SFPUC
FY 2022-23 1st Quarter Budget Report
Laura Busch
Budget Director
December 13, 2022
2 • Positive operating results projected for Water, Wastewater and CleanPowerSF and operating shortfall projected for
Power
• Water and Wastewater: revenues up due to higher retail and wholesale sales vs. a conservative budget
• Power and CleanPowerSF: high power purchase costs are leading to significant shortfalls in expenditure budgets, offset by increased revenues and planned general reserve contributions
• Year-end financial results projected to meet or exceed policy targets
FY 2022-23 Q1 Report Summary
3 • Net operating result: $38.3M
• Total sources up $36.0M, and $2.3M in cost savings
Sources
• $8.5M or 2.6% retail revenues
• $25.6M or 9.6% wholesale revenues
• $1.9M or 3.5% non-operating revenues
Uses
• $2.3M or -2.0% salaries and benefits
FY 2022-23 Water Budgetary Variances
4 • Net operating result: $22.2M
• Total sources $9.3M, and $12.9M in cost savings
Sources
• $7.1M or 1.9% sewer service charges
• $2.2M or 19.1% non-operating revenues
Uses
• $3.2M or -3.7% salaries and benefits
• $9.7M or -8.5% debt service (because of the postponed bond issuance due to market conditions, and issuance of the 2022B Wastewater Refunding Bonds)
FY 2022-23 Wastewater Budgetary
Variances
5 • Net operating result: ($1.3M)
• Total sources ($0.2M), and ($1.0M) in cost overruns
Sources
• ($15.4M) or -9.0% retail sales (Not due to underperformance.
Budget was set too high because of timing of rate study adoption.) • $13.4M or 73.1% wholesale sales
• $1.4M or 13.0% non-operating revenues
• $0.4M or 2.6% gas & steam sales
Uses
• ($19.2M) or 19.9% power and gas & steam cost savings
• $0.1M or -0.2% salaries and benefits
• $18.0M or -100.0% general reserve planned to go unspent • Power price increases may entail the need for supplemental appropriation. We are tracking this closely.
FY 2022-23 Power Budgetary
Variances
6 • Net operating result: $21.1M
• Total sources up $2.3M and $18.9M in cost savings
Sources
• $1.4M or 0.5% power sales
• $0.8M or 151.3% interest income
Uses
• ($15.4M) or (-6.1%) purchase of power
• $0.7M or -9.4% salaries and benefits
• $33.5M or -100% general reserve planned to go unspent FY 2022-23 CleanPowerSF Budgetary
Variances
7 Key Financial Ratios
Fund Balance Reserve
Water Waste
Water
Hetchy Clean
Power
SF
• 25%-68% of Annual
Operating Uses
59.4% 66.4% 56.2% 24.2%*
Debt Service Coverage
Reserve
• Indenture Basis ≥ 1.35x 1.6 3.2 39.3
• Current Basis ≥ 1.10x 1.3 2.1 1.8
* CleanPowerSF’s SFPUC's Fund Balance Reserve Policy requires this to be at least 50% within three years of policy adoption (by April 2025). 8 OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.934.5707
F 415.554.1877
Date: December 13, 2022
To: Commissioner Newsha Ajami, President
Commissioner Sophie Maxwell, Vice President
Commissioner Tim Paulson
Commissioner Tony Rivera
Commissioner Kate Stacy
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, CFO/AGM Business Services
Subject: SFPUC FY 2022-23 First Quarter Budgetary Report through September 30, 2022
The FY 202 2-23 first quarter budgetary reports are attached for the three Enterprises and CleanPowerSF, with high- level changes to revenues and expenses summarized in the following table:
Beginning
Available
Fund
Balance
Fund
Balance
Budgeted
to be
(Used)
FY 2022-23 Operations
Projected
Year End
Available
Fund
Balance
Projected
Sources
Projected
Uses
(excluding
Capital)
Net
Operating
Results
Surplus /
(Shortfall)
Mid-year
Adjustments
to Fund
Balance
Water 244.7 (67.9) 36.0 2.3 38.3 - 215.0
Wastewater 158.4 (25.1) 9.3 12.9 22.2 - 155.5
Power 136.7 - (0.2) (1.1) (1.3) - 135.5
CleanPowerSF 51.3 - 2.3 18.9 21.1 - 72.4
Summary:
• Positive operating results projected for Water, Wastewater and CleanPowerSF, and operating shortfalls projected for Power. • Water and Wastewater: In both enterprises, revenues are projected to significantly exceed budget due to higher than expected retail sales, conservative budget assumptions, and higher than expected interest rates. Additionally, wholesale sales are higher than projected compared to the budget and lower than expected conservation efforts. Savings are also projected from lower labor costs due to vacant positions.
• CleanPowerSF: revenues are projected to slightly exceed the budget due to wholesale sales and higher than expected interest rates. In addition, labor savings are anticipated due to vacant
positions. These are offset by significantly increased cost of power purchases which are driven by higher market for energy costs.
• Pow
er:
o Retail sales are $15.4M below budget, not because of
underperformance, but because the revenue budget was
not adjusted downwards to match assumptions in the final Power Rate Study. The Rate Study was adopted in late
May 2022, which did not allow time for the budget to be adjusted before adoption.
o Wholesale revenues are projected to exceed the budget due to higher power prices resulting in sales above budget.
Conversely, revenues are offset by significantly higher power purchase costs related to lower power generation, higher power prices and transmission costs, which are in turn offset by the power purchase contingency budget, as well as unspent funds carried forward from the prior year. • All enterprises are projected to meet financial policy minimums and coverage ratios at year end.
If you have questions, please contact me at [email protected].
CC:
M
asood Ordikhani, AGM, External Affairs, SFPUC
Barbara Hale, AGM, Power Enterprise, SFPUC
Stephen Robinson, AGM, Infrastructure, SFPUC
Greg Norby, AGM, Wastewater Enterprise, SFPUC
Steve Ritchie, AGM, Water Enterprise, SFPUC
Wendy Macy, Chief People Officer, SFPUC
Anna Duning, Budget Director, Mayor’s Office
Ben Rosenfield, Controller
Attachments:
Appendix A Water Enterprise
Appendix B Wastewater Enterprise
Appendix C Hetch Hetchy Water & Power, including the Power Enterprise Appendix D CleanPowerSF
FY 2021-22
Actuals Original Budget
Revised
Budget
(includes
carryforwards)
Projection
(includes
carryforwards)
Variance
(Projection vs
Revised Budget)
Sources
Retail Water Sales 308.3 323.9 324.4 332.9 8.5 A Wholesale Water Sales 261.4 266.3 266.3 291.9 25.6 B Interest Income 1.8 1.1 1.1 2.6 1.5 C Rental Income 14.2 13.1 13.1 13.1 - Miscellaneous Income 23.6 19.6 19.6 20.1 0.4 D Departmental Transfer Adjustment (45.8) (49.6) (49.6) (49.6) - Federal Bond Interest Subsidy 21.6 21.3 21.3 21.3 - Appropriated/Budgeted Use of Fund Balance 72.8 67.9 149.9 149.9 - Total Sources 657.8 663.7 746.0 782.1 36.0 Operating Uses
Personnel 100.7 114.5 114.5 112.3 2.3 E Non-Personnel Services 14.3 24.3 38.3 38.3 - Materials and Supplies 15.5 17.8 22.6 22.6 - Equipment 3.4 2.4 8.6 8.6 - Light, Heat, and Power 11.4 11.2 11.2 11.2 - Overhead (SFPUC Bureaus) 52.6 63.1 72.4 72.4 - Services of Other Departments 12.6 15.4 17.4 17.4 - Debt Service 279.3 335.1 335.1 335.1 - Total Operating Uses 489.8 583.8 620.0 617.8 2.3 Net Operating Results 167.9 164.3 38.3 Other Impacts to Operating Budget FY 2021-22
Actuals
Current Year
Transfers from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Capital Projects 54.6 46.0 206.0 206.0 - Facilities Maintenance/Programmatic 27.6 33.9 79.6 79.6 - Total Adjustments to Operating Fund Balance $ 82.1 $ 79.8 $ 285.5 $ 285.5 $ - Available Fund Balance as of Fiscal Year-End $ 244.7 $ 215.0 Available Fund Balance, % of Operating Uses (F) 25-68% 102.8% 59.4% Debt Service Coverage (Year-End Budgetary Basis)
Indenture Basis (includes Available Fund Balance) (G) ≥ 1.35 1.82 1.69 1.60 Current Basis (H) ≥ 1.10 1.19 1.17 1.30 FY 2022-23
Appendix A
WATER ENTERPRISE OPERATING FUNDS
FY 2022-23 1st Quarter - Budgetary Basis, Funds 25940, 25950, 25960, 25990, 26570 & 26600 ($ Millions)
Appendix A
WATER ENTERPRISE OPERATING FUNDS
FY 2022-23 1st Quarter - Budgetary Basis, Funds 25940, 25950, 25960, 25990, 26570 & 26600 ($ Millions)
Revenue Variances
Other Notes
G. Calculated as ratio between (a) Total Sources plus Beginning Available Fund Balance plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic, excluding all revenues and expenses related to the 525 Golden Gate COPs, and (b) Debt Service. The Indenture requires this ratio to be a minimum of 1.25 times, and SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.35 times. FY22 calculations presented are from the Q4 Budgetary Status Report and will be revised when FY22 financial statements are published.
H. Calculated as ratio between (a) Total Sources plus any appropriated fund balance, plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic, excluding all revenues and expenses related to the 525 Golden Gate COPs, and (b) Debt Service. SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of
1.10 times. FY22 calculations presented are from the Q4 Budgetary Status Report and will be revised when FY22 financial statements are published.
A. Retail water sales forecasted to be 55.5 MGD, a 2.8% increase from budgeted volumes of 56.3 MGD, and a 5.9% increase from prior year actuals of 52.4 MGD.
B. Wholesale water forecasted to be 126.9 MGD, an 11.6% increase from budgeted volumes of 113.7 MGD, and a 1.2% decrease from prior year actuals of 127.4 MGD.
D. Miscellaneous income slightly increased from budget due to increased collection of miscellaneous billing charges.
Expenditure Variances
F. Calculated as Ending Available Fund Balance (including additions to General Reserve) as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. SFPUC's Fund Balance Reserve Policy requires this to be within a range of 25-68%.
E. Savings due to vacant positions.
C. Interest rate of 1.2% is higher compared to budget of 0.5%.
FY 2021-22
Actuals
Original
Budget
Revised
Budget
(includes
carryforwards)
Projection
(current year
spending)
Variance
(Projection vs
Revised Budget)
Sources
Sewer Service Charges 355.9 370.8 370.8 377.9 7.1 A Interest Income 1.6 1.6 1.6 3.8 2.2 B Miscellaneous Income 3.5 5.2 6.7 6.7 - Federal Bond Interest Subsidy 3.5 3.5 3.5 3.5 - Appropriated/Budgeted Use of Fund Balance 40.9 25.1 52.7 52.7 - Total Sources 405.5 406.1 435.2 444.5 9.3 Operating Uses
Personnel 72.0 87.2 87.2 84.0 3.2 C Non-Personnel Services 28.7 26.6 33.6 33.6 - City Grant Programs 0.2 0.3 0.5 0.5 - Materials and Supplies 11.5 12.2 14.1 14.1 - Equipment 1.7 2.2 7.1 7.1 - Light, Heat, and Power 11.9 12.7 12.7 12.7 - Overhead (SFPUC Bureaus) 32.2 37.6 43.1 43.1 - Services of Other Departments 26.2 23.0 25.8 25.8 - Debt Service 87.4 113.2 113.2 103.6 9.7 D Total Operating Uses 271.8 314.9 337.4 324.5 12.9 Net Operating Results 133.6 120.0 $ 22.2 Other Impacts to Operating Budget FY 2021-22
Actuals
Current
Year
Transfers
from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Capital Projects 72.7 82.6 253.5 253.5 - Facilities Maintenance/Programmatic 8.1 8.6 13.2 13.2 - Legal Settlements 8.6 - - - - Total Adjustments to Operating Fund Balance $ 89.4 $ 91.2 $ 266.7 $ 266.7 $ - Available Fund Balance as of Fiscal Year-End $ 158.4 $ 155.5 Available Fund Balance, % of Operating Uses (E) 25-68% 82.3% 66.4% Debt Service Coverage (Year-End Budgetary Basis)
Indenture Basis (includes Available Fund Balance) (F) ≥ 1.35 3.77 3.01 3.15 Current Basis (G) ≥ 1.10 2.19 1.83 2.09 Appendix B
WASTEWATER ENTERPRISE OPERATING FUNDS
FY 2022-23 1st Quarter - Budgetary Basis, Funds 20160, 20170, 20550 ($ Millions)
FY 2022-23
Appendix B
WASTEWATER ENTERPRISE OPERATING FUNDS
FY 2022-23 1st Quarter - Budgetary Basis, Funds 20160, 20170, 20550 ($ Millions)
Revenue Variances
Expenditure Variances
Other Notes
B. Interest rate of 1.2% is higher compared to budget of 0.5%.
C. Salary savings reflect vacant positions.
D. Debt service savings mainly due to the postponed issuance of the 2023 Wastewater Revenue Notes due to market conditions and issuance of the 2022B Wastewater Refunding Bonds.
E. Calculated as Ending Available Fund Balance (including additions to General Reserve) as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. SFPUC's Fund Balance Reserve Policy requires this to be within a range of 25-68%.
F. Calculated as ratio between (a) Total Sources plus Beginning Available Fund Balance plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic (excluding all revenues and expenses related to the 525 Golden Gate COPs), and (b) Debt Service. The Indenture requires this ratio to be a minimum of 1.25 times, and SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.35 times. FY22 calculations presented are from the Q4 Budgetary Status Report and will be revised when FY22 financial statements are published.
A. Wastewater retail billable volumes forecasted to be 44.5 MGD, a 1.1% increase from budget of 44.0 MGD and a 3.5% increase from prior year actuals of 43.0 MGD. This includes a 5% drought surcharge.
G. Calculated as ratio between (a) Total Sources plus any appropriated fund balance plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic (excluding all revenues and expenses related to the 525 Golden Gate COPs), and (b) Debt Service. SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.10 times. FY22 calculations presented are from the Q4 Budgetary Status Report and will be revised when FY22 financial statements are published.
FY 2021-22
Actuals
Original
Budget
Revised
Budget
(includes
carryforwards)
Projection
(current year
spending)
Variance
(Projection vs
Revised Budget)
Sources
Electric Sales - Retail 153.1 171.4 171.4 155.9 (15.4) A Electric Sales - Wholesale 30.2 18.3 18.3 31.7 13.4 B Water Sales - Transfer from Water Department 45.8 49.6 49.6 49.6 - Natural Gas & Steam - City Work Orders 17.4 15.9 16.3 16.7 0.4 C Interest Income 1.5 1.0 1.0 2.5 1.5 D Federal Interest Subsidy - Power Bonds 0.1 0.4 0.4 0.4 0.0 Miscellaneous Income 8.2 9.3 9.3 9.3 (0.0) Appropriated/Budgeted Use of Fund Balance 50.2 - 40.5 40.5 - Total Sources 306.5 266.0 306.9 306.7 (0.2) Operating Uses
Personnel 47.6 54.4 54.4 54.3 0.1 E Non-Personnel Services 29.5 40.3 63.4 63.4 - Power Purchases, Transmission Distribution & Related Charges 59.0 76.7 80.1 98.8 (18.8) F Natural Gas & Steam 17.4 15.9 16.3 16.7 (0.4) G Materials and Supplies 3.2 3.5 3.9 3.9 - Equipment 1.2 3.2 7.1 7.1 - Overhead (SFPUC Bureaus) 19.7 24.1 27.5 27.5 - Services of Other Departments 7.0 9.4 9.5 9.5 - Debt Service 3.9 4.0 4.0 4.0 - General Reserve - 18.0 18.0 - 18.0 H Total Operating Uses 188.4 249.5 284.2 285.2 (1.0) Net Operating Results 118.1 21.5 (1.3) Other Impacts to Operating Budget FY 2021-22
Actuals
Current Year
Transfers
from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Facilities Maintenance/Programmatic 13.7 14.2 20.5 20.5 - Capital projects 48.6 2.3 84.3 84.3 - Total Adjustments to Operating Fund Balance 62.3 16.5 104.8 104.8 - Available Fund Balance as of Fiscal Year-End 136.7 135.5 Available Fund Balance, % of Operating Uses 25-68% 69.0% 56.2% Debt Service Coverage… Year-End Budgetary Basis
Indenture Basis (includes Available Fund Balance) (I) ≥ 1.35 32.90 55.54 39.25 Current Basis (J) ≥ 1.10 19.19 2.26 1.77 Appendix C
HETCH HETCHY WATER & POWER OPERATING FUNDS
FY 2022-23 1st Quarter - Budgetary Basis - 24970, 24980, 24990 ($ Millions)
FY 2022-23
Revenue Variances
Expenditure Variances
Other Notes
G. Due to slightly higher usage in natural gas & steam.
J.FY22 calculations presented are from the Q4 Budgetary Status Report and will be revised when FY22 financial statements are published.
I. FY22 calculations presented are from the Q4 Budgetary Status Report and will be revised when FY22 financial statements are published.
H. General Reserve was intentionally budgeted and planned to go unspent to build reserves..
D. Interest rate of 1.2% is higher compared to budget of 0.5%..
A. Retail sales are $15.5M below budget, not because of underperformance, but because the budget was not adjusted downwards to match assumptions in the final Power Rate Study. The Rate Study was adopted in late May 2022, which did not allow time for the budget to be adjusted.
F. Deficit is due to lower generation and higher power prices, leading to $20M in additional power purchases. Transmission costs are also $6M higher due to higher rates approved than budget assumptions. Costs partially offset by $4M appropriated reserve for power purchase and $3M carryforward.
E. Savings due to vacant positions.
B. Wholesale sales are higher than budget mainly due to higher power prices.
C. Due to slightly higher usage in natural gas & steam.
FY 2021-22
Actuals
Original
Budget
Revised Budget
(includes carryforwards
& supplemental)
Projection
(includes
carryforwards)
Variance
(Projection vs Revised
Budget)
Operating Sources
Electric Sales - Green Product 234.3 299.5 299.5 298.6 (0.9) Electric Sales - SuperGreen Product 12.3 15.7 15.7 15.8 0.1 Wholesale Sales 4.6 - - 2.2 2.2 Subtotal - Electric Revenues 251.2 315.2 315.2 316.7 1.4 A Interest Income 0.4 0.6 0.6 1.4 0.8 B Appropriated/Budgeted Use of Fund Balance 13.4 - 3.9 3.9 - Total Sources 265.0 315.7 319.7 322.0 2.3 Operating Uses
Personnel 4.1 7.8 7.8 7.1 0.7 C Overhead 2.5 5.4 5.8 5.8 - Non Personnel Services 11.2 11.9 14.0 14.0 - Materials & Supplies 0.0 0.2 0.4 0.4 - Power Purchases, Transmission Distribution & Related Charges 241.3 251.1 251.1 266.5 (15.4) D Services of Other Departments 3.3 4.1 4.1 4.1 - Debt Service - - - - - General Reserve - 33.5 33.5 - 33.5 E Total Operating Uses 262.4 314.0 316.7 297.8 18.9 Net Operating Results 2.6 24.1 21.1 Other Impacts to Operating Budget FY 2021-22
Actuals
Current Year
Transfers from
Operating
Total Available
Funds
Projection
(current &
future years
spending)
Project
Closeouts
Programmatic 0.4 0.2 1.4 1.4 - Capital Projects 0.4 1.6 5.4 5.4 - Total Adjustments to Operating Fund Balance 0.7 1.7 6.8 6.8 - Available Fund Balance as of Fiscal Year-End 51.3 72.4 F Available Fund Balance, % of Operating Uses (G) % 19.5% 24.2% Revenue Variances
Expenditure Variances
Other Notes
G. Calculated as Ending Available Fund Balance as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. SFPUC's Fund Balance Reserve Policy requires this to be atleast 50% within three years of policy adoption (April of 2022).
D. Higher than expected costs in the energy market are driving projections over budget .
Appendix D
CleanPowerSF
FY 2022-23 1st Quarter - Budgetary Basis - 24750, 24761, 24765 & 24870 ($ Millions)
FY 2022-23
A. Revenues slightly higher than budget due to resource adequacy wholesale sales B. Interest rate of 1.2% is higher compared to budget of 0.5%.
C. Salary savings due to vacant positions.
F. Available fund balance at fiscal year end is calculated within this report by taking beginning fund balance, less any fund balance budgeted to be used as a source, and adding the projected variances as well as project closeouts. As the CleanPowerSF Trust Fund is a continuing fund, amounts budgeted therein will automatically roll forward to the following year and will not be closed out to fund balance. As such, variances related to revenues, purchase of power, and general reserves will not close out to fund balance at the end of the year without manual intervention. However, as those funds are not considered restricted and CleanPowerSF may choose to close them out to fund balance, we are presenting them here as part of fund balance.
E. General Reserve was intentionally budgeted and planned to go unspent to build reserves.