
2025 150 60 (40) 20
2026 152 53 (35) 18
2027-2031 792 159 (105) 54
2032-2033 249 12 (8) 4
1,779 506 (334) 172
Less: Current portion (142)
Long-term portion as of June 30, 2021 $ 1,637

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

58 (Continued)

The future annual debt service relating to the 2015 Series AB Bonds outstanding as of June 30, 2021 are as follows:

(f) Certificates of Participation Issued for the 525 Golden Gate Headquarters Building In October 2009, the City issued $167,670 in certificates of participation to fund construction of the headquarters of the SFPUC at 525 Golden Gate Avenue. The 2009 Series C certificates were issued for $38,120 and 2009 Series D for $129,550 as “Build America Bonds” (BABs) on a taxable basis under the 2009 American Recovery and Reinvestment Act. The 2009 Series C certificates carry interest rates ranging from 2.0% to 5.0% and mature on November 1, 2022.

The 2009 Series D certificates carry interest rates ranging from 6.4% to 6.5% and mature on November 1, 2041. After adjusting Series D for the federal interest subsidy, the true interest cost averages 3.4% and 4.3% for Series C and Series D certificates, respectively.

Under the terms of a Memorandum of Understanding between the City and the SFPUC dated October 1, 2009, the City conveyed the real pr operty to the Trustee, the Bank of New York Mellon Trust Company, N.A., which was replaced by U.S. Bank in March 2014 under a property lease in exchange for the proceeds of the sale of the certificates. The Trustee has leased the property back to the City for the City’s use under a project lease. The City is obligated under the project lease to pay base rental payments and other payments to the Trustee each year during the 32-year term of the project lease. The Commission makes annual base rental payments to the City for the building equal to annual debt service on the certificates. It is anticipated these lease costs will be offset with reductions in costs associated with current office rental expense.

Hetchy Power’s share is reflected on the Hetchy Power fund statements. There are no events of default stated in this memorandum of understanding.

Fiscal years ending June 30: Principal Interest Total
2022 $ — 1,593 1,593
2023 — 1,593 1,593
2024 — 1,593 1,593
2025 — 1,593 1,593
2026 — 1,593 1,593
2027-2031 5,235 7,388 12,623
2032-2036 6,860 5,873 12,733
2037-2041 8,755 3,931 12,686
2042-2046 11,175 1,452 12,627
32,025 26,609 58,634
Add: Unamortized bond premium 3,272
Long-term portion as of June 30, 2021 $ 35,297
Hetchy Power - Power Revenue Bonds 2015 Series A (Green) Fiscal years ending June 30: Principal Interest Total
2022 $ 815 157 972
2023 850 124 974
2024 880 93 973
2025 910 62 972
2026 945 25 970
2027 150 3 153
4,550 464 5,014
Less: Current portion (815)
Add: Unamortized bond premium 176
Long-term portion as of June 30, 2021 $ 3,911
Hetchy Power - Power Revenue Bonds 2015 Series B

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

59 (Continued)

The Power, Water, and Wastewater Enterprises have ownership interest in the building equal to their projected usage of space as follows: Water (73%), Wastewater (15%), and Power (12%).

Similarly, each Enterprise is responsible for a portion of the annual base rental payment based on their ownership percentages less contributed equity. The percentage share of base rental payments for the Enterprises is as follows: Wa ter (71.4%), Wastewater (18.9%), and Power (9.7%). The future annual debt service relating to the certificates of participation 2009 Series C and D outstanding as of June 30, 2021 are as follow:

* The SFPUC received IRS notice dated June 29, 2021 that the federal interest subsidy is reduced by 5.7% or a total reduction of $207 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same.

(8) Revenue Pledge

Hetchy Power has pledged future power revenues to repay the 2008 CREBs, the 2011 QECBs, the 2012 NCREBs, and the 2015 NCREBs. Additionally, Hetchy Power has pledged future power revenues for 2015 Series AB power revenue bonds. Proceeds from the bonds provided financing for various capital construction and facility energy efficiency projects. The Series 2015 AB power revenue bonds are payable through fiscal year 2046 and are solely payable from net revenues of Hetchy Power on a senior lien basis to the 2008 CREBs, the 2011 QECBs, the 2012 NCREBs, and the 2015 NCREBs.

Fiscal years ending June 30: Principal Interest Total
2022 $ 405 31 436
2023 425 10 435
830 41 871
Less: Current portion (405)
Add: Unamortized bond premium 8
Long-term portion as of June 30, 2021 $ 433
Hetchy Power - Certificates of Participation 2009 Series C (Tax Exempt) Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2022 $ — 812 (268) 544
2023 — 812 (268) 544
2024 445 798 (263) 535
2025 463 769 (254) 515
2026 483 739 (244) 495
2027-2031 2,736 3,199 (1,056) 2,143
2032-2036 3,370 2,218 (732) 1,486
2037-2041 4,155 1,002 (331) 671
2042 941 32 (10) 22
10,381 (3,426) 6,955
Long-term portion as of June 30, 2021 $ 12,593
Hetchy Power - Certificates of Participation 2009 Series D (Taxable BABs)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

60 (Continued)

The original amount of bonds issued, total principal and interest remaining, principal and interest paid during fiscal years 2021 and 2020, applicable net revenues, and funds available for debt service are as follows:

* P e r I n de n t u r e , d e b t s e r v i c e f o r c o v e r a g e i s c a l c u la te d u s i n g t he amount of principal and interest paid during the year for the 2015 series AB power revenue bonds, which has a senior lien on power enterprise revenues; principal and interest paid during the year for the 2015 Series AB power revenue bonds was $2,567.

(9) Other Non-Operating Revenues – Transbay Cable Construction and Licensing Fees

In 2007, the Board of Supervisors adopted the resolution to enter into two non-exclusive licenses with the Transbay Cable LLC (the Licensee) for the Transbay Cable Project. The Licensee proposed to install, operate, and maintain approximately 53 miles of high-voltage direct current transmission cable running from the City of Pittsburg to the City. The first license is a Construction License to install a 400 MW high-voltage transmission line, with a four-year term. The Licensee has paid Hetchy Power $3,500 in Renewable Energy, Transmission and Grid Reliability. Of this amount, $1,905 of the payments were spent for study and development of two City-owned transmission projects, a Newark-San Francisco project, and a Potrero-Embarcadero project. In 2020, the Board of Supervisors adopted an ordinance to use $1,593 of the remaining funds from this license to analyze the proposed purchase of power assets from Pacific Gas & Electric Company. The entire licensing fees were fully spent as of 2020.

The second license is an operational license for operation of the transmission line with 25-year term and an option to renew for 10 years. The Licensee agrees to pay Hetchy Power in excess of $20,000 in 10 separate installments of $2,000 annually with adjustments for inflation, as the “San Francisco Electric Reliability Payment” to implement, advance, promote, or enhance policies and projects consistent with City Energy Policies. The project came on line November 29, 2010, and Hetchy Power received the first installment of $2,000. As of June 30, 2021, cumulative revenues to date of $22,708 were recorded, with final payment of $2,574 received in fiscal year 2020. Per agreement, the SFPUC shall consult with Departments of Environment and Public Health, as well as community members, including the Power Plant Task Force, in developing its proposals to the Board of Supervisors on how to spend the San Francisco Electricity Reliability Payment, and shall consider specifically renewable energy, conservation, and environmental health programs, which benefit low- income, at-risk, and environmentally disadvantaged communities. The San Francisco Electricity Reliability Payment shall also be partly used for green jobs training and placement programs, which benefit low-income, at-risk, and environmentally disadvantaged communities. As of June 30, 2021, cumulative expenses of $9,611 have been incurred, with $1,254 and $843 in fiscal years 2021 and 2020, respectively.

(10) Employee Benefits

(a) Pension Plan

Retirement Plan – Hetch Hetchy participates in a cost-sharing multiple-employer defined benefit pension Plan (SFERS Plan). The Plan is administered by the San Francisco City and County Employees’ Retirement System (SFERS). For purposes of measuring the net pension liability, deferred outflows/inflows of resources related to pensions, pension expense, information about Hetchy Power 2021 2020
Bonds issued with revenue pledge $ 64,871 64,871
Principal and interest remaining due at the end of the year 71,082 76,829 Principal and interest paid during the year* 5,368 4,743 Net revenues for the year ended June 30 10,609 34,522 Funds available for debt service 34,178 80,561

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

61 (Continued)

the fiduciary net position of the SFERS Plan, and additions to/deductions from the SFERS Plan’s fiduciary net position have been determined on the same basis as they are reported by the SFERS Plan. Contributions are recognized in the period in which they are due pursuant to legal requirements. Benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

GASB Statement No. 68 requires that the SFERS Plan reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

SFERS Plan – The City is an employer of the plan with a proportionate share of 94.39% as of June 30, 2020 (measurement date), 0.26% increased from prior year. Hetch Hetchy’s allocation percentage was determined based on its employer contributions divided by the City’s total employer contributions for fiscal years 2020 and 2019. Hetch Hetchy’s net pension liability, deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/inflows, and pension expense is based on its allocated percentage. Hetch Hetchy’s allocation of the City’s proportionate share was 1.22%, of which 0.52% for Hetchy Water, 0.64% for Hetchy Power, and 0.06% for CleanPowerSF as of June 30, 2020 (measurement date).

Hetch Hetchy’s allocation of the City’s proportionate share was 1.17%, of which 0.51% for Hetchy Water, 0.62% for Hetchy Power, and 0.04% for CleanPowerSF as of June 30, 2019 (measurement date).

Plan Description – The Plan provides basic service retirement, disability, and death benefits based on specified percentages of defined fina l average monthly salary and provides annual cost-of-living adjustments (COLA) after retirement. The Plan also provides pension continuation benefits to qualified survivors. The City Charter and the Administrative Code are the authorities which establish and amend the benefit provisions and employer obligations of the Plan. The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report may be obtained on the Retirement System’s website or by writing to the San Francisco Employees’ Retirement System, 1145 Market Street, 5
th Floor, San Francisco, CA 94103 or by calling (415) 487-7000.

Benefits – The Retirement System provides service retirement, disability and death benefits based on specified percentages of defined final average monthly salary and annual COLA after retirement. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. The Retirement System pays benefits according to the category of employment and the type of benefit coverage prov ided by the City. The four main categories of Plan members are:

a) Miscellaneous Non-Safety Members – staff, oper ational, supervisory, and all other eligible employees who are not in special membership categories. b) Sheriff’s Department and Miscellaneous Safety members – sheriffs assuming office on and after January 7, 2012, and undersheriffs, deputized personnel of the Sheriff’s department, and miscellaneous safety employees hired on and after January 7, 2012.

Fiscal Year 2021 Fiscal Year 2020
Valuation Date (VD) June 30, 2019 updated to June 30, 2020 June 30, 2018 updated to June 30, 2019 Measurement Date (MD) June 30, 2020 June 30, 2019
Measurement Period (MP) July 1, 2019 to June 30, 2020 July 1, 2018 to June 30, 2019

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

62 (Continued)

c) Firefighter Members – firefighters and other employees whose principal duties are in fire prevention and suppression work or who occupy positions designated by law as firefighter member positions.
d) Police Members – police officers and other employees whose principal duties are in active law enforcement or who occupy positions designated by law as police member positions.

The membership groups and the related service retirement benefits are included in the Notes to the Basic Financial Statements of San Francisco Employees’ Retirement System.

All members are eligible to apply for a disability retirement benefit, regardless of age, when they have 10 or more years of credited service and they sustain an injury or illness that prevents them from performing their duties. Safety members are eligible to apply for an industrial disability retirement benefit from their first day on the job if their disability is caused by an illness or injury that they receive while performing their duties.

All retired members receive a benefit adjustment each July 1, which is the Basic COLA. The majority of adjustments are determined by ch anges in Consumer Price Index with increases capped at 2%. The Plan provides for a Supplemental COLA in years when there are sufficient “excess” investment earnings in the Plan. The maximum benefit adjustment each July 1 is 3.5% including the Basic COLA. Effective July 1, 2012, voters approved changes in the criteria for payment of the Supplemental COLA benefit, so that Supplemental COLAs would only be paid when the Plan is also fully funded on a market value of assets basis. Certain provisions of this voter-approved proposition were challenged in the Courts. A decision by the California Courts modified the interpretation of the proposition. Effective July 1, 2012, members who retired before November 6, 1996 will receive a Supplemental COLA only when the Plan is also fully funded on a market value of assets basis. Ho wever, the “full funding” requirement does not apply to members who retired on or after November 6, 1996 and were hired before January 7, 2012. For all members hired before January 7, 2012, all Supplemental COLAs paid to them in retirement benefits will continue into the future even where an additional Supplemental COLA is not payable in any given year. For members hired on and after January 7, 2012, a Supplemental COLA will only be paid to retirees when the Plan is fully funded on a market value of asset basis and in addition for these members, Supplemental COLAs will not be permanent adjustments to retirement benefits. That is, in years when a Su pplemental COLA is not paid, all previously paid Supplemental COLAs will expire.

Funding and Contribution Policy

SFERS Plan – Contributions are made by both the City and the participating employees.

Employee contributions are mandatory as required by the Charter. Employee contribution rates varied from 7.5% to 13.0% as a percentage of gross covered salary in fiscal years 2021 and 2020. Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The City is required to contribute at an actuarially determined rate. Based on the July 1, 2019 actuarial report, the required employer contribution rate for fiscal year 2021 range from 22.40% to 26.90%. Based on the July 1, 2018 actuarial report, the required employer contribution rate for fiscal year 2020 range from 20.69% to 25.19%.

Employer contributions and employee contributions made by the employer to the Plan are recognized when due and the employer has made a formal commitment to provide the contributions. The City’s proportionate share of employer contributions recognized by the Retirement System in fiscal years ended June 30, 2020 and 2019 (measurement years) were

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

63 (Continued)

$701,307 and $607,408, respectively. Hetchy Water’s allocation of employer contributions were $3,574 and $3,073 or 45%, and Hetchy Power’s allocation of employer contributions were $4,369 and $3,756 or 55%, respectively, for fiscal years 2020 and 2019 (measurement periods). CleanPowerSF’s allocation of employer contributions were $300 and $161, respectively, for fiscal years 2020 and 2019 (measurement periods).

Pension Liabilities, Pension Expenses, and Deferre d Outflows and Inflows of Resources Related to Pensions

Fiscal Year 2021

As of June 30, 2021, the City reported net pension liabilities (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $5,107,270. The City’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the SFERS Plan is measured as of June 30, 2020 (measurement date), and the total pension liability for the SFERS Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. Hetch Hetchy’s allocation of the City’s proportionate share of the net pension liability for the SFERS Plan as of June 30, 2021 was $62,219, of which $26,645 for Hetchy Water, $32,566 for Hetchy Power, and $3,008 for CleanPowerSF.

For the year ended June 30, 2021, the City’s recognized pension expense was $962,576 (which includes Retirement Benefit Plan pension expense of $25,243), including amortization of deferred outflows/inflows related pension items. Hetch Hetchy’s allocation of pension expense including amortization of deferred outflows/i nflows related pension items were $14,883, of which $6,103 for Hetchy Water, $7,459 for Hetchy Power, and $1,321 for CleanPowerSF.

Pension expense increased from the prior year, largely due to the amortization of deferrals.

At June 30, 2021, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions were the following:

Hetchy Hetchy Hetchy Hetchy
Fiscal Year 2021 Water Power CleanPowerSF Total Water Power CleanPowerSF Total Pension contributions subsequent to the $ 4,130 5,048 466 9,644 — — — — measurement date
Differences between expected and actual
experience 905 1,106 102 2,113 83 102 9 194 Changes in assumptions 1,463 1,788 165 3,416 462 564 52 1,078 Net difference between projected and actual
earnings on pension plan investments 558 682 63 1,303 — — — — Change in employer's proportion 743 907 7 1,657 443 541 1,032 2,016 Total $ 7,799 9,531 803 18,133 988 1,207 1,093 3,288 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

64 (Continued)

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in pension expense as follows:

Fiscal Year 2020

As of June 30, 2020, the City reported net pens ion liabilities for its proportionate share of the pension liability of the Plan of $4,213,808. The City’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2019 (measurement date), and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2018 rolled forward to June 30, 2019 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. Hetch Hetchy’s allocation of the City’s proportionate share of the net pension liability for the Plan as of June 30, 2020 was $49,531, of which $21,477 for Hetchy Water, $26,249 for Hetchy Power, and $1,805 for CleanPowerSF.

For the year ended June 30, 2020, the City’s recognized pension expense was $883,395 including amortization of deferred outflow/inflow related pension items. Hetch Hetchy’s allocation of pension expense including amortizati on of deferred outflow/inflow related pension items were $9,852, of which $3,619 for Hetchy Water, $4,424 for Hetchy Power, and $1,809 for CleanPowerSF. Pension expense increased from the prior year, largely due to the amortization of deferrals.

At June 30, 2020, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions were the following:

Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2022 $ (115) (141) (472) (728) 2023 665 812 (195) 1,282 2024 1,160 1,418 (90) 2,488
2025 971 1,187 1 2,159 $2 , 6 8 1 3,276 (756) 5,201
Hetchy Hetchy Hetchy Hetchy
Fiscal Year 2020 Water Power CleanPowerSF Total Water Power CleanPowerSF Total Pension contribution subsequent to the $ 3,574 4,369 300 8,243 —    —    —    — measurement date
Differences between expected and actual
experience 159 194 13 366 236 289 20 545
Changes in assumptions 3,055 3,733 257 7,045 —    —    —    — Net difference between projected and actual
earnings on pension plan investments —
—    —    —    3,958 4,837 333 9,128 Change in employer's proportion 1,162 1,420 2 2,584 141 172 857 1,170 Total $ 7,950 9,716 572 18,238 4,335 5,298 1,210 10,843 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

65 (Continued)

Actuarial Assumptions

Fiscal Year 2021

A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for SFERS Plan as of June 30, 2020 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2019 actuarial valuation. Refer to the July 1, 2019 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org.

For healthy annuitants, the sex distinct 2009 CalPERS healthy annuitant mortality table, adjusted 1.014 for females and 0.909 for males. For active members, the sex distinct 2009 CalPERS employee mortality tables, adjusted 0.918 for females and 0.948 for males. Rates are projected generationally from the 2009 base year using a modified version of the MP-2015 projection scale.

The actuarial assumptions used at the June 30, 2020 measurement date was based upon the result of a demographic experience study for the period July 1, 2009 through June 30, 2014 and an economic experience study as of July 1, 2019.

Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2021 $ 1,197 1,464 (235) 2,426 2022 (1,047) (1,280) (425) (2,752) 2023 (293) (359) (181) (833) 2024 184 224 (97) 311 $4 1 49 (938) (848)
Key Actuarial Assumptions
Valuation Date June 30, 2019 updated to June 30, 2020
Measurement Date June 30, 2020
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.40% net of pension plan investment, including inflation Municipal Bond Yield 3.50% as of June 30, 2019

2.21% as of June 30, 2020
Bond Buyer 20-Bond GO Index, June 27, 2019 and June 25, 2020 Inflation 2.75%
Projected salary increases 3.50% plus merit component based employee classification and years of service Discount Rate 7.40% as of June 30, 2019

7.40% as of June 30, 2020
Administrative Expenses 0.60% of payroll as of June 30, 2019

0.60% of payroll as of June 30, 2020
Basic COLA
June 30, 2019
June 30, 2020
SFERS Plan

4.20%

2.00%

2.50%

3.10%

3.10%
Old Miscellaneous and
all New Plans
Old Police & Fire
Charters A8.559 and
A8.585
Old Police & Fire
Charters A8.595 and
A8.596
Old Police & Fire
Pre 7/1/75

4.20%

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

66 (Continued)

Fiscal Year 2020

A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability as of June 30, 2019 (measurement period) is provided below, including any assumptions that differ from those used in the July 1, 2018 actuarial valuation. Refer to the July 1, 2018 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org.

Mortality rates for active members and healthy an nuitants were based upon adjusted Employee and Healthy Annuitant CalPERS mortality tables projected generationally from the 2009 base year using a modified version of the MP-2015 projection scale.

Discount Rate

Fiscal Year 2021

SFERS Plan – The beginning and end of year measurements are based on different assumptions and contribution methods that may resu lt in different discount rates. The discount rate was 7.40% as of June 30, 2020 (measurement date) and June 30, 2019 (measurement date).

The discount rate used to measure the Total Pension Liability as of the June 30, 2020 was

7.40%. The projection of cash flows used to de termine the discount rate assumed that plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2019 actuarial valuation. That policy includes contributions equal to the employer portion of the entry age, normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

3.50% as of June 30, 2019
Bond Buyer 20-Bond GO Index, June 28, 2018 and June 27, 2019 Inflation 2.75%
Salary Increases 3.50% plus merit component based on employee classification and years of service Discount Rate 7.50% as of June 30, 2018

7.40% as of June 30, 2019
Administrative Expenses 0.60% of payroll as of June 30, 2018

0.60% of payroll as of June 30, 2019
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire,
Charters A8.595
and A8.596
Old Police & Fire,
Charters A8.559
and A8.585
June 30, 2018 2.00% 2.50% 3.10% 4.20%
June 30, 2019 2.00% 2.50% 3.10% 4.20%
Key Actuarial Assumptions

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

67 (Continued)

is amortized over a 19-year peri od commencing July 1, 2014. Experience gains and losses and assumption or method changes on or after July 1, 2014 are amortized over 20 years. The full amortization payment for the 2015 assumption chan ges is phased in over a period of 5 years.

For the July 1, 2016 valuation, the increase in th e unfunded actuarial liability attributable to the Supplemental COLAs granted on July 1, 2013 and July 1, 2014 are amortized over 17-years and 5-years respectively. All amortization schedules ar e established as a level percentage of payroll, so payments increase 3.50% each year. The unfund ed actuarial liability is based on an actuarial value of assets that smooths investment gains and losses over five years and a measurement of the actuarial liability that excludes the value of any future Supplemental COLAs.

While the contributions and measure of actuaria l liability in the funding valuation do not anticipate any future Supplemental COLAs, the projected contributions for the determination of the discount rate include the anticipated future amortization payments on future Supplemental COLAs for current members when they are expected to be granted. For members who worked after November 6, 1996 and before Proposition C passed (Post 1997 Retirees), a Supplemental COLA is granted if the actual investment earnings during the year exceed the expected investment earnings on the actuarial value of assets. For members who did not work after November 6, 1996 and before Proposition C passed, the market value of assets must also exceed the actuarial liability at the beginning of the year for a Supplemental COLA to be granted.

When a Supplemental COLA is granted, the amou nt depends on the amount of excess earnings and the basic COLA amount for each membership group. The large majority of members receive a 1.50% Supplemental COLA when granted.

Because the probability of a Supplemental COLA depends on the current funded level of the Retirement System for certain members, an assumption was developed as of June 30, 2020 for the probability and amount of Supplemental COLA for each future year. There were no excess earnings during the fiscal year ending June 30, 2020; consequently, no Supplemental COLA will be paid effective July 1, 2020. The table be low shows the net assumed Supplemental COLA for members with a 2.00% Basic COLA for sample years.

The projection of benefit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.

Based on these assumptions, the Retirement System’s fiduciary net position was projected to be available to make projected future benefit payments for current members for all future years.

Projected benefit payments are discounted at the long-term expected return on assets of 7.40% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 2.21% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2020 is 7.40%.

Assumed Supplemental COLA for Members with a 2.00% Basic COLA Fiscal years
2022 0.75 % 0.19 %
2024 0.75 0.27
2026 0.75 0.30
2028 0.75 0.33
2030 0.75 0.35
2032 0.75 0.37
2034+ 0.75 0.38
96 - Prop C
Before 11/6/96
or After Prop C

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

68 (Continued)

The long-term expected rate of return on pensio n plan investments was 7.40%. It was set by the Retirement Board after consideration of both expected future returns and historical returns experienced by the Retirement System. Expected future returns were determined by using a building-block method in which best-estimate ranges of expected future real rates of return were developed for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Target allocation and best estimates of geometric long-term expected real rates of return (net of pension plan investment expense and inflation) for each major asset class are summarized in the following table.

Fiscal Year 2020

The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of June 30, 2019 (measurement date) and 7. 50% as of June 30, 2018 (measurement date), respectively.

The discount rate used to measure the Total Pension Liability as of the June 30, 2019 was

7.40%. The projection of cash flows used to de termine the discount rate assumed that plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2018 actuarial valuation. That policy includes contributions equal to the employer portion of the Entry Age normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

The amortization payment is based on closed periods that vary in length depending on the source. Charter amendments prior to July 1, 2014 are amortized over 20 years. After July 1, 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member benefits, including Supplemental COLAs, are amortized over 5 years. The remaining unfunded actuarial liability not attributable to Charter amendments as of July 1, 2013 is amortized over a 19-year peri od commencing July 1, 2014. Experience gains and losses and assumption or method changes on or after July 1, 2014 are amortized over 20 years. For the July 1, 2016 valuation, the increase in the un funded actuarial liability attributable to the Supplemental COLAs granted on July 1, 2013 and July 1, 2014 are amortized over 17-years and 5-years respectively. All amortization schedules ar e established as a level percentage of payroll, so payments increase 3.50% each year. The unfund ed actuarial liability is based on an actuarial value of assets that smooths investment gains and losses over five years and a measurement of the actuarial liability that excludes the value of any future Supplemental COLAs.

While the contributions and measure of actuaria l liability in the funding valuation do not anticipate any future Supplemental COLAs, the projected contributions for the determination of Asset Class
Target
Allocation
Long-Term Expected Real
Rate of Return
Global Equ ty 31.0 % 4.9 % Private Equ ty 18.0 7.9
Real Assets 17.0 5.7
Hedge Funds/Absolute Returns 15.0 3.0
Private Cred t 10.0 4.8
Treasuries 6.0 (0.5)
Liquid Credit 3.0 2.7
Total 100.0

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

69 (Continued)

the discount rate include the anticipated future amortization payments on future Supplemental COLAs for current members when they are expected to be granted. For members who worked after November 6, 1996 and before Proposition C passed (Post 1997 Retirees), a Supplemental COLA is granted if the actual investment earnings during the year exceed the expected investment earnings on the actuarial value of assets. For members who did not work after November 6, 1996 and before Proposition C passed, the market value of assets must also exceed the actuarial liability at the beginning of the year for a Supplemental COLA to be granted.

Because the probability of a Supplemental COLA depends on the current funded level of the Retirement System for certain members, the following assumptions were developed for the probability and amount of Supplemental COLA for each future year. The City has assumed that a full Supplemental COLA will be paid to all Post 1997 Retirees effective July 1, 2019. The table below shows the net assumed Supplemental COLA for members with a 2.00% Basic COLA for sample years.

The projection of benefit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.

Based on these assumptions, the Retirement System’s fiduciary net position was projected to be available to make projected future benefit payments for current members for all future years.

Projected benefit payments are discounted at the long-term expected return on assets of 7.40% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 3.50% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2019 is 7.40%.

Assumed Supplemental COLA for Members with a 2.00% Basic COLA Fiscal years
2021 0.75 % 0.27 %
2023 0.75 0.34
2025 0.75 0.36
2027 0.75 0.37
2030+ 0.75 0.38
96 - Prop C
Before 11/6/96
or After Prop C

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

70 (Continued)

Target allocation and best estimates of geometric long-term expected real rates of return (net of pension plan investment expense and inflation) for each major asset class are summarized in the following table:

Sensitivity of Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents Hetch Hetchy’s allocation of the employer’s proportionate share of the net pension liability for the SFERS Plan, calculated using the discount rate, as well as what Hetch Hetchy’s allocation of the employer’s proportionate share of the net pension liability w o u l d b e i f i t w e r e c a l c u l a t e d u s i n g a d i s c o u n t r a t e t h a t i s 1 % l o w e r o r 1 % h i g h e r t h a n t h e current rate:

(b) Other Post-Employment Benefits

Hetch Hetchy participates in a single-employer defined benefit other post-employment plan (the Plan). The Plan is maintained by the City and is administered through the City’s Health Service System. It provides post-employment medical, dent al and vision insurance benefits to eligible employees, retired employees, surviving spouse s, and domestic part ners. Health benefit provisions are established and may be amended through negotiations between the City and the respective bargaining units. The City does not issue a separate report on its other post- employment benefit plan.

GASB Statement No. 75 requires that reported re sults must pertain to li ability and asset information within certain defined timeframes. For this report, the following timeframes are used.

Asset Class
Target
Allocation
Long-Term Expected Real
Rate of Return
Global Equity 31.0 % 5.3 %
Private Equity 18.0 8.3
Real Assets 17.0 5.4
Hedge Funds/Absolute Returns 15.0 3.9
Private Credit 10.0 5.2
Treasuries 6.0 0.9
Liquid Credit 3.0 3.6
Total 100.0
Hetchy Hetchy
Fiscal Year 2021 Water Power CleanPowerSF Total
$ 47,111 57,580 5,318 110,009
26,645 32,566 3,008 62,219
9,736 11,899 1,099 22,734
Hetchy Hetchy
Fiscal Year 2020 Water Power CleanPowerSF Total
$ 40,539 49,547 3,407 93,493
21,477 26,249 1,805 49,531
5,727 6,999 481 13,207
1% Decrease Share of NPL @ 6.40%
Share of NPL @ 7.40%
1% Increase Share of NPL @ 8.40%
1% Decrease Share of NPL @ 6.40%
Share of NPL @ 7.40%
1% Increase Share of NPL @ 8.40%
Fiscal Year 2021 Fiscal Year 2020
Valuation Date (VD) June 30, 2020 June 30, 2018 updated to June 30, 2019 Measurement Date (MD) June 30, 2020 June 30, 2019
Measurement Period (MP) July 1, 2019 to June 30, 2020 July 1, 2018 to June 30, 2019 San Francisco Health Service System Retiree Plan - Single-Employer

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

71 (Continued)

Hetch Hetchy’s proportionate share percentage of the Plan was determined based on its percentage of citywide “pay-as-you-go” contributions for the year ended June 30, 2020. Hetch Hetchy’s net OPEB liability, deferred outflows/inflows of resources related to OPEB, amortization of deferred outflows/inflows and OPEB expense to each department is based on its allocated percentage. Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.92%, of which 0.38% for Hetchy Water, 0.46% for Hetchy Power, and 0.08% for CleanPowerSF as of June 30, 2020 (measurement date). Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.99%, of which 0.42% for Hetchy Water, 0.51% for Hetchy Power, and 0.06% for CleanPowerSF as of June 30, 2019 (measurement date).

Benefits

Permanent full-time and elected employees are eligible to retire and receive post-retirement health insurance benefits when they are eligible for retirement benefits from the City and County of San Francisco’s Retirement System. The eligibility requirements are as follows:

Normal Retirement Miscellaneous Age 50 with 20 years of credited service 1 Age 60 with 10 years of credited service
Safet y Age 50 with 5 years of credited service
Disabled Retirement2 Any age with 10 years of credited service Terminated Vested 5 years of credited service at separation

1 Age 53 with 20 years of credited service, age 60 with 10 years of credited service, or age 65 for Miscellaneous members hired on or after January 7, 2012.
2 No service requirement for Safety members retiring under the industrial disability benefit or for surviving spouses/domestic partners of those killed in the line of duty.

Retiree healthcare benefits are administered by the San Francisco Health Service System and include the following:

Medical: PPO – City Health Plan (self-insured) and UHC Medicare Advantage (fully- insured)
HMO – Kaiser (fully-insured) and Blue Shield (flex-funded) Dental: Delta Dental, DeltaCare US A and United Healthcare Dental Vision: Vision benefits are provided un der the medical insu rance plans and are administered by Vision Service Plan.

Projections of the sharing of benefit related costs are based on an established pattern of practice.

Contributions

Benefits provided under the Plan are curren tly paid through “pay-as-you-go” funding.

Additionally, under the City Charter, active officers and employees of the City who commenced employment on or after January 10, 2009, shall contribute to the Retiree Health Care Trust Fund (Trust Fund) a percentage of compensation not to exceed 2% of pre-tax compensation. The City shall contribute 1% of compensation for officers and employees who commenced employment on or after January 10, 2009 until the City’s GASB Actuary has determined that the City’s portion of the Trust Fund is fully funded. At that time, the City’s 1% contribution shall cease, and officers and employees will each contribute 50% of the maximum 2% of pre-tax compensation.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

72 (Continued)

Starting July 1, 2016, active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute 0.25% of pre-tax compensation into the Trust Fund.

Beginning on July 1st of each subsequent year, the active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute an additional 0.25% of pre-tax compensation up to a maximum of 1%. Starting July 1, 2016, the City shall contribute

0.25% of compensation into the Trust Fund for each officer and employee who commenced employment on or before January 9, 2009. Beginning on July 1 st of each subsequent year, the City shall contribute an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment on or before January 9, 2009. When the City’s Actuary has determined that the City’s portion of the Trust Fund is fully funded, the City’s 1% contribution shall cease, and officers and employees will each contribute 50% of the maximum 1% of pre-tax compensation. Additional or existing contribution requirements may be established or modified by amendment to the City’s Charter.

Fiscal Year 2021

For the fiscal year ended June 30, 2021, the City ’s funding was based on “pay-as-you-go” plus a contribution of $39,555 to the Retiree Healthcare Trust Fund. The “pay-as-you-go” portion paid by the City was $206,439 for a total contribution of $245,994 for the fiscal year ended June 30, 2021. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 2021 were $2,252: $929 for Hetchy Water, $1,136 for Hetchy Power, and $187 for CleanPowerSF.

Fiscal Year 2020

For the fiscal year ended June 30, 2020, the City ’s funding was based on “pay-as-you-go” plus a contribution of $39,518 to the Retiree Healthcare Trust Fund. The “pay-as-you-go” portion paid by the City was $196,445 for a total contribution of $235,963 for the fiscal year ended June 30, 2020. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 2020 were $2,321: $985 for Hetchy Water, $1,204 for Hetchy Power, and $132 for CleanPowerSF.

OPEB Liabilities, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB

Fiscal Year 2021

As of June 30, 2021, the City reported net OPEB liabilities related to the Plan of $3,823,334.

Hetch Hetchy’s proportionate share of the City’s net OPEB liability as of June 30, 2021 was $35,006: $14,444 for Hetchy Water, $17,653 for Hetchy Power, and $2,909 for CleanPowerSF.

For the year ended June 30, 2021, the City’s recognized OPEB expense was $320,684.

Amortization of the City’s deferred outflows an d inflows is included as a component of OPEB expense. Hetch Hetchy’s proportionate share of the City’s reduction of OPEB expense was $1,859: $1,480 for Hetchy Water and $1,809 for Hetchy Power, offset by an increase of $1,430 expense for CleanPowerSF.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

73 (Continued)

As of June 30, 2021, Hetch Hetchy reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

Fiscal Year 2020

As of June 30, 2020, the City reported net OPEB liabilities related to the Plan of $3,915,814.

Hetch Hetchy’s proportionate share of the City net OPEB liability as of June 30, 2020 was $38,530: $16,350 for Hetchy Water, $19,983 for Hetchy Power, and $2,197 for CleanPowerSF.

For the year ended June 30, 2020, the City’s recognized OPEB expense was $330,673.

Amortization of the City’s deferred outflows an d inflows is included as a component of OPEB expense. Hetch Hetchy’s proportionate share of the City’s OPEB expense was $3,595: $708 for Hetchy Water, $866 for Hetchy Power, and $2,021 for CleanPowerSF.

Hetchy Hetchy Hetchy Hetchy
Water Power CleanPowerSF Total Water Power CleanPowerSF Total Contributions subsequent to measurement date $ 929 1,136 187 2,252 —    —    —    — Differences between expected and actual
experience 524 640 106 1,270 2,070 2,529 417 5,016 Changes in assumptions 731 894 147 1,772 —    —    —    — Net difference between projected and actual
earnings on plan investments
9 12 2 23 —    —    —    —
Change in proportion 1,532 1,870 —    3,402 15 19 1,496 1,530 Total $ 3,725 4,552 442 8,719 2,085 2,548 1,913 6,546 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2022 $ 90 110 (328) (128) 2023 96 117 (326) (113) 2024 94 116 (326) (116) 2025 99 120 (326) (107) 2026 245 299 (222) 322 Thereafter 87 106 (130) 63 Total $ 711 868 (1,658) (79) Deferred Outflows/(Inflows) of Resources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

74 (Continued)

As of June 30, 2020, Hetch Hetchy reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

Hetchy Hetchy Hetchy Hetchy
Water Power CleanPowerSF Total Water Power CleanPowerSF Total Contributions subsequent to measurement date $ 985 1,204 132 2,321 —    —    —    — Differences between expected and actual
experience 694 849 93 1,636 1,150 1,406 155 2,711 Changes in assumptions 331 405 45 781 —    —    —    — Net difference between projected and actual
earnings on plan investments —    —    —    —    26 31 3 60 Change in proportion 322 392 —    714 19 24 1,053 1,096 Total $ 2,332 2,850 270 5,452 1,195 1,461 1,211 3,867 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2021 $ (8) (9) (195) (212) 2022 (8) (9) (195) (212) 2023 (1) (2) (195) (198) 2024 (3) (3) (195) (201) 2025 2 2 (195) (191) Thereafter 170 206 (98) 278 Total $ 152 185 (1,073) (736) Deferred Outflows/(Inflows) of Resources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

75 (Continued)

Actuarial Assumptions

Fiscal Year 2021

A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2020 (measurement year) is provided below:

The mortality rates in the base tables are projected generationally from the base year using the MP-2019 projection scale.

Key Actuarial Assumptions
Valuation Date June 30, 2020
Measurement Date June 30, 2020
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 4.00% in 2022, 7.00% in 2023, trending down to ultimate rate of 4.04% in 2075 Medicare trend starts at 1.00% in 2022, 7.50% in 2023, trending down to ultimate rate of 4.04% in 2075 10-County average trend starts at 4.5% in 2022, 5.50% in 2023, trending down to ultimate rate of 4.04% in 2075 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Non-Annuitants
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0.979
Healthy Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1.044
Disabled Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0.995
Beneficiaries
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0.977
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ending June 30, 2019.

Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

76 (Continued)

Fiscal Year 2020

A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2019 (measurement year) is provided below:

The mortality rates in the base tables are projected generationally from the base year using the modified version of the MP-2015 projection scale. The scale was modified using the Society of Actuaries’ model implementation tool with ra tes converging to the ultimate rate in 2017 (instead of 2029) and an ultimate rate of improvement of 0.85% (instead of 1.00%) up to age 85 decreasing to 0.70% (instead of 0.85%) at age 95.

Key Actuarial Assumptions
Valuation Date June 30, 2018 updated to June 30, 2019
Measurement Date June 30, 2019
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 6.35% in 2021 and trends down to ultimate rate of 3.93% in 2076 Medicare trend starts at 7.00% in 2021 and trends down to ultimate rate of 3.93% in 2076 10-County average trend starts at 5.82% in 2021 and trends down to ultimate rate of 3.93% in 2076 Vision and expenses trend remains a flat 3.50% for all years Expected Rate of Return on Plan Assets 7.40%
Discount Rate 7.40%
Salary Increase Rate Wage Inflation Component: 3.50%
Additional Merit Component (dependent on years of service):

Police: 1.50% - 8.00%
Fire: 1.50% - 15.00%
Muni Drivers: 0.00% - 15.00%
Craft: 0.00% - 3.50%
Misc: 0.00% - 5.25%
Inflation Rate Wage Inflation: 3.50% compounded annually Consumer Price Inflation: 2.75% compounded annually
Mortality Tables
Non-Annuitant - CalPERS employee mortality tables without scale BB projection Gender Adjustment Factor Base Year
Female 0.918 2009
Male 0.948 2009
Healthy Annuitants - CalPERS healthy annuitant mortality table without scale BB projection Gender Adjustment Factor Base Year
Female 1.014 2009
Male 0.909 2009
Miscellaneous Disabled Annuitants - RP-2014 Disabled Retiree Tables without MP-2014 projection Gender Adjustment Factor Base Year
Female 1.066 2006
Male 0.942 2006
Safety Disabled Annuitants - CalPERS industrial disability mortality table without scale BB projection Gender Adjustment Factor Base Year
Female 0.983 2009
Male 0.909 2009
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ending June 30, 2014.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

77 (Continued)

Sensitivity of Liabilities to Changes in the Healthcare Cost Trend Rate and Discount Rate

The following presents Hetch Hetchy’s proportionate share of the City’s net OPEB liability calculated using the healthcare cost trend rate, as well as what its allocation of the City’s net OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1% lower or 1% higher than the current rate as of June 30, 2021 and June 30, 2020:

Discount Rate

Fiscal Year 2021

The discount rate used to measure the total OPEB liability as of June 30, 2020 was 7.00%.

Based on the assumption that plan member contributions will continue to be made at the rates specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on plan inve stments was applied to all periods of projected benefit payments to determine the total OPEB liability.

The long-term expected rate of return on OPEB plan investments was 7.00% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation.

Hetchy Hetchy
Water Power CleanPowerSF Total 2021
1% Decrease $ 12,488 15,264 2,515 30,267
Hea thcare Trend 14,444 17,653 2,909 35,006
1% Increase 16,992 20,767 3,422 41,181
Hetchy Hetchy
Water Power CleanPowerSF Total 2020
1% Decrease $ 14,150 17,295 1,901 33,346
Hea thcare Trend 16,350 19,983 2,197 38,530
1% Increase 19,080 23,320 2,563 44,963

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

78 (Continued)

Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

The asset allocation targets summarized above have a 20-year return estimate of 6.90%, which was weighted against a 10-year model estimating a 6.93% return, resulting in the ultimate long- term expected rate of return of 7.00%.

The following presents Hetch Hetchy’s proportionate share of the City’s net OPEB liability calculated using the discount rate, as well as what Hetch Hetchy’s proportionate share of the City’s net OPEB liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate:

Fiscal Year 2020

The discount rate used to measure the total OPEB liability as of June 30, 2019 was 7.40%.

The long-term expected rate of return on OPEB plan investments was 7.40% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation.

Asset Class
Target
Allocation
Equities
U.S. Large Cap 28.0 % 8.4 % U.S. Small Cap 3.0 9.8
Developed Market Equity (non-U.S.) 15.0 9.6
Emerging Market Equ ty 13.0 11.7
Credit
Bank Loans 3.0 4.9
High Yield Bonds 3.0 4.9
Emerging Market Bonds 3.0 4.8
Rate Securities
Investment Grade Bonds 9.0 2.2
Long-term Government Bonds 4.0 3.1
Short-term Treasury Inflation-Protected Securities (TIPS) 4.0 1.9 Private Markets
Private Equity 5.0 12.5
Core Private Real Estate 5.0 6.4
Risk Mitigating Strategies
G Global Macro 5.0 4.1
Total 100.0 %
Long-term
Expected Real
Rate of Return
Hetchy Hetchy
Water Power CleanPowerSF Total
1% Decrease 6.00% $ 16,761 20,486 3,376 40,623
Discount Rate 7.00% 14,444 17,653 2,909 35,006
1% Increase 8.00% 12,551 15,341 2,528 30,420

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

79 (Continued)

Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

The asset allocation targets summarized above have a 20-year return estimate of 8.30%, which was weighted against a 10-year model estimating a 7.50% return, resulting in the ultimate long- term expected rate of return of 7.40%.

The City issues a publicly available financial report that includes the complete note disclosures and required supplementary information related to the City’s post-employment health care obligations. The report may be obtained by writing to the City and County of San Francisco, Office of the Controller, 1 Dr. Carlton B. Goodlett Place, Room 316, San Francisco, California 94102, or by calling (415) 554-7500.

(11) Related Parties

(a) Hetch Hetchy
Various common costs incurred by the SFPUC are allocated among Hetch Hetchy, Water, and Wastewater Enterprises. The allocations are based on the SFPUC management’s best estimate and may change from year to year depending on the activities incurred by each Enterprise and the information available. For the years ended June 30, 2021 and 2020, the SFPUC allocated $20,099 or 20.5% and $18,948 or 20.5% respectively, in administrative costs including COVID- 19 Project expenses, which is presented in the financial statements under various expense categories. These costs are then allocated to Hetchy Water, Hetchy Power, and CleanPowerSF in the Hetch Hetchy financial statements, using the periodically reviewed department overhead allocation model.

Asset Class
Target
Allocation
Equities
U.S. Equities 41.0 % 8.1 % Developed Market Equity (non-U.S.) 20.0 8.5 Emerging Market Equity 16.0 10.4
Credit
High Yield Bonds 3.0 6.5
Bank Loans 3.0 6.1
Emerging Market Bonds 3.0 5.2
Rate Securities
Investment Grade Bonds 9.0 3.9
Treasury Inflation Protected Securities 5.0 3.6 Total 100.0 %
Long-term
Expected Real
Rate of Return
Hetchy Hetchy
Water Power CleanPowerSF Total
1% Decrease 6.40% $1 8 , 8 7 9 23,074 2,536 44,489
Discount Rate 7.40% 16,350 19,983 2,197 38,530
1% Increase 8.40% 14,283 17,457 1,919 33,659

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

80 (Continued)

The City performs certain administrative servic es such as maintenance of accounting records and investment of cash for all fund groups within the City. The various funds are charged for these services based on the City’s indirect cost allocation plan. Some City departments provide direct services such as engineering, purchasing, legal, data processing, telecommunication, and human resources to Hetch Hetchy and charge amounts designed to recover those departments’ costs. These charges totaling approximately $12,582 and $11,007 for the years ended June 30, 2021 and 2020, respectively, have been included in services provided by other departments in the accompanying financial statements.

SFPUC’s 75-year lease agreement with the San Francisco Recreation and Parks Department, for the use of parking spaces for its fleet of vehicles at the Civic Center Garage, commenced on February 1, 2011. Total payment under this agre ement is $6,274, which was fully made as of fiscal year 2015. The expenses and prepayments among the three SFPUC Enterprises are based on 525 Golden Gate occupancy. As of June 30, 2021, Hetch Hetchy’s allocable shares of expenses and prepayment were $17 and $922, respectively, and as of June 30, 2020 were $18 and $939, respectively.

(b) Hetchy Water
For the years ended June 30, 2021 and 2020, the SFPUC allocated $4,585 or 4.7%, and $4,326 or 4.7%, respectively, in administrative costs including COVID- 19 Project expense to Hetchy Water.

The Water Enterprise purchases water from Hetchy Water. Included in the operating revenues are the water assessment fees of $44,149 and $34,585 for the years ended June 30, 2021 and 2020, respectively. The water assessment fees represent a recovery to fund upcountry, water-related costs that are not otherwise funded through Hetchy water-related revenue or Water revenue bonds.

Hetchy Water received $16,000 and $14,000 for the years ended June 30, 2021 and 2020, respectively, from the Water Enterprise to fund upcountry projects.

Hetchy Water had no receivable or payable with other City departments as of June 30, 2021. As of June 30, 2020, Hetchy Water had $240 in payable and $104 in receivable with the City Attorney’s Office for legal services.

(c) Hetchy Power
For the years ended June 30, 2021 and 2020, the SFPUC allocated $13,202 or 13.5%, and $12,581 or 13.6% respectively, in administrati ve costs including COVID-19 Project expense to Hetchy Power.

As of June 30, 2021, and 2020, operating revenues in sales of power to departments within the City were $82,129 and $99,797, respectively.

The Water Enterprise also purchases electricity and gas from Hetchy Power. This amount totaled $9,790 and $9,909 for the years ended June 30, 2021 and 2020, respectively.

The Wastewater Enterprise purchases electricity and gas from Hetchy Power. This amount totaled $10,122 and $10,760 for the years ended June 30, 2021 and 2020, respectively.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

81 (Continued)

The Low Carbon Fuel Standard (LCFS) program is a regulatory program overseen by the California Air Resources Board (CARB). The LCFS program seeks to reduce the carbon intensity of California’s transportation fuel by 20% by 2030. Transportation fuel suppliers can achieve this goal by either reducing the carbon intensity of their fuels or purchasing LCFS credits from other fuel suppliers that have a lower carbon intensity. In 2017, the San Francisco Municipal Transportation Agency (SFMTA) joined the LCFS program, signing up its transit fleet of electric buses, cable cars, and light rail vehicles and generating LCFS credits. Through a Memorandum of Understanding (MOU) with SFMTA, approved by the SFPUC Commission in Resolution 17- 0199, net proceeds from the sale of LCFS cred its would be shared 50/50 between SFMTA and Hetchy Power. Under the MOU, Hetchy Power would take responsibility for selling the LCFS credits. In Ordinance 0199-19, the Board of Supervisors authorized Hetchy Power to establish the Low Carbon Fuel Standard Fund to account for the revenue and expenditure from the sale of LCFS credits. The Ordinance also allowed Hetchy Power to sell LCFS credits on behalf of other City agencies. During fiscal year ended June 30, 2021, Hetchy Power received total payments of $2,362 for the LCSF credits, of which $1,181 or 50% was reallocated to SFMTA and the remaining portion was reported as other non-operating revenues on the Statements of Revenues, Expenses, and Change in Net Position . During fiscal year ended June 30, 2020, Hetchy Power received total payments of $13,840 for the LCSF credits, of which $6,920 or 50% was reallocated to SFMTA and the remaining portion was reported as other non-operating revenues on the Statements of Revenues, Expenses, and Change in Net Position.

Hetchy Power facilitates all electric and gas service connections between PG&E and City departments. In this capacity, Hetchy Power facilitates and coordinates the terms and payment for the service connections that are performed by PG&E. As of June 30, 2021 and 2020, there was no outstanding amount due from City departments related to this work. In the event Hetchy Power received money from PG&E after project completion, monies are to be refunded to the City departments for their respective credits.

Due from other City departments was $12,40 6 and $13,369 with elimination of $0 and $1,800 working capital loan to CleanPowerSF for the years ended June 30, 2021 and 2020, respectively. Hetchy Power serves as the City’s department for energy efficiency projects and maintains the Sustainable Energy Account (SEA) (formerly known as the Mayor’s Energy Conservation Account) fund to sponsor and financially support such projects at various City departments. In this role, Hetchy Power may secure low-interest financing to supplement funds available in the SEA fund. At June 30, 2021 and 2020, projects completed or under way throughout the City amounted to $4,556 and $5,062, respectively, and are recorded as due from other government agencies.

Hetch Hetchy funded a project for the Treasure Island Development Authority and recorded a receivable in connection with an upgraded submarine power cable for the Treasure Island as due from other government agencies. This amount totaled $6,627 and $6,581 for the years ended June 30, 2021 and 2020, respectively.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

82 (Continued)

As of June 30, 2021 and 2020, Hetchy Power recorded receivables of $739 and $847, respectively, due from Wastewater Enterprise for its share of costs relating to SFPUC Headquarters Living Machine System. Details of due from other City departments are as follows:

As of June 30, 2021, Hetchy Power had payables of $369 to the Port of San Francisco for Pier 70 Shoreside Power Project. As of June 30, 2020, Hetchy Power had payables in the amount of $600, of which $369 to the Port of San Francisco for Pier 70 Shoreside Power Project and $231 to the City Attorney’s Office for legal services.

(d) CleanPowerSF
For the years ended June 30, 2021 and 2020, the SFPUC allocated $2,312 or 2.4%, and $2,041 or 2.2%, respectively, in administrative costs to CleanPowerSF.

As of June 30, 2021, and 2020, operating revenue in sales of power to Hetchy Power were $1,072 and $694, respectively. Operating expenses in purchase of power from Hetchy Power were $2,456 and $339, respectively. Wholesale sales of energy, capacity and/or other electric power related products may be made between the CleanPowerSF and Hetchy Power, when available. CleanPowerSF and Hetchy Power transa c t f o r s u c h p r o d u c t s a t p r e v a i l i n g m a r k e t prices.

CleanPowerSF received program support services from Hetchy Power. This amount totaled $2,224 and $1,685 for the years ended June 30, 2021 and 2020, respectively.

CleanPowerSF had $0 and $9 in payables due to the other City departments for legal services as of June 30, 2021 and 2020, respectively.

(12) Risk Management

The Enterprise’s Risk Management program includes both self-insured (i.e., self-retention) and insured exposures at risk. Risk assessments and purchasing of insurance coverage are collaboratively coordinated by SFPUC Enterprise Risk Management and the City’s Office of Risk Management. With certain exceptions, the City and the Enterprise’s general approach is to first evaluate the exposure at risk for self-insurance. Based on this analysis, inte rnal mitigation strategies and financing through a self-retention mechanism are generally more economical, as the SFPUC in coordination with the City Attorney’s Office administers, adjusts, settles, de fends, and pays claims from budgeted resources (i.e., pay-as-you-go fund). When economically more viable or when required by debt financing covenants, the Enterprise obtains commercial insurance. At least annually, the City actuarially determines general liability and workers’ compensation risk exposures. The Enterprise does not maintain commercial earthquake coverage, with certain minor exceptions, such as a sub-limit for fire- sprinkler leakage due to earthquake under the SFPU C Property Insurance Program. In the past three 2021 2020
Treasure Island Development Authority $ 6,627 6,581
SEA-related project: Moscone Center 4,556 5,062
Wastewater - 525 Golden Gate Headquarters Project 739 847 San Francisco Recreation and Park 419 524
City Attorney's Office — 331
Department of Public Works 65 24
Total due from other City departments 12,406 13,369
Less: current portion (7,413) (1,074)
Long-term portion as of June 30, net $ 4,993 12,295

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

83 (Continued)

years, there were no settlements that exceeded insurance coverage.

(a) General Liability
Through coordination with the Controller’s Office and City Attorney’s Office, the general liability risk exposure is actuarially determined and is addressed through pay-as-you-go funding as part of the budgetary process. Associated costs and estimates are recorded as expenses as required under GAAP for financial statement purposes for both the Enterprise and the City and County of San Francisco’s Annual Comprehensive Financial Report. The claim expense allocations are determined based on actuarially determined anticipated claim payments and the projected timing of disbursement.

The changes for the general liability (damage claims) for the years ended June 30, 2021 and 2020 are as follows:

(b) Workers’ Compensation
The City actuarially determines and allocates workers’ compensation costs to the Enterprise according to a formula based on the following: (i) the dollar amount of claims; (ii) yearly projections of payments based on historical expe rience; and (iii) the size of the Enterprise’s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent years. The City continues to develop and implem ent improved programs, such as return-to-work programs, to (a) General Liability Self-Insured
(b) Workers' Compensation Self-Insured Through City-wide Pool (c) Property Purchased Insurance and Self-Insured
(d) Public Officials Liability Purchased Insurance
(e) Employment Practices Liability Purchased Insurance
(f) Cyber Liability Purchased Insurance
(g) Crime Purchased Insurance
(h) Electronic Data Processing Purchased Insurance and Self-Insured (i) Surety Bonds Purchased and Contractual Risk Transfer (j) Errors and Omissions Purchased and Contractual Risk Transfer (k) Builders' Risk Contractual Risk Transfer
Risk Coverage Approach
Beginning Claims and changes Claims End of
Fiscal years of year in estimates paid year
Hetch Hetchy
2,886$ 4,843 (6,090) 1,639
2,284 10,039 (9,437) 2,886
Hetchy Water
558$ 478 (511) 525
224 550 (216) 558
Hetchy Power
2,222$ 4,212 (5,326) 1,108
2,053 9,182 (9,013) 2,222
CleanPowerSF
106$ 153 (253) 6
7 307 (208) 106 2020
2021
2021
2021
2021
2020
2020
2020

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

84 (Continued)

lower or mitigate the growth of workers’ co mpensation costs. Programs include accident prevention, investigation, and du ty modification for injured employees with medical restrictions so return to work can occur as soon as possible.

The changes for the workers’ compensation liabilities for the years ended June 30, 2021 and 2020 are as follows:

*CleanPowerSF had no workers’ compensation liabilities as of June 30, 2021 and 2020. (c) Property
The Enterprise’s property risk management approach varies depending on whether the facility is currently under construction, the property is part of revenue-generating operations, the property is of high value, or is mission-critical in nature . During the course of construction, the Enterprise requires each contractor to provide its own insu rance, while ensuring the full scope of work is covered with satisfactory levels to limit the Enterprise’s risk exposure. Once construction is complete, the Enterprise performs an assessment to determine whether liability/loss coverage will be obtained through the commercial property policy or self-insurance. The majority of property scheduled in the insurance program is for (1) revenue generating facilities, (2) debt- financed facilities, (3) mandated coverage to meet statutory requirements for bonding of various public officials, or (4) high-value, mission-critical property or equipment.

(d) Public Officials Liability
All Enterprise public officials with financial ov ersight responsibilities are provided coverage through a commercial Public Officials Liability Policy.

(e) Employment Practices Liability
An Employment Practices Liability Policy is retained to protect against employment-related claims and liabilities.

(f) Cyber Liability
A Cyber Liability Policy is retained to protect against cyber-related claims and liabilities.

(g) Crime
The Enterprise also retains a Commercial Crime Policy, in lieu of bonding its employees, to provide coverage against liabilities or losses due to third-party crime or employee fraud.

Beginning Claims and changes Claims End of
Fiscal years of year in estimates paid year
Hetch Hetchy*
3,387$ 113 (262) 3,238 3,499 336 (448) 3,387 Hetchy Water
1,187$ 18 (85) 1,120 1,238 75 (126) 1,187 Hetchy Power
2,200$ 95 (177) 2,118 2,261 261 (322) 2,200 2020 2021
2020
2021
2020
2021

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

85 (Continued)

(h) Electronic Data Processing
The Electronic Data Processing policy protects selected high-value electronic property in case of damage or loss.

(i) Surety Bonds
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.

(j) Errors and Omissions
Errors and omissions, also known as Profession al Liability, are commonly transferred through contract to the contracted professional, or retained through self insurance on a case-by-case basis depending on the size, complexity, or sc ope of construction or professional service contracts. Examples of such contracts are inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers.

(k) Builders’ Risk
Builders’ Risk policies of insurance are required to be provided by the contractor on all construction projects for the full value of construction. (l) Energy Risk Management
Similar to other electric utilities with a heavy reliance on hydroelectric generation, Hetch Hetchy is exposed to risks that could impact its ability to generate net revenues to fund operating and capital investment activities. Hydroelectric generation facilities in the Sierra Nevada are the primary source of electricity for Hetch Hetchy. For this reason, the Hetch Hetchy revenues can vary with watershed hydrology, unexpected generator outages, and market prices for energy.

Given the inherent risk for all hydroelectric generation, several risk management interventions have been developed to mitigate exposure.

(m) Enterprise Risk Management
The Power Enterprise adopted the ISO 31000 standard for Hetchy Power and the CleanPowerSF program as the framework for implementing Enterprise Risk Management (ERM). The Enterprise utilizes this framework to systematically and proactively identify and mitigate risks that threatens its business objectives. Since not all ri sks are insurable or transferable contractually, the ERM program provides an additional method to manage risks and protect the Enterprise’s current and expanding business allowing for increa sed operational resiliency and the ability to capitalize on opportunities.

(13) Commitments and Litigation

(a) Commitments
As of June 30, 2021, and 2020, Hetch Hetchy, has outstanding commitments with third parties of $143,404 and $103,508, respectively, for various capital projects and other purchase agreements for materials and services.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

86 (Continued)

Hetchy Water

To meet certain requirements of the Don Pedro Reservoir operating license, the City entered into an agreement with the Modesto Irrigation District (MID) and Turlock Irrigation District (TID) in which the Districts would be responsible for a n i n c r e a s e i n w a t e r f l o w r e l e a s e s f r o m t h e reservoir in exchange for annual payments from the City, which are included in Hetchy Water’s operating expenses. The payment amounts were $5,069 and $4,979 for fiscal years 2021 and 2020, respectively. The payments are to be made for the duration of the license, but may be terminated with one year’s prior written notice after 2001. The City and the Districts have also agreed to monitor the fisheries in the lower Tuolumne River for the duration of the license. A maximum monitoring expense of $1,400 is to be shared between the City and the Districts over the term of the license. The City’s share of the monitoring costs is 52%, while the Districts are responsible for 48% of the costs.

Hetchy Power

Wholesale Distribution Tariff (WDT) and Key Operating Agreements for Grid Access

Upon expiration of the City’s previous Interconnection Agreement with PG&E, the City began taking service in 2015 under the Wholesale Distribution Tariff (WDT) for distribution service and under the CAISO Open-Access Transmission Tariff for transmission service. The FERC-regulated Wholesale Distribution Tariff is implemented by PG&E through the City specific Service Agreements and Interconnection Agreements. The terms of these agreements have been in contention since the effective date. The City continues to negotiate with PG&E and, where necessary, file complaints and protests at FERC. In September 2020, PG&E filed a revised WDT.

Under the terms of the new WDT, the City would pa y substantially higher rates, at least twice to potentially four times the current charges, and be required to install costly and inefficient equipment not needed for technical, safety or reliability of operations. In addition, Hetchy Power would no longer be allowed to connect to the “network” grid in the center of San Francisco; have new secondary interconnections; and/or serve an y small, typically unmetered loads, such as streetlights, traffic signal and bus shelters.

Staff prepare regular reporting to the Board of Supervisors outlining on-going disputes with PG&E over project requirements, costs and delays . During fiscal years 2021 and 2020, Hetchy Power purchased distribution services for $8,868 and $9,270, respectively, from PG&E under the terms of the Service Agreements and Interconnection Agreements that implement the WDT.

The City continues to litigate and dispute these terms at FERC and in the court systems; and pursue the purchase of the electric grid in San Francisco.

Western System Power Pool and other Market Purchases and Sales

H e t c h y P o w e r m a y p u r c h a s e o r s e l l e n e r g y a nd other related products (such as ancillary services, spinning reserves, resource adequacy products, and congestion revenue rights) with different market entities through the Western System Power Pool (WSPP) and the CAISO. During fiscal years 2021 and 2020, Hetchy Power purchased $0 and $2,041 of power and other related products, respectively. Sales of excess po wer, after meeting Hetch Hetchy’s obligations, were $469 or 110,043 MWh for 2021 and $3,105 or 134,574 MWh for 2020, respectively.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

87 (Continued)

Power Purchase Agreement (PPA)

Hetchy Power (Buyer) purchases energy, capacity, and environmental attributes from a local solar photovoltaic project located at Sunset Reservoir (the facility) pursuant to the 2009 25-year PPA with SFCity1, LP, owned by Duke Energy (Seller). In November 2010, the facility commenced commercial operation and began to provide Hetchy Power energy generated by the facility.

The PPA sets the starting purchase price of generated energy at $235/MWh, increasing by 3% each year throughout the term of the agreement, an d it is expected that the facility will generate 6,560 MWh per year. In fiscal year 2021, the facility generated 6,598 MWh and the rate was at $324/MWh. In the event that the facility genera tes more energy than expected due to better than normal meteorological conditions, the PPA requires the Buyer to purchase all the excess energy but generation in excess o f 1 2 0 % o f e x p e c t e d i s p u r c h a s e d a t n o c o s t . T h e P P A a l s o requires the Seller to generate a minimum amount of energy from the facility annually. If energy production falls below 50% of expected, the Seller must provide replacement power, and if energy falls below 90% of expected, the price for energy generated is lowered. In fiscal years 2021 and 2020, purchases of energy under the Agreement were $2,127, or 6,598 MWh, and $2,135, or 6,877 MWh, respectively.

CleanPowerSF

CleanPowerSF began serving customers in May 20 16 and entered into contracts with Calpine Energy Services L.P. (Calpine) and Shiloh I Wind Project LLC (Shiloh) to purchase renewable and conventional energy and resource adequacy capaci ty to meet its retail sales obligations. Both contracts feature 10-year master agreements under which multiple transactions may be executed. Calpine did not have any reserve balance requirement in fiscal years 2021 and 2020.

Since its launch, CleanPowerSF has added mult iple additional short- term and medium-term contracts with multiple counterparties pursuant to master agreements, including the WSPP Master Agreement, to purchase renewable, carbon-free and conventional energy and resource adequacy capacity, as well as long-term contracts for renewable energy and capacity with renewable energy developers sPower, Terra-Gen, NextEra and EDF Renewables. These contracts have been entered to allow CleanPowerSF to both meet its existing retail sales obligations and to support future retail sales from the citywide enrollment into the CleanPowerSF program. Citywide enrollment was substantively completed with the enrollment of residential accounts in April 2019. The total power purchase cost, net of wholesale sales, equaled $188,533 and $174,432 in fiscal years 2021 and 2020, respectively.

CleanPowerSF entered into a contract with Noble Americas Energy Solutions in November 2015 for a three-year term, not to exceed $5,600 to provide data management, billing administration and customer care services. On December 1, 2016, Noble Americas Energy Solutions was acquired by Calpine Corporation and was renamed Calpine Energy Solutions. Subsequently, CleanPowerSF’s contract was assigned to Calpine Energy Solutions under its new name and ownership. In August 2018, CleanPowerSF exercised its option under the contract to extend the term for three years, through October 31, 2021, and increased the contract’s not-to-exceed value to $18,769. During fiscal years 2021 and 2020, amounts paid were $6,664 and $6,240, respectively.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

88 (Continued)

CleanPowerSF Power Purchase Agreement (PPA)

In November 2020, CleanPowerSF executed a Power and Storage Purchase Agreement to purchase solar product and storage product from a solar powered generation facility and battery storage facility located at Livermore pursuant to the 25-year PPA with IP Aramis, LLC (Seller). As of June 30, 2021, CleanPowerSF received cash collateral of $9,000 for Development Assurance and Performance Assurance from the Seller.

CleanPowerSF Guarantee

In March 2018, CleanPowerSF entered into a five-year, $75,000 Credit Agreement with JPMorgan Chase Bank, National Association (“Bank”) to provide letters of credit or loans from the Bank to guarantee certain power purchase agreement payment obligations of CleanPowerSF and to meet working capital needs, if necessary. The Credit Agreement is secured by CleanPowerSF’s net revenues; there is no pledge of, or lien on net revenues that ranks senior to the obligations under the Credit Agreement. The Bank issued letters of credit in the face amounts totaling $13,810 and $17,985 for fiscal years ending June 30, 2021 and 2020, respectively. CleanPowerSF did not draw on the Credit Agreement during fiscal years 2021 and 2020. Accordingly, the uncommitted credit capacity under the Credit Agreement was $61,190 and $57,015 during fiscal years 2021 and 2020, respectively.

Financial covenants include that CleanPowerSF maintain a Debt Service Coverage Ratio as defined in the Credit Agreement of not less than 1.05 for each fiscal quarter, as determined for the four consecutive fiscal quarter periods ended on the last day of such fiscal quarter. As of June 30, 2021, CleanPowerSF was not in complian ce with this financial covenant as calculated for the four consecutive fiscal quarters ended on such date, resulting in a covenant event of default under the Credit Agreement. In connection with subsequent amendments to the Credit Agreement, JPMorgan Chase granted a waiver of such event of default for the period ended June 30, 2021. See Note 14(a), Subsequent Events, for additional details. CleanPowerSF was in compliance with other covenants and requirements of the Credit Agreement as of June 30, 2021.

GASB Statement No. 88, Certain Disclosures Related to Debt , Including Direct Borrowings and Direct Placements , requires the disclosure of certain information related to debt, including unused letters of credit. Significant events of default under the Credit Agreement, include 1) non-payment, 2) material breach of warranty, re presentation, or other non-remedied breach of covenants as specified in the agreement and 3) bankruptcy and insolvency events, which could result in all outstanding loans under the Credit Agreement to be immediately due and payable; or the immediate termination of the Bank’s commitment to issue letters of credit or make loans under the Credit Agreement.

(b) Litigation
Hetch Hetchy is a defendant in various legal actions and claims that arise during the normal course of business. The final disposition of thes e legal actions and claims is not determinable.

However, in the opinion of management, the outc ome of any litigation of these matters will not have a material effect on the financial position or changes in net position of Hetch Hetchy.

(c) Grants
Grants that the Enterprise received are subject to audit and final acceptance by the granting agency. Current and prior year costs of such grants are subject to adjustment upon audit.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2021 and 2020
(Dollars in thousands, unless otherwise stated)

89 (d) Environmental Issue
As of June 30, 2021, and 2020, there was no pollution remediation liability recorded.

(14) Subsequent Events

(a) CleanPowerSF Guarantee
On November 10, 2021, CleanPowerSF and JPMorgan Chase Bank, National Association executed amendments to the March 2018 Credit Agreement. In connection with the amendments, JPMorgan waived the debt service coverage covenant event of default described in Note 13(a). Among other things, the amendm ents provided for a decrease in the Credit Agreement amount to $20,000 from $75,000 at the request of CleanPowerSF, and extended the agreement to March 2024. Additional changes to the agreement include elimination of target reserve requirements, revisions to debt service coverage and rate-setting covenants, changes to ongoing reporting requirements to the Bank, and changes to events of default, including the addition of an event of default if CleanPowerSF’s credit rating is downgraded below investment grade or suspended, withdrawn or otherwise unavailable.

(b) Power Enterprise, Issuance of Commercial Paper Notes On December 8, 2021, the SFPUC issued $23,000 in Power Enterprise commercial paper notes to finance a portion of the design, acquisition and construction of various capital projects in furtherance of the SFPUC’s Power Enterprise capital improvement program. The commercial paper notes were refinanced with proceeds of the Power Revenue Bonds Series 2021 AB issuance on December 22, 2021.

(c) Power Revenue Bonds Series 2021 AB Issuance
On December 21, 2021, the SFPUC issued its San Francisco Power Revenue Bonds, 2021 Sub-Series A (Green), and Sub-Series B together with an aggregate principal of $124,000 to refund approximately $137,714 aggregate principal amount of commercial paper notes issued pursuant to the Power Enterprise’s commercial paper program to finance or refinance a portion of the design, acquisition and construction of various capital projects in furtherance of the SFPUC’s Power Enterprise capital improvement program.

(d) SFPUC’s Claim to California State for Arrearages Relief The California Department of Community Services & Development is administering funds to energy utilities for the California Arrearage Payment Program (Program) during fiscal year 2022, sourced by the American Rescue Plan Act. The Program was created to provide relief for unpaid bills related to the COVID-19 pandemic. The SFPUC has submitted surveys to the Department of Community Services & Development. Hetch Hetchy received notice from California Department of Community Services & Development on October 28, 2021 stating that $1,218 will be allocated to Hetchy Power and $2,424 will be allocated to CleanPowerSF.

Funds for energy arrearage relief are expected to reach the agency sometime in early 2022.

Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
The Honorable Mayor and Board of Supervisors
City and County of San Francisco, California:

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the business-type activities and each fund of San Francisco Hetch Hetchy Water and Power and CleanPowerSF (Hetch Hetchy), an enterprise fund of the City and County of San Francisco, California (the City), which comprise the statement of net position as of June 30, 2021, and the related statements of revenues, expenses, and changes in net position , and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated January 27, 2022.

Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Hetch Hetchy’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Hetch Hetchy’s internal control. Accordingly, we do not express an opinion on the effectiveness of Hetch Hetchy’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness , yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficienc ies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters
As part of obtaining reasonable assurance about whether Hetch Hetchy’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

KPMG LLP
Suite 1400
55 Second Street
San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 91 Pur
pose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Hetch Hetchy’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Hetch Hetchy’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

San Fr
ancisco, California
January 27, 2022

CleanPowerSF Sfpuc CommissionMarch 8, 2022

CleanPowerSF Sfpuc Commission
March 8, 2022