CleanPowerSF Sfpuc Commission
September 20, 2023

Services of the San Francisco Public Utilities Commission 1 Nikolai J. Sklaroff,
Capital Finance Director
September 20, 2023
Power Financing
Authorization
2023 Series A Power Revenue Bonds

Services of the San Francisco Public Utilities Commission Agenda
• FY 2022-23 Capital Financing Plan Wrap Up
• Power Capital Financing Strategy
• Series 2023 Power Revenue Bonds
• Commission Authorization
• Authorize the issuance of up to $145 million of Series 2023A P
ower Revenue Bonds
2 Services of the San Francisco Public Utilities Commission FY 2022-23 Capital Financing Plan
(Originally presented September 27, 2022)
3 Description
Approximate Issue Size
($million)
Commission
Acts

1. Water - Clean Water State Revolving Fund (SRF) amended Loan Agreement - Westside Recycled Water Project $4.9 increase to $191 total 11/2022

2. Wastewater & Power - Renewal or replacement of bank
credit facilities for interim funding programs
$125 (Power)
$100 (Wastewater)
2/2023

3. Wastewater - Revenue Bonds Issuance $775 New Money 3/2023

4. Wastewater - Water Infrastructure Finance and Innovation Act (WIFIA) Loan Agreement - Resilience Projects
$791 Programmatic
Agreement and
$369 Loan
4/2023

5. Water - Revenue Bonds Issuance $425 New Money 5/2023

6. CleanPowerSF Credit Agreement -Amend credit agreement $20 increase to $40 total TBD

7. Power - Revenue Bond issuance $110 8/2023


Dates and amounts are preliminary and subject to change. 

Services of the San Francisco Public Utilities Commission Capital Financing Strategy
(Power Enterprise)
• Mitigate upward pressure on rates and charges
 10-Y ear Financial Plan* calls for issuance of
$912 million of Power Revenue Bonds, including this transaction  Focus on most efficient use of project funding; only issue f
inancing when needed
• Actively manage capital financing costs
 Borrow only what is needed now
 Manage large borrowing on top of 2015 and 2021 bonds
 Manage increase on rates for rate payers, including other City depar
tments
 Manage bond rating to borrow at lowest possible cost
4*10-Year Financial Plan (FY 2023-24 to FY 2032-33), February 2023 Services of the San Francisco Public Utilities Commission Enterprise Debt Overview
5 Outstanding as of September 1, 2023 ($ million)
Water Wastewater Power
Revenue Bonds $4,769 $2,745 $159
Federal WIFIA Loans
• Executed
• Drawn
-
-
1,582*
122
-
-
State Revolving Fund
Loans
• Executed**
• Drawn***
429
137
401
323
-
-
Commercial Paper
• Authorized
• Drawn****
500
-
750
-
250
117
*Amount includes Project 1 sub-loan agreement of $369 million from the new total WIFIA Master Loan agreement of $791 million. ** Includes $15 million grant for Recycled Water Project. ***Does not include reimbursements submitted but not yet received. **** Excludes accrued interest due at maturity.

Services of the San Francisco Public Utilities Commission Enterprise Debt Ratings
(as of August 1, 2023)
6 Moody’s
Investors Service
S&P Global
Ratings
Fitch
Ratings
Long‐Term Outlook Long‐Term Outlook Long‐Term Outlook
Water Enterprise Aa2 Stable AA- Stable -- --
Wastewater Enterprise Aa2 Stable AA Stable -- --
Power Enterprise* ‐‐ ‐‐ AA S
table AA
‐ S
table
CleanPowerSF** A2 Stable -- -- -- --
*Ratings applied for and pending on Series 2023A Bonds
**On December 9, 2020, Moody's Investors Service, assigned a first-time A2 Issuer Rating to CleanPowerSF , with a Stable outlook, however no outstanding debt is associated with this rating.

Services of the San Francisco Public Utilities Commission 7 Services of the San Francisco Public Utilities Commission • Authorize up to $145 million par amount
• R
efunds interim financing issued to fund Power Enterprise capital program
o Approximately $118 million of outstanding Commercial Paper and accrued interest
• Mitigates rate impacts with:
o 30 year debt amortization with level, but wrapped debt service which partially defers amortization in years without amortizing bonds
o Interest capitalized through November 1, 2025
o While not expected, the resolution authorizes a debt service reserve fund if necessary or advantageous
• Bonds issued on parity with outstanding 2015 and 2021 Power Revenue Bonds
Plan of Finance
Power Revenue Bonds
Services of the San Francisco Public Utilities Commission 8 Bond Sale Details
Services of the San Francisco Public Utilities Commission • 2023 Power Bonds are
ex
pected to be sold on a
negotiated basis
• Bond underwriters
selected via a competitive
RFP process from firms
in the Controller’s
underwriting pool
Senior
Manager
Co-Senior
Manager
Co-Manager Pricing Date Closing Date
JP Morgan
Securities, Inc.

Morgan Stanley Siebert Williams
Shanks
September 27 October 12

Services of the San Francisco Public Utilities Commission 9 Series 2023A Bonds
Sources
Par Amount $118,520,000
Premium 11,565,639
Total $130,085,639
Uses
Commercial Paper Retirement $117,712,348
Capitalized Interest Fund 11,595,870
Costs of Issuance 545,591
Underwriter’s Discount 231,830
Total 130,085,639
• Refund
approximately
$118 million of
commercial paper
and accrued
interest**
• Interest
capitalized to
November 1, 2025
• No reserve fund
anticipated (but
authorized if
advantageous)
Sources & Uses of Funds
(Series 2023A Power Revenue Bonds)*
*Preliminary, subject to change. Current estimates based on rates as of August 17, 2023. **Conservative Total NTE as calculated by Municipal Advisors.

Services of the San Francisco Public Utilities Commission 10 • 30-year fixed rate; first principal November 1, 2026 • “Wrapped” debt service structure for level aggregate debt • Interest capitalized to November 1, 2025
• Municipal advisors prepared chart based on Net Debt Service Aggregate Senior Lien Debt Service (FY)
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
Millions
Total Senior Lien Debt Service Series 2023A Bonds Debt Service Debt Service Schedule
(Series 2023A Power Revenue Bonds)*
Services of the San Francisco Public Utilities Commission 11 • California Government Code Section 5852.1 requires local agencies to disclose estimates of certain debt financing-related information at authorization
• SFPUC’s Municipal Advisors (PFM Financial Advisors LLC) have prepared this “Good Faith Estimate”
• Actual rates will depend on market conditions when the bonds are sold in September.
"Good Faith Estimate"
True Interest
Cost (TIC)
Finance Charge
of the Bonds
Amount of Proceeds
Received from Sale
Total Payment
Amount
2023A 4.29% $777,420.84 $117,712,348 $234,420,000
Preliminary and subject to change based on market conditions at the time the bonds are sold. Current estimates based on rates as of August 18, 2023, plus 25 basis points and 5.5% coupons and 110% of proceeds.

Services of the San Francisco Public Utilities Commission 12Source: PFM Financial Advisors LLC
Market Overview
(Tax-Exempt Interest Rates)

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%
Current Average MMD Range
AAA MMD Position Since Inception
AAA MMD Rate Position
(June 8, 1981, Inception to August 23, 2023)
Summary of August 23, 2023 vs. Historical (since Inception) MMD Rates Statistic 1-Year 2-Year 3-Year 4-Year 5-Year 7-Year 10-Year 15-Year 20-Year 25-Year 30-Year August 23, 2023 3.27% 3.19% 3.06% 2.96% 2.93% 2.88% 2.95% 3.45% 3.68% 3.85% 3.91% Historical Average 2.82% 3.10% 3.32% 3.50% 3.68% 4.00% 4.37% 4.84% 5.10% 5.22% 5.26% Spread to Average 0.45% 0.09% -0.26% -0.54% -0.75% -1.12% -1.42% -1.39% -1.42% -1.37% -1.35% Minimum 0.05% 0.05% 0.10% 0.13% 0.16% 0.36% 0.58% 0.88% 1.08% 1.22% 1.27% Maximum 9.65% 9.85% 10.05% 10.30% 10.65% 11.05% 11.50% 12.40% 12.70% 12.80% 12.90% % of Time Lower 55.66% 48.46% 46.05% 43.22% 40.66% 35.09% 31.12% 30.58% 28.07% 27.46% 27.51% Services of the San Francisco Public Utilities Commission SFPUC Green Bond Program
(Annual by Enterprise)
13 • 2023 has been the largest year of Green Bond issuance in SFPUC’s history • Since 2015, Power Enterprise has self-certified Green Bonds; market changes and regulatory comments have prompted reevaluation • Plan to update Green Bond Program to incorporate external certification • 2023 Power Bonds will therefore not be labeled green.

Water​ Wastewater​ Power​ Total​
$2,367M​ $1,953M​ $106M​ $4,426M
Services of the San Francisco Public Utilities Commission 14 Related Transaction Documents
Services of the San Francisco Public Utilities Commission • Preliminary Official Statement (POS)
o Disclosure describing bond terms and factors relevant to the credit of the Power Enterprise
• Form of Continuing Disclosure Agreement (included
with the POS)
• Third Supplemental Indenture
o Agreement between SFPUC and bondholders
• Bond Purchase Contract
o Agreement between the SFPUC and the Underwriters setting forth conditions upon which the bonds will be offered and underwritten by the Underwriter
Services of the San Francisco Public Utilities Commission 15 • Commission Disclosure Training
Deputy City Attorney Mark Blake and SFPUC Disclosure
Counsel, Steve Spitz, Partner, Orrick Herrington & Sutcliffe LLP provided Commission refreshed Disclosure Training at its February 14, 2023 Meeting, titled “How Commissioners
Discharge their Legal Obligations Under Federal Securities Laws”
• Disclosure Standard:

Rule 10b-5 “unlawful for any person . . . to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not
misleading . . . .”
Commission Legal Obligations
Services of the San Francisco Public Utilities Commission 16 Recommended Commission Action
• Authorize issuance of up to $145 million
2023 S
eries A Power Revenue Bonds
• Approve form of related bond documents
• Authorize General Manager to sell Bonds in
one or more series on a negotiated basis
Services of the San Francisco Public Utilities Commission 17 Questions

AGENDA ITEM
Public Utilities Commission
City and County of San Francisco

DEPARTMENT Financial Services
AGENDA NO.

6 MEETING DATE

September 20, 2023

Power Revenue Bond Authorization: Regular Calendar
Project Manager: Nikolai J. Sklaroff

Authorize the Issuance of up to $ 145 Million of 202 3 Series A Power Revenue Bonds to Refund Outstanding Commercial Paper

Summary of
Proposed
Commission
Action:

Authorize the Issuance of up to $ 145 million of the 202 3 Series A Power Revenue Bonds ( 2023 Power Bonds ) (i) to finance or refinance Power Enterprise projects through the refunding and retirement of commercial paper issued as interim financing for such projects, (ii) to fund capitalized interest to mitigate the short- term budgetary impact of borrowing, and ( iii) to potentially
fund a debt service reserve fund (if the SFPUC elects to fund a reserve); Delegate to the General Manager authorization to appoint bond underwriters and to enter into one or more bond purchase contracts with underwriters selected from t he City’s pool of pre -
qualified underwriters, subject to a competitive
procurement process and in accordance with the City’s policies and procedures with respect thereto, and further subject to the limits on underwriters’ compensation set forth in the Comm ission resolution; Approve the issuance of 2023 Pow er Bonds; Approve the form of, and authorize the execution and delivery of, related documents; and authorize the General Manager to negotiate the sale of the 2023 Power Bonds in one or more series of bonds , as the General Manager determines is in the best financial interest of the San Francisco Public Utilities Commission.

Background: 2023 Power Bonds: The San Francisco Public Utilities Commission (SFPUC) will issue the 2023 Pow er Bonds pursuant to provisions of the Charter Sections

9.107(6) and 9.107(8) (to the extent applicable) and Proposition A approved by San Francisco voters on June 5, 2018 and incorporated into the San Francisco Charter as Section 8B.124, Article XIV of Chapter 43 of the City Administrative Code (providing procedures for the issuance of power enterprise revenue bonds), and pursuant to various resolutions and ordinances approved by the Commission and the Board of Supervisors.

Proceeds of the 2023 Power Bonds will be used to refund approximately $118 million of outstanding commercial paper issued to pay interim financing costs of Power Enterprise capital projects (including certain upcountry generation projects, upcountry transmission projects, and certain in-city redevelopment and distribution projects), plus accrued interest . The 2023 Power Bonds will also provide proceeds to fund a debt service reserve fund (if determined to be in the best financial interest of the SFPUC ), capitalized interest, and transaction - related costs of issuance.

Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

The security for the bonds will be on the same security lien as the Commission’s outstanding 2015 and 2021 power enterprise Revenue Bonds. On November 9, 2021, the Power Enterprise most recently issued $124 million of new money Revenue Bonds to finance and refinance various capital projects.

The 2023 Power Bonds transaction was included as part of the FY 2022- 23 Capital Financing Plan presen ted to the Commission on September 27, 2022.

The 2023 Power Bonds are being issued in compliance with the “Debt Management Policies & Procedures,” most recently updated and approved by the Commission on November 26, 2019.

Plan of Finance: The SFPUC expects to issue up to $145 million of 2023 Power Bonds, sized (i) to fund expenditures for Power enterprise capital improvements which were originally financed on an interim basis from the proceeds of commercial paper notes together with accrued interest , (ii) to fund a capitalized interest account, and (iii) to potentially fund a debt service reserve fund. By refinancing accumulated c ommercial paper, this transaction allows the Power Enterprise to encumber additional funds for contracts and fund power enterprise capital project needs in reliance on the availability of commercial paper.

Structure of the Bonds: The 2023 Power Bonds would be structured as tax- exempt fixed rate bonds with a final maturity not -to-exceed 30 years from the issuance year. Proceeds of the bonds would also fund the payment of capitalized interest through approximately November 1, 2025 with the first principal payment expected to be on November 1, 2026. The interest rates will be determined on the bond pricing date and will remain fixed while the bonds remain outstanding. The resolution provides that the True Interest Cost (TIC) shall not exceed five percent (5%). All dates and amounts are preliminary and subject to change pending the bond pricing. The 2023 Power Bonds may also include optional redemption features that will also be determined on the bond pricing date. Typically, investors ask that 30 -year bonds not be called in first 10 years, and then the bonds are callable at par . In some markets, it may be possible to get a shorter period without paying a higher rate . Having this flexibility to refinance the bonds in the future creates the opportuni ty for potential future savings.

Transaction Schedule: Depending on market conditions, it is expected that the sale of 2023 Power Bonds will occur in late September 2023 and the transaction will close by the middle of October 2023.

Government Code 5821.1 Compliance : Pursuant to Senate Bill 450 (SB450) enacted in 2017 (codified at Government Code Section 5821.1) , California law requires the governing body of a local public body to obtain and disclose, prior to authorization of a new bond issue, good
faith estimates of the following
financing-related information:

1. True Interest Cost (TIC) of the bonds;

2. Finance charge of the bonds = Representing the sum of all fees and charges paid to third parties;

3. Amount of proceeds received = Representing proceeds of the bonds net Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

of fees and charges paid to third parties and any reserves or capitalized interest funded by the bonds; and

4. Total paym ent amount - The sum of all debt service payments on the bonds calculated to the final maturity of the bonds.

Issuers are required to obtain good faith estimates from either the issuer’s municipal advisor, underwriter, or third-party lender. The Commission has been presented with this information in past staff reports requesting approval of bonds issued or loans executed since the enactment of SB 450.

The following represents a good faith reasonable estimate of certain costs of the 2023 Power Bonds for
purposes of compliance with SB 450 and based upon
information as of August 17, 2023. Staff has consulted with the SFPUC’s Municipal Advisor, PFM California Advisors LLC , and obtained estimates reflecting the expected closing date with regard to the 2023 Power Bonds.

Actual results may vary based on prevailing market conditions when the bonds are priced.

1. True Interest Cost (TIC): 4.29%

2. Finance Charge of the Bonds: $777,420.84 (reflects both costs of issuance and underwriter’s discount).

3. Amount of Proceeds Received by the Public Body for Sale of the Bonds: $117,712,348 (less the finance charge and any capitalized interest)

4. Total Payment Amount: $234,420,000 (represents total estimated debt service, net of capitalized interest, if any).

Method of Sale: In consultation with the SFPUC’s Municipal Advisor on this transaction, PFM California Advisors LLC, the SFPUC staff has recommended a negotiated sale for the 2023 Power Bonds. In a negotiated sale, the SFPUC hires underwriters for the bonds through a competitive Request for Proposals process issued to firms that have been prequalified in the City’s underwriting pool. The underwriters are able to work with the SFPUC on structuring the transaction and preparing documents, including the disclosure document , and ultimately lead the pricing and underwriting of the transaction. In addition, they assist with the process of preparing materials for rating agencies and investors, and premarketing and marketing of the bonds. Staff has recommended a negotiated sale because:

1) the past year has been a time of unprecedented market volatility, due to numerous Federal Reserve interest rate increases, the potential for a bank crisis, the debt limit standoff in Congress earlier this year, the impact of the war in Ukraine , persistent inflation,
and the enduring
impacts of the Covid- 19 pandemic. A negotiated sale process provides the SFPUC with more financial expertise during the preparation of the bond transaction, the ability to premarket the bonds, and timing flexibility, all of which can improve the results of Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

a bond sale;
2) negotiated sales provide greater “real time” structuring flexibility than competitive sales;
3) negotiated sales have allowed the SFPUC to select diverse underwriting teams which include smaller local firms including firms that have supported the SFPUC with credit and liquidity support, as part of the underwriting team; and
4) based on data provided by our Municipal Advisors in making their method of sale recommendation in April, less than 2% of California public power bonds issued since 2015
has been issued on a
competitive basis for many of the reasons noted here.

A Request for Proposals was sent to all firms in the Controller’s Office of Public Finance Underwriter Pool. A total of 16 proposa ls were received by the June 9, 2023 deadline and reviewed by the SFPUC’s Municipal Advisor and staff, including 12 responses to serve as senior manager. After a formal evaluation and scoring process, JP Morgan Securities LLC, and Morgan Stanley & Co. LLC were selected to serve as Co -Senior Manager s, with JPMorgan as Bookrunner . These firms were selected based on the firms’ experience, underwriting capabilities, technical expertise, financing ideas and competitive fees. Additionally, Siebert Williams Shank & Co., LLC was selected as Co-Manager for the 2023 Power Bond sale.

Bond Documents: The Commission Resolution approves the form of and authorizes the execution of documents relating to the 2023 Power Bonds, as described below.
1) Preliminary Official Statement – The Preliminary Official Statement (POS) is the primary disclosure document that is provided to potential investors. The POS contains material information regarding the bond issuance and the Power Enterprise credit for a potential investor to use in making an informed investment decision. It includes, but is not limited to, information regarding the bond terms , repayment sources, risk factors, and financial and operating data relating to the Power Enterprise.

The POS, when posted, is intended to be final except for certain pricing information. The Commission R
esolution also authorizes the General
Manager to execute a final Official Statement , which will consist of the POS together with final pricing information from the sale of the bonds. a) Continuing Disclosure Certificate – The Continuing Dis closure Certificate (CDC) sets forth the SFPUC’s commitment to provide certain financial information and operating data relating to the Power Enterprise on an annual basis , and to provide notices of the occurrence of certain enumerated events pursuant to the Securities and Exchange Commission’s (SEC) Rule 15c2- 12. To facilitate the sale, the SFPUC is required to execute the CDC as a regulatory prerequisite to enable the underwriters to unde rwrite the bonds. The CDC is included in the Preliminary Official Statement as an appendix.
2) Indenture (as amended by the Third Supplemental Indenture) – The Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

Indenture is an agreement between the SFPUC and the Trustee which sets forth the contractual terms for the bonds, including pledge of revenues, flow of funds, covenants, defaults and remedy provisions, and provisions to issue additional debt. The Suppl emental Indentures set forth the terms of each individual series of bonds, including maturities, interest rates and terms of early redemption.
3) Bond Purchase Contract – The agreement between the SFPUC and the Underwriters setting forth conditions upon whic h the bonds will be offered and underwritten by the Underwriters, and the obligations of both parties, including provisions allowing the Underwriters to not underwrite the bonds in the event of certain extraordinary circumstances.

Legal and Advisory Team: The SFPUC Finance Team worked collaboratively with its outside municipal advisor, as well as with the City Attorney’s Office and outside bond and disclosure counsel, to develop all aspects of the documents associated with the sale of the 2023 Power Bonds, i
ncluding all attachments.

The parties working with the SFPUC on this financing are as follows:
• General Counsel: City Attorney’s Office of the City and County of San Francisco
• Disclosure Counsel: Orrick, Herrington & Sutcliffe LLP • Bond Counsel: Stradling Yocca Carlson & Rauth
• Municipal Advisor: PFM California Advisors, LLC
• Senior Managing Underwriter s: JP Morgan Securities LLC (Bookrunner) and Morgan Stanley & Co. LLC
• Co-Manager: Siebert Williams Shank & Co., LLC
• Trustee: U.S. Bank National Association
• Independent Pricing Consultant: Backstrom McCarley Berry & Co., LLC
• Underwriter’s Counsel: Husch Blackwell LLP

Disclosure Considerations: As part of the Commissioner’s disclosure training, Commissioners have been informed that under the federal securities laws , the SFPUC must disclose the financial condition of, and other operating information about, the Pow
er Enterprise to prospective investors as included in the Preliminary Official Statement and the final Official Statement for the bonds .

Such disclosure must be complete and accurate with no material misstatements or material omissions.

The preparation of the Preliminary Official Statement reflects a rigorous and iterative drafting and review process , undertaken by subject matter experts and senior management within the Pow er Enterprise, the City Attorney’s Office and the SFPUC’s financing team . In addition, the SFPUC has been assisted in the preparation of the document by Or rick, Herrington & Sutcliffe LLP serving as the SFPUC’s disclosure counsel.

Prior to distribution to investors, the Preliminary Official Statement will be updated to reflect the most current information of the Pow er Enterprise. The final Official Statement will be distributed after the bonds are priced but prior to the closing of the bonds and will include relevant pricing-related information.

Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

Management and staff have been involved in drafting and reviewing the POS, with the assistance of the SFPUC’s Disclosure Counsel, the City Attorney’s Office, and members of the SFPUC’s financing team. If Commissioners would like additional information or have important information concerning the Power Enterprise (and would like to confirm its disclosure) , they are encouraged to contact Nikolai Sklaroff, as representative of the SFPUC’s Finance Team, or the City Attorney’s Office.

Counsel has advised that prior to approval of the form of Preliminary Official Statement, individual Commissioners should review the attached documents and be satisfied that:
1) They understand the key terms of the bond transaction, including commitments undertaken by the SFPUC;
2) The process followed in the preparation of the Preliminary Official Statement and final Official Statement is adequate; and 3) SFPUC officers or the City Attorney’s Office are aware of all matters important to the financial condition of the SFPUC and the Pow er Enterprise of which Commissioners have personal knowledge.

A summary level bond disclosure “Questions and Answers” is set forth below:

Q. What is the size of the bond issue?
A. The SFPUC expects to issue an aggregate not -to-exceed $145 million of the 2023 Power Revenue Bonds.

Q. Why are bonds being issued?
A. The 2023 Power Revenue Bonds are being issued to provide long- term funding for approved Power Enterprise capital projects , and to refund outstanding commercial paper issued to provide interim financing for Power Enterprise capital projects.

Q. What is the bond structure?
A. The 2023 Power Bonds are expected to consist of senior lien, fixed rate tax-exempt bonds. The 2023 Power Bonds may fund a debt service reserve fund only if determined to be in the best financial interest of the SFPUC and will fund an estimated two years of capitalized interest . The bonds will have a final maturity not -to-exceed 30 years from the original year of issuance. The bonds may also include optional redemption features that will also be determined on the bond pricing date.

Q. By what method will the bonds be sold?
A. The sale of the 2023 Power Revenue Bonds will be negotiated with a syndicate of underwriters led by J.P. Morgan Secu rities and Morgan Stanley. T he underwriters have been selected through a competitive RFP issued to the City’s prequalified underwriting pool and the pricing terms (i.e. interest rates) of the bonds are set after marketing the bonds to investors and negoti ating with the underwriters based on investor demand and market conditions , with advice from the SFPUC’s transaction municipal advisor. As required under the SFPUC’s debt policy, an independent pricing consultant will verify whether the SFPUC Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

received a fair price.

Q. How will debt service on the bonds be paid?
A. The 2023 Power Revenue Bonds will be repaid from a pledge of the “net revenues” of the Pow er Enterprise, in accordanc e with the Power Enterprise Trust Indenture, the source of which is revenues from rates and charges to customers of the Power Enterprise . Net revenues are those revenues remaining after the payment of Operati on and Maintenance Expenses of the Pow er Enterprise. Please note that under the Indenture , the CleanPowerSF program is treated as a separate system. As such, Revenues, Expenses, Assets and Liabili ties of the CleanPowerSF program are not included in the net revenue pledge of Power Enterprise revenue bonds.

Q. What impact will the issuance of the 2023 Power Revenue Bonds have on Power Enterprise rates?
A. Conservative assumptions for this d ebt service and debt service coverage requirements have been included in an update of the Power Enterprise 10-Year Financial Plan. This debt is not expected to lead to a further increase of Power Enterprise rates beyond existing projections .

Projected annu al rate increases are projected to average approximately

6.7% over 10 years (2024-2033).

Q. Will issuance of the bonds have a negative impact on the SFPUC credit ratings?
A. The SFPUC senior leadership will have made a formal credit presentation to the bond rating agencies before this item is heard by the Commission. The SFPUC has applied for ratings for the 2023 Power Bonds and expects to have the results of the rating review in time for the Commission me eting. Staff
will be able to communicate the rating
results for the 2023 Power Bonds. It is not expected that the issuance of the 2023 Power Bonds will have a negative credit impact.

Environmental
Review:

The projects to be refinanced by bond proceeds have already undergone California Environmental Quality Act (CEQA) review and have been approved by this Commission. The bond proceeds may be used to finance additional capital projects benefitting the Power Enterprise that have not yet completed environmental review or been approved by the Commission. This proposed action does not constitute approval of any projects that have not been approved by this Commission and have not yet completed CEQA review. For such projects, environmental review will be completed an d considered by this Commission prior to the approval of expenditure of funds for construction.

The Environmental Review Officer has previously issued the certificates required by subsection (b) of Section 8B.124 of the Charter with respect to the projects financed with the proceeds of the bonds to be refinanced with 2023 Power Bonds. All projects listed in these certificates that proceeded to construction have undergone any applicable California Environmental Quality Act review.

Execute Agreement: Authorize the Issuance of up to $145 Million of 2023 Series A Power Revenue Bonds to Finance Power Enterprise Capital Projects
Commission Meeting Date: September 20, 2023

The certificates can be found here:
https://sfpuc.sharefile.com/d-sb4b46b69be974185b627e2206c375d5f Attachments: 1) Form of Preliminary Official Statement (POS) including Form of Continuing Disclosure Certificate (POS Appendix)
2) Form of Third Supplemental Indenture
3) Form of Bond Purchase Contract

PUBLIC UTILITIES COMMISSION
City and County of San Francisco

RESOLUTION NO. ________________
WHEREAS, Section 9.107(6) of the Charter (Charter) of the City and County of San Francisco (City) authorizes the issuance of revenue bonds, without voter approval, when authorized by resolution approved by a three -fourths affirmative vote of the Board of Supervisors of the City (Board), for the purpose of the reconstruction or replacement of existing water facilities and electric power facilities or combinations of water and electric power facilities under the jurisdiction of the Public Utilities Commission of the City and County of San Francisco (Commission); and
WHEREAS, Charter Section 9.107(8) authorizes the issuance of revenue bonds, without voter approval, upon an affirmative vote of the Board, for the purpose of financing or refinancing the acquisition, construction, installation, equipping, improvement or rehabilitation of equipment or facilities for renewable energy and energy conservation; and WHEREAS, On June 5, 2018, the voters of the City approved Proposition A, amending Article VIIIB of the Charter (Article VIIIB), which among other things (and in addition to the authority granted under Charter Section 9.107), authorizes the Commission to issue revenue bonds, including notes, commercial paper or other forms of indebtedness, when authorized by ordinance approved by a two-thirds vote of the Board, for the purpose of reconstructing, replacing, expanding, repairing or improving power facilitie s (in addition to water and clean water facilities) or combinations of water, clean water and power facilities under the jurisdiction of the Commission or for any other lawful purpose of the water, clean water, or power facilities of the City; and
WHEREAS, Pursuant to Article V of Chapter 43 (Article V) of the San Francisco Administrative Code (City Administrative Code), enacted by Ordinance No. 203-98, adopted by the Board on June 8, 1998, and signed by the Mayor of the City (Mayor) on June 19, 1998, as amended by Ordinance No. 270-06, adopted by the Board on October 24, 2006, and signed by the Mayor on October 31, 2006 (collectively, the Short -Term Borrowing Procedure), the Board established a procedure pursuant to which the Commission may, with the prior approval of the Board, issue short -term indebtedness in the form of commercial paper, temporary notes or other forms of indebtedness, including short -term indebtedness in anticipation of the issuance of revenue bonds; and
WHEREAS, Pursuant to Article XIV of Chapter 43 (Article XIV) of the City Administrative Code, enacted by Ordinance 40-15, adopted by the Board on March 24, 2015, and signed by the Mayor on April 2, 2015 (the Power Revenue Bonds Procedure), the Board established a procedure pursuant to whic h the Commission may, when approved by the Board, issue revenue bonds for any purposes of the City’s power enterprise (Power Enterprise); and

WHEREAS, Pursuant to Ordinance No. 41-15, adopted by the Board on March 24, 2015, and signed by the Mayor on April 2, 2015, the Board authorized the issuance and sale by the Commission of revenue bonds in an aggregate principal amount not to exceed $48,000,000 to finance various capital projects for the Power Enterprise pursuant to Charter Sections 9.107(6) and 9.107(8), and in accordance with the Power Revenue Bonds Procedure, which ordinance was in supplement to Ordinance No. 106-14, adopted by the Board on June 24, 2014 and signed by the Mayor on July 2, 2014; and
WHEREAS, Pursuant to Resolution No. 427-15, adopt ed by the Board on November 15, 2015, and signed by the Mayor on November 25, 2015, the Board authorized the establishment by the Commission of a commercial paper (CP) program for the Power Enterprise (the CP Program) in anticipation of the issuance of revenue bonds and the issuance of CP notes thereunder, pursuant to Charter Section 9.107(6) and Charter Section 9.107(8) and the Short-Term Borrowing Procedure, in a maximum aggregate principal amount at any time outstanding not to exceed $90,000,000, which CP Program was approved by the Commission (subject to the Board’s adoption of Resolution No. 427- 15), pursuant to Commission Resolution No. 15-0183, adopted on September 15, 2015; and WHEREAS, Pursuant to Ordinance No. 113-16, adopted by the Board on June 14, 2016, and signed by the Mayor on June 24, 2016, the Board authorized the issuance and sale of revenue bonds and other forms of indebtedness of the Commission in an aggregate principal amount of not to exceed $32,483,088 to finance the costs of various capital projects benefiting the Power Enterprise pursuant to Charter Sections 9.107(6) and 9.107(8); and WHEREAS, Pursuant to Ordinance No. 142-18, adopted by the Board on June 12, 2018, and signed by the Mayor on June 20, 2018, as amended by Ordinanc e No. 152-19, adopted by the Board June 25, 2019, and signed by the Mayor on June 28, 2019, the Board authorized the issuance and sale of revenue bonds and other forms of indebtedness (including, without limitation, commercial paper) by the Commission in a n aggregate principal amount of not to exceed $199,898,526 to finance the costs of various capital projects benefiting the Power Enterprise, pursuant to Charter Sections 9.107(6) and 9.107(8) and Article VIIIB; and
WHEREAS, Pursuant to Ordinance No. 002-19, adopted by the Board on January 15, 2019, and signed by the Mayor on January 18, 2019, the Board authorized and approved of an increase in the maximum aggregate principal amount of CP notes that may at any time be outstanding under the CP Program for the Power Enterprise from $90,000,000 to $250,000,000, and additionally approved the issuance of CP notes pursuant to Article VIIIB (subject to receipt of the certifications required thereunder), as well as Charter Sections

9.107(6) and Section 9.107(8), all as approved by the Commission (subject to the Board’s adoption of Ordinance No. 002-19), pursuant to Commission Resolution No. 18-0188, adopted on November 13, 2018; and
WHEREAS, Pursuant to Ordinance No. 172-20, adopted by the Board on September 29, 2020, and signed by the Mayor on October 1, 2020, as amended by Ordinance No. 127- 21, adopted by the Board on July 27, 2021, and signed by the Mayor on August 4, 2021, the Board authorized the issuance and sale of revenue bonds and other forms of indebtedness by the Commission in an aggregate principal amount of not to exceed $162,314,897 to finance the costs of various capital projects benefiting the Power Enterprise; and

WHEREAS, Pursuant to Ordinance No. 109-22, adopted by the Board on June 14, 2022, and signed by the Mayor on June 24, 2022, the Board authorized the issuance and sale of revenue bonds and other forms of indebtedness by the Commission in an aggregate principal amount of not to exceed $140,889,875 to finance the costs of various capital projects benefiting the Power Enterprise; and
WHEREAS, Under the authority granted by the Charter provisions and by the applicable ordinances and resolutions of the Board and this Commission, the Commission has issued: (1) $39,555,000 aggregate principal amount of its Power Revenue Bonds, 2015 Series AB (2015 Power Bonds), as approved by the Commission pursuant to Commission Resolution No. 14-0197 adopted on December 9, 2014, as supplemented by Commission Resolution No. 15-0101 adopted on April 28, 2015; (2) $124,000,000 aggregate principal amount of its Power Revenue Bonds, 2021 Series AB (2021 Power Bonds), as approved by the Commission pursuant to Commission Resolution No. 21-0169 adopted on November 9, 2021; and (3) approximately $116,352,000 aggregate principal amount of CP notes outstanding as of July 1, 2023 (which, together with any additional CP notes issued under the CP Program prior to the delivery of the 2023 Power Bonds (as hereinafter defined) contemplated by this Resolution, are referred to herein as Outstanding CP Notes); and WHEREAS, It is proposed that the Commission issue one or more series of revenue bonds, under the authority granted by the Charter and by the applicable ordinances hereinabove mentioned (Authorizing Ordinances) and this Resolution, for the purpose of financing or refinancing (through the retirement of Outstanding CP Notes) various capital projects benefitting the Power Enterprise (including, if applicable, reimbursing the Commission for certain capital costs previously paid with proc eeds of Outstanding CP Notes or from other moneys) in an aggregate principal amount not to exceed $144,880,000 (the 2023 Power Bonds) pursuant to the Trust Indenture, dated as of May 1, 2015, by and between the Commission and U.S. Bank Trust Company National Association, as trustee (the Trustee), as previously supplemented and amended (as so supplemented and amended, the Trust Indenture), and one or more additional supplemental indentures as herein provided; and WHEREAS, It is proposed that the 2023 Power Bonds be issued pursuant to a supplemental indenture or supplemental indentures (each, the Supplemental Indenture), between the Commission and the Trustee, in the form submitted to this Commission; and WHEREAS, It is proposed that such 2023 Power Bonds be s old in a negotiated sale pursuant to a Bond Purchase Contract (the Bond Purchase Contract) between the Commission and the underwriters identified therein; and WHEREAS, The General Manager has deemed the negotiated sale of the 2023 Power Bonds in the best interest of the Commission for a successful offering, given significant bond market volatility and the need for pre -marketing, and the timing and structuring flexibility afforded by a negotiated sale (as compared to a competitive sale) is an important deter minant to the success of the offering; and
WHEREAS, A preliminary official statement for the 2023 Power Bonds (the Preliminary Official Statement) has been prepared and there will be prepared a final official statement for the 2023 Power Bonds (the Officia l Statement) to be used in connection with the offering and sale of the 2023 Power Bonds; and

WHEREAS, A continuing disclosure certificate (Continuing Disclosure Certificate) will be executed and delivered with respect to the 2023 Power Bonds in order to a ssist the underwriters in complying with Securities and Exchange Commission Rule 15c2-12 (Rule 15c2-12); and
WHEREAS, The Commission has examined the proposed forms of the Supplemental Indenture, the Bond Purchase Contract, the Preliminary Official Stateme nt and the Continuing Disclosure Certificate; and
WHEREAS, A California Environmental Quality Act (CEQA) determination has already been issued for the projects that will be refinanced using 2023 Power Bond proceeds, and any additional project to be finance d with 2023 Power Bond proceeds will comply with applicable requirements of CEQA prior to project approval by the Commission and any draw on the proceeds to finance the acquisition or construction of such projects; and WHEREAS, This Commission has reviewed and considered project specific Final Environmental Impact Reports and Mitigated Negative Declarations and adopted CEQA findings and Mitigated Monitoring and Reporting Programs for the projects that will be refinanced using 2023 Power Bond proceeds, which are on file with the Commission Secretary, and finds that the FEIRs and MNDs are adequate for its use as the decision making body for the actions taken herein, and hereby reaffirms the previously adopted CEQA findings, including the Statements of Overriding Considerations and the MMRPs and incorporates the same herein as part of this Resolution by this reference thereto; and WHEREAS, The 2023 Power Bond proceeds may be used to finance capital projects that this Commission has not yet approved, and this Resolution does not constitute project approval or approval of expenditure of 2023 Power Bond funds for project construction, and projects that have not yet been approved will be subject to this Commission’s review and consideration of completed environmental documentation prior to approval of the expenditure of funds for construction; and
WHEREAS, Article VIIIB of the Charter (specifically, Section 8B.124) allows for the issuance of revenue bonds, including notes, commercial paper and other forms of indebtedness, when authorized by ordinance approved by a two-thirds vote of the Board, subject to the provision of certain certifications of an independent engineer retained by the Commission and certain certifications by the San Francisco Planning Departme nt, which certifications make the findings and determinations set forth in Section 8B.124; and WHEREAS, Certificates intended to meet the requirements set forth in Section 8B.124 (to the extent applicable) with respect to the 2023 Power Bonds have been pre sented for review by the Board (the Certificates), and the Certificates have been filed with the Clerk of the Board and the Secretary of the Commission; and
WHEREAS, The voters of the City approved Proposition P in November 2002, to which this Resolution a nd the 2023 Power Bonds are subject, constituting Section 5A.30 et seq. of Chapter V of the City Administrative Code (Proposition P Requirements), including the requirement that, to the extent permitted by law, one -twentieth of one percent (0.05%) of the gross proceeds of the 2023 Power Bonds shall be deposited in a fund established by the Office of the Controller of the City (Controller’s Office) and appropriated by the Board at the direction of the Public Utilities Revenue Bond Oversight Committee to cove r the costs of said committee; and

WHEREAS, in compliance with California Government Code Section 5852.1, the Commission has obtained from PFM California Advisors LLC, the Commission’s Municipal Advisor with respect to the 2023 Power Bonds, good faith estimates of the following information: (a) the true interest cost of the 2023 Power Bonds, (b) the sum of all fees and charges paid to third parties with respect to the 2023 Power Bonds, (c) the amount of proceeds of the 2023 Power Bonds expected to be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the 2023 Power Bonds, and (d) the sum total of all debt service payments on the 2023 Power Bonds calculated to the final maturity of the 2023 Power Bonds plus the fees and charges paid to third parties not paid with the proceeds of the 2023 Power Bonds; and WHEREAS, The Commission is duly empowered, pursuant to each and every requirement of law, to authorize the foregoing transactions, to issue the 2023 Power Bonds and to authorize the distribution of the Preliminary Official Statement and the Official Statement, and the execution and delivery of the Supplemental Indenture, the Bond Purchase Contract, the Official Statement, the Conti nuing Disclosure Certificate and related documents, each as appropriate for any series of 2023 Power Bonds (or subseries thereof), for the purposes, in the manner and upon the terms provided herein; and now, therefore, be it RESOLVED by the Public Utilitie s Commission of the City and County of San Francisco, as follows:

Section 1. Issuance of the 2023 Power Bonds. The issuance of the 2023 Power Bonds, in one or more series (or subseries) and on one or more dates, in an aggregate principal amount not to exceed $144,880,000, pursuant to the authority granted by the Charter and the applicable Authorizing Ordinances, is hereby authorized and approved by the Commission, subject to the limitations and conditions provided herein. The 2023 Power Bonds shall be issued for the purpose of: (a) financing or refinancing (through the retirement of all or any portion of the Outstanding CP Notes) various capital projects benefitting the Power Enterprise (including, if applicable, reimbursing the Commission for certain capital costs previously paid with the proceeds of Outstanding CP Notes or other moneys), as may be determined by the General Manager of the Commission or the General Manager’s designee (General Manager), (b) financing capitalized interest, (c) funding a debt service reserve account for the 2023 Power Bonds, if any; and (d) paying costs of issuance of the 2023 Power Bonds.

The 2023 Power Bonds shall be issued in accordance with the Charter, the Authorizing Ordinances, this Resolution and the Trust Indenture (as supplemented by the Supplemental Indenture), and in accordance with the Power Revenue Bonds Procedure. The General Manager is hereby authorized and directed to determine the aggregate principal amount of 2023 Power Bonds to be issued from time to time (subject to the maximum amount and further limitations and conditions set forth herein) and to determine the various titles and series (or subseries) designations of the 2023 Power Bonds. The 2023 Power Bonds may be issued as tax -exempt or taxable bonds, or any combination thereof. The form of the 2023 Power Bonds, in substantially the form set forth in the applicable Supplemental Indenture and presented to this meeting is hereby approved. The General Manager is hereby authorized and directed to approve and to execute the 2023 Power Bonds by manual or facsimile signature, and the Secretary of the Commission is hereby authorized and directed to attest, by manual or facsimile signature, with such changes, additions, amendments or modifications thereto which they may approve with the advice of the City Attorney, such

approval to be conclusively evidenced by the execution and delivery of the 2023 Power Bonds, subject to the limitations set forth in Section 2 hereof.

Section 2. Sale of the 2023 Power Bonds. The sale of the 2023 Power Bonds by negotiated sale, in one or more series and on one or more dates, is hereby authorized and approved by the Commission, subject to the limitations and conditions provided herein. The Commission hereby finds and acknowledges that (i) the General Manager has deemed the negotiated sale of the 2023 Power Bonds in the best interest of the Commission, and (ii) the applicable requirements of the Commission’s Debt Management Policies and Procedures, including the retention of an independent pricing consultant in connection with such negotiated sale of the 2023 Power Bonds, have been or will be satisfied. The true interest cost of the 2023 Power Bonds shall not exceed five percent (5.00%) and the final maturity of any 2023 Power Bonds shall not be later than thirty (30) years after the issuance year thereof.

Section 3. S
upplemental Indenture. The proposed form of Supplemental Indenture for the 2023 Power Bonds submitted to this Commission, and the terms and conditions thereof, are hereby approved. The General Manager of the Commission is authorized and directed to execute and deliver, and the Secretary of the Commission is authorized to attest to, the Supplemental Indenture or Supplemental Indentures for the 2023 Power Bonds substantially in the form presented at this meeting, with such changes and additions thereto as they may approve upon consultation with the Commission’s Municipal Advisor with respect to the 2023 Power Bonds and the City Attorney, such approval to be conclusively evidenced by the execution and delivery thereof. Subject to the further limitations hereof, the principal amount, date, maturity date or dates, maxi mum interest rate or rates, series (and any subseries) designation, interest payment dates, forms, registration privileges, place or places of payment, terms of redemption, insurance provisions and other terms of the 2023 Power Bonds shall be as provided in the applicable Supplemental Indenture as finally executed. The Secretary of the Commission is directed to file a copy of the form of Supplemental Indenture (which includes the proposed form of the 2023 Power Bonds) with the minutes of this meeting.

Section 4. S
election of Underwriters ; Bond Purchase Contract . The General Manager is hereby authorized to select and appoint one or more underwriters (each, an Underwriter and collectively, the Underwriters) from the Commission’s or the City’s pool of pre-qualified underwriters subject to a competitive procurement process and in accordance with the City’s policies and procedures with respect thereto, subject to the limits on Underwriters’ compensation set forth below. The proposed form of Bond Purchase Contract with the Un derwriters for the 2023 Power Bonds, submitted to this Commission, is hereby approved. The General Manager is hereby authorized to enter into a Bond Purchase Contract with one or more of the Underwriters, individually or collectively, as the General Manage r deems appropriate, substantially in the form presented at this meeting, with such changes and additions as the General Manager may approve upon consultation with the City Attorney, such approval to be evidenced conclusively by the execution and delivery of such Bond Purchase Contract; provided, however, that the total compensation to the Underwriter(s) shall not exceed 0.35% of the par value of the 2023 Power Bonds to be sold pursuant to any such Bond Purchase Contract. The Secretary of the Commission is directed to file a copy of said form of Bond Purchase Contract with the minutes of this meeting.

Section 5. A
pproval of the Preliminary Official Statement and Official Statement. The Preliminary Official Statement for the 2023 Power Bonds, in substantially the form submitted to the Commission and on file with the Secretary of the Commission, is

hereby approved. The General Manager is hereby authorized to certify from time to time, for and on behalf of the Commission, that the Preliminary Official Statement, with such changes, additions and supplements as the General Manager may deem necessary or appropriate in the interest of the Commission, upon consultation with the City Attorney, is deemed final as of its date, within the meaning of Securities and Exchange Commission Rule 15c2-12 (except for the omission of certain final pricing, rating and related information as permitted by Rule 15c2-12). Such Preliminary Official Statement is hereby authorized to be used from time to time in connection with the marketing of the 2023 Power Bonds. In connection with the sale of all or a portion of the 2023 Power Bonds, the General Manager is hereby authorized and directed, for and on behalf of the Commission, to execute an Official Statement for any such 2023 Power Bonds in substantially the form of the Preliminary Official Statement, with such changes, additions or supplements thereto to reflect the terms of the sale of such 2023 Power Bonds, or as otherwise approved by the General Manager upon consultation with the City Attorney, and to cause the delivery of such Official Statement to the Underwriters for distribution to purchasers of such 2023 Power Bonds.

Section 6. Continuing Disclosure Certificate. The proposed form of Continuing Disclosure Certificate for the 2023 Power Bonds, submitted to this Commission, is hereby approved. The General Manager is hereby authorized and directed to execute the Continuing Disclosure Certificate for the 2023 Power Bonds, substantially in the form submitted to this Commission, with such additions, changes and corrections thereto as the General Manager shall approve with the advice of the City Attorney, such approval to be conclusively evidenced by the execution and delivery of such Continuing Disclosure Certificate. The Secretary of the Commission is directed to file a copy of said form of Continuing Disclosure Certificate with the minutes of this meeting.

Section 7. P
roposition P. Pursuant to Proposition P approved by the voters of the City in November 2002, this Resolution and the 2023 Power Bonds are subject to, and incorporate by reference, the Proposition P Requirements. Pursuant to the Proposition P Requirements, to the extent permitted by law, one -twentieth of one percent (0.05%) of the gross proceeds of the 2023 Power Bonds shall be deposited in a fund established by the Controller's Office and appropriated by the Board at the direction of the Public Utilities Revenue Bond Oversight Committee established by Proposition P Requirements to cover the costs of said committee.

Section 8. G
eneral Authority. The General Manager, the Deputy General Manager and Chief Operating Officer, the Chief Financial Officer and Assistant General Manager, Business Services, and the Assistant General Manager, Power Enterprise, of the Commission, and the officers of the City are hereby authorized and directed, each acting alone, for and in the name and on behalf of this Commission, to execute and deliver any and all documents, certificates and representations, including, but not limited to, signature certificates, no-litigation certificates, tax certificates, letters of representation relating to book-entry registration, custody agreements, filing agent agreements, and certificates concerning the contents of the Official Statement and the Preliminary Official Statement, to contract for municipal bond insurance for all or a portion of the 2023 Power Bonds if determined by the General Manager, with the advice of the Municipal Advisor, to be beneficial to the Commission, to contract for one or more surety bonds or insurance policies for the debt service reserves, if any, for the 2023 Power Bonds if determined by the General Manager, in consultation with the City Attorney and with the advice of the Municipal Advisor, to be beneficial to the Commission, and to do any and all things and take any and all

actions which may be necessary or advisable, in their discretion, to effectuate the issuance and sale of the 2023 Power Bonds, the financing or refinancing of the capital projects benefitting the Power Enterprise, the retirement of Outstanding CP Notes, and the ot her actions which the Commission has approved in this Resolution. The General Manager is authorized to delegate any of the responsibilities or duties set forth in this Resolution to the Deputy General Manager and Chief Operating Officer, to the Chief Financial Officer and Assistant General Manager, Business Services, to the Assistant General Manager, Power Enterprise, to the Deputy Chief Financial Officer, or to the Capital Finance Director, of the Commission. The other officers of the Commission are hereby authorized to delegate any of the actions on their behalf set forth herein to another officer or employee of the Commission.

Section 9. Government Code Section 5852.1 Compliance . The Commission acknowledges that the good faith estimates required by Section 5852.1 of the California Government Code are disclosed in the staff report and are available to the public at the meeting at which this Resolution is approved. Such good faith estimates are incorporated by reference as if set forth in full herein.

Section 10. R
atification. All actions heretofore taken by the officers, employees and agents of the Commission with respect to the authorization, sale and issuance of the 2023 Power Bonds, prior to the date hereof and in accordance with the provisions hereof, are hereby ratified, approved and confirmed.

Section 11. E
ffective Date . This Resolution shall take effect from and after its adoption.

I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting September 20, 2023.

Secretary, Public Utilities Commission
OH&S DRAFT – Distributed 08/18/2023

PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER __, 2023

This Preliminary Official Statement and the information contained herein are subject to completion and amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or th e solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, so licitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction.

NEW ISSUE – BOOK-ENTRY ONLY Ratings:

S&P: “___”
Fitch: “___”
(see “RATINGS”)

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the 2023A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating t he federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2023A Bonds is exempt from State of California personal income tax . See “TAX MATTERS” with respect to certain tax consequences relating to the 2023A Bonds, including with respect to the alternative minimum tax imposed on certain large corporations for tax years beginning after December 31, 2022.

$__________*

PUBLIC UTILITIES COMMISSION

OF THE CITY AND COUNTY OF SAN FRANCISCO
POWER REVENUE BONDS, 2023 SERIES A
Dated: Date of Delivery Due: As shown on inside front cover

This cover page contains information for general reference only. It is not intended to be a summary of this issue.

Potential purchasers are advised to read the entire Official Statement to obtain information essential to making an informed investment decision.

The Public Utilities Commission of the City and County of San Francisco (the “SFPUC”) is issuing a single series of its Power Revenue Bonds, 2023 Series A (the “ 2023A Bonds”), pursuant to authority granted by the Charter of the City and County of San Francisco (the “ City”) and a Trust Indenture, dated as of May 1, 2015, as amended and supplemented, including as supplemented by a Third Supplemental Trust Indenture, dated as of October 1, 2023 (collectively, the “Indenture”), each by and between the SFPUC and U.S. Bank Trust Company, National Association, as trustee (the “ Trustee”).

The 2023A Bonds are being issued to (i ) refund approximately $117.7 million * principal amount of and interest on Commercial
Paper Notes issued to finance a portion of the costs of various capital projects benefiting the Power Enterprise, (ii ) fund capitalized interest on the 2023A Bonds through [May/November] 1, 20__*, and (iii) pay costs of issuance of the 2023A Bonds.

The 2023A Bonds will be available in denominations of $5,000 or any integral multiple thereof and will mature in the years and amounts and accrue interest from their date of delivery at the per annum rates set forth on the inside cover page of this Off icial Statement. Interest on the 2023A Bonds is payable semiannually on May 1 and November 1 of each year, commencing May 1, 2024.

The 2023A Bonds will be issued as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company (“ DTC”), New York, New York, and will be available to ultimate purchasers (the “ Beneficial Owners”) under the book -entry only system maintained by DTC. Beneficial Owners will not receive physical certificates representing their interests in the 2023A Bonds. The principal of, premium, if any, and interest on the 2023A Bonds are payable to DTC by the Trustee, and, so long as DTC is acting as securities depository for the 2023A Bonds, disbursements of such payments to DTC Participants is the responsibility of DT C and disbursements of such payments to the Beneficial Owners is the responsibility of DTC Participants.

The 2023A Bonds are subject to optional and mandatory redemption prior to maturity as described in this Official Statement.

Under the Indenture, the SFPUC has irrevocably pledged the Revenues of its Power Enterprise, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits (each as defined herein), to the punctual payment of principal of, premium, if any, and interest on the Bonds, which consist of all outstanding parity revenue bonds issued under the Indenture, including the 2023A Bonds. The 2023A Bonds, all other Bonds and outstanding parity obligations permitted by the Indenture are secured by a parity lien on Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits. No Reserve Account will be established for the 2023A Bonds. See “SECURITY FOR THE BONDS.” The 2023A Bonds are special limited obligations of the SFPUC. The SFPUC is n ot obligated to pay the principal of, premium, if any, or interest on the 2023A Bonds from any source of funds other than Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits. Neither the general funds of the SF PUC nor the funds of any SFPUC enterprise (other than the Revenues and the funds pledged therefor under the Indenture)

* Preliminary, subject to change.

shall be liable for the payment on the 2023A Bonds. The SFPUC has no taxing power. The General Fund of the City is not liable for the payment of the principal of, premium, if any, or interest on the 2023A Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, premium, if any, or interest on the 2023A Bonds. The 2023A Bonds are not secured by a legal or equitable pledge of, or charge, lien, or encumbrance upon, any of the property of the City or of the SFPUC or any of its income or receipts, except Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits . The 2023A Bonds are not secured by or payable from the revenues of the Water Enterprise, the Wastewater Enterprise or CleanPowerSF , or the revenues allocated to Hetch Hetchy Water. See “SECURITY FOR THE BONDS.”

MATURITY SCHEDULES
(See inside cover)
The 2023A Bonds are offered when, as and if issued by the SFPUC and received by the Underwriters, subject to the approval of validity by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and to certain other conditions. Orrick, Herrington & Sutcliffe LLP, San Francisco, California, is acting as Disclosure Counsel. PFM California Advisors LLC, San Francisco, California, Municipal Advisor to the SFPUC, assisted in the structuring of this financing. Certain matters will be passed upon for the Underwriters by Husch Blackwell LLP, Oakland, California . It is expected that the 2023A Bonds in fully registered form will be available for delivery in book -entry form through the facilities of DTC, on or about October __, 2023.

J.P. Morgan Morgan Stanley
Siebert Williams Shank & Co., LLC

The date of this Official Statement is __________, 2023.

MATURITY SCHEDULE*
2023 Series A Bonds
(Base CUSIP† Number: _________)
$_____ Serial Bonds
Maturity
(November 1) Principal Amount Interest Rate Yield‡ CUSIP†

$_____ ___% Term Bonds due November 1, 20__ Yield‡ ___% CUSIP† ___ $_____ ___% Term Bonds due November 1, 20__ Yield‡ ___% CUSIP† ___

* Preliminary, subject to change.
† CUSIP is a registered trademark of the American Bankers Association . CUSIP data herein are provided by CUSIP Global Services (“CGS”), which is managed on behalf of the American Bankers Association by FactSet Research Syst ems Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CGS data base. Neither the SFPUC nor the Underwriters assume any responsibility for the accuracy of the CUSIP data.
‡ Reoffering yields have been provided by the Underwriters. See “UNDERWRITING.”

Hetch Hetchy Power System

Figure 1-1 – Provides a depiction of the SFPUC’s Hetch Hetchy Power System (Not to Scale) The Hetch Hetchy Power system generates hydroelectric power that is 100% free of greenhouse gases. The Hetch Hetchy Power sys tem consists of three hydroelectric powerhouses: Moccasin, Kirkwood, and Holm. Moccasin and Kirkwood receive water from the Hetch Hetchy Reservoir, while Holm is fed from Lake Eleanor and Lake Lloyd Reservoir (Cherry Lake). The electricity generated is transmitted through a system of high-voltage power transmission lines from the Sierra Nevada mountains across the Central Valley to PG&E’s transmission system, interconnecting at Newark Substation. E lectricity is transmitted through PG&E’s transmission system to San Francisco. For more information, see “THE HETCH HETCHY PROJECT.” The 2023A Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the SFPUC or of its income or receipts, except Revenues, after payment of Operation and Maintenance E xpenses and any Priority R&R Fund Deposits. See “SECURITY FOR THE BONDS.”

GENERAL STATEMENT
No dealer, broker, salesperson or other person has been authorized by the SFPUC to give any information or to make any representation other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the SFPUC.

This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2023A Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation, or sale. This Official Statement is not to be construed as a contract with the purchasers of the 2023A Bonds. Any statement made in this Official Statement involving any forecast or matter of estimates or opinion, whether or not expressly so stated, is intended solely as such and not as a representation of fact. The information set forth herein other than that provided by the SFPUC, although obtained from sources which are believed to be reliable, is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice, and neither deliver y of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the SFPUC or the City since the date hereof.

The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and ci rcumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

The City maintains a website at https://sf.gov, and the SFPUC maintains a website at http://www.sfpuc.org.

The information contained in such websites is not incorporated by reference and should not be relied upon in making an investment in the 2023A Bonds.

References to website addresses presented herein are for information purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such websites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement.

The issuance and sale of the 2023A Bonds have not been registered under the Securities Act of 1933 in reliance upon the exemption provided thereunder by Section 3(a)(2) for the potential issuance and sale of municipal securities.

IN CONNECTION WITH THE OFFERING OF THE 2023A BONDS, THE UNDERWRITERS MAY

OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2023A BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

This Official Statement is delivered for use in connection with the issuance, sale, and delivery of the 2023A Bonds and may not be reproduced or used, in whole or in part, for any other purpose.

(Remainder of Page Intentionally Left Blank)

FORWARD LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND ARE “FORWARD -LOOKING STATEMENTS.” ALL FORWARD- LOOKING

STATEMENTS ARE PREDICTIONS AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS DISCUSSED

HEREIN WILL BE ACHIEVED, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS “ESTIMATE,” “PROJECT,” “ANTICIPATE,” “EXPECT,” “INTEND,” “BELIEVE” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD- LOOKING STATEMENTS. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS,

EXPRESSIONS OF OPINIONS, ESTI MATES AND OTHER FORWARD- LOOKING STATEMENTS ARE

EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. GIVEN THEIR UNCERTAINTY, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH STATEMENTS.

(Remainder of Page Intentionally Left Blank)

SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Newsha Ajami, President
Sophie Maxwell, Vice President
Tim Paulson, Commissioner
Anthony Rivera, Commissioner
Kate H. Stacy, Commissioner

PUBLIC UTILITIES COMMISSION OFFICIALS
Dennis J. Herrera, General Manager
Ronald P. Flynn, Deputy General Manager and Chief Operating Officer Nancy L. Hom, Chief Financial Officer and Assistant General Manager, Business Services Barbara Hale, Assistant General Manager, Power Enterprise Masood Ordikhani, Assistant General Manager, External Affairs and Chief Strategy Officer Stephen Robinson, Assistant General Manager, Infrastructure Division Joel Prather, Acting Assistant General Manager, Wastewater Enterprise Steven R. Ritchie, Assistant General Manager, Water Enterprise

CITY AND COUNTY OF SAN FRANCISCO
MAYOR
London Breed

BOARD OF SUPERVISORS
Aaron Peskin, Board President, District 3
Connie Chan, District 1 Dean Preston, District 5
Matt Dorsey, District 6 Hillary Ronen, District 9
Joel Engardio, District 4 Ahsha Safaí, District 11
Rafael Mandelman, District 8 Catherine Stefani, District 2 Myrna Melgar, District 7 Shamann Walton, District 10

CITY ATTORNEY
David Chiu

CITY TREASURER
José Cisneros

OTHER CITY AND COUNTY OFFICIALS
Benjamin Rosenfield, Controller
Carmen Chu, City Administrator

SPECIAL SERVICES
Bond Counsel
Stradling Yocca Carlson & Rauth,
a Professional Corporation
Newport Beach, California

Municipal Advisor
PFM California Advisors LLC
San Francisco, California

Disclosure Counsel
Orrick, Herrington & Sutcliffe LLP
San Francisco, California

Independent Pricing Consultant
Backstrom McCarley Berry & Co., LLC
San Francisco, California

Trustee
U.S. Bank Trust Company, National Association
San Francisco, California

TABLE OF CONTENTS
Page Page

INTRODUCTION ..................................................... 1 General .................................................................. 1 Authority for Issuance ........................................... 1 The San Francisco Public Utilities
Commission and the Power Enterprise .............. 1
Purposes ................................................................. 3 Security for the Bonds ........................................... 4 Outstanding and Future Parity Obligations ........... 4 Proposed Transaction with Pacific Gas &
Electric Company .............................................. 4 Certain Risk Factors .............................................. 5 Continuing Disclosure ........................................... 5 Other Matters ......................................................... 5 THE 2023A BONDS ................................................. 5 General .................................................................. 5 Securities Depository and Book-Entry Only
System ............................................................... 5 Redemption* .......................................................... 6 Defeasance ............................................................. 7 PLAN OF FINANCE ................................................ 7

ESTIMATED SOURCES AND USES OF
FUNDS ................................................................. 8 SECURITY FOR THE BONDS ................................ 8 Pledge of Revenues ............................................... 8 Limited Obligations ............................................. 10 Flow of Funds ...................................................... 10 Rate Covenant; Rates and Charges ...................... 11 No Reserve Account for 2023A Bonds ............... 12
Reconstruction and Replacement Fund ............... 12
No Senior Obligations; Other Parity
Obligations ...................................................... 12 Additional Series of Bonds .................................. 12 Certain Obligations Payable as Operations
and Maintenance Expenses .............................. 15 Subordinate Obligations; Obligations Not
Payable from Revenues ................................... 15 Authorized Investments ....................................... 15

OBLIGATIONS PAYABLE FROM
REVENUES ....................................................... 16 Authority for Issuance of Revenue Bonds and
Other Obligations Payable from Revenues...... 16
Senior Obligations; Parity Obligations ................ 16 Subordinate Obligations ...................................... 17 Contingent Payment Obligations ......................... 17 Power Purchase Agreements ............................... 17 Other Obligations Payable from Revenues .......... 18
Revenue Bond Oversight Committee .................. 18
Debt Service Requirements ................................. 19

THE CITY AND COUNTY OF SAN
FRANCISCO ..................................................... 20 THE PUBLIC UTILITIES COMMISSION ............ 22
General ................................................................ 22 Organization, Purposes and Powers..................... 22 Commission Members ......................................... 23 Management ........................................................ 24 Ongoing Investigations ........................................ 25 Proposed Transaction with Pacific Gas &
Electric Company ............................................ 26 Employee Relations ............................................. 27 Employee Benefit Plans ....................................... 28 THE HETCH HETCHY PROJECT ........................ 32
General ................................................................ 32 History ................................................................. 32 Hydroelectric Generation..................................... 33 Transmission and Distribution ............................. 34 Physical Condition of Facilities ........................... 35 Hetch Hetchy Project Operations ........................ 45 Licensing and Regulation .................................... 46 FERC Proceeding Regarding Relicensing of
the New Don Pedro Project ............................. 47 WECC/NERC Requirements ............................... 48 Recent Storms ...................................................... 48 Wildfire Considerations ....................................... 49 Safety and Security .............................................. 50 Variability of Hydroelectric Generation .............. 51 THE POWER ENTERPRISE .................................. 54 General ................................................................ 54 Power Service in San Francisco .......................... 55 Power Supply Resources ..................................... 57 Wholesale Electricity Sales ................................. 60 Load and Electricity Supply Resource
Management; Wholesale Electricity
Trading ............................................................ 61

Transmission and Distribution ............................. 62 Operational Control ............................................. 63 Power Enterprise Customers................................ 63 Recent Factors Impacting Power Revenues ......... 68
Security and Reliability ....................................... 68 FUTURE POWER SUPPLY AND DEMAND ....... 69
Projected Power Demand and Adequacy of
Power Supply .................................................. 69 POWER ENTERPRISE CAPITAL PROGRAM .... 70
Capital and Financial Planning Process ............... 70 Financing of Capital Program .............................. 70 2024 Capital Plan Projects ................................... 71 Environmental Considerations ............................. 72 Climate Action Plan............................................. 72 FINANCIAL OPERATIONS .................................. 73 General ................................................................ 73 Rate-Setting Process; Rates ................................. 74 Power Sales Revenues; Other Revenues ............. 80
Operation and Maintenance Expenses ................. 81 Allocation of Costs .............................................. 81 Payments to/from the City ................................... 82 Financial Management Policies ........................... 82 Investment of SFPUC Funds ............................... 83 Risk Management and Insurance ......................... 84 HISTORICAL OPERATING RESULTS ................ 85
CERTAIN RISK FACTORS ................................... 87 General ................................................................ 87

TABLE OF CONTENTS
(Continued)
Page Page
Limited Obligations ............................................. 87 Risks Related to Power Enterprise Operations
and Facilities ................................................... 88 Inverse Condemnation ......................................... 91 Seismic Considerations ........................................ 91 Climate Change ................................................... 92 Cybersecurity ....................................................... 94 Construction Related Risks.................................. 96 Commercial Paper Note Credit Facilities ............ 96 Limitations on Rate-Setting ................................. 96 Raker Act Requirements ...................................... 96 Customer Concentration ...................................... 96 Increased Operation and Maintenance
Expenses .......................................................... 97 Uncertainties of Forecasting Future Load
Growth ............................................................. 97 Changes in Energy Prices .................................... 97 Changes in Transmission and Distribution
Service Costs ................................................... 98 Uncertainties of the Electric Utility Industry ....... 98 Economic, Political, Social and
Environmental Conditions ............................... 98 Pandemics; COVID-19 Pandemic ....................... 98 Constitutional, Statutory and Charter
Limitations ...................................................... 98 Initiative, Referendum, Charter Amendments
and Future Legislation and Regulations .......... 99
Bankruptcy of the City ........................................ 99 Limitations on Remedies ................................... 100 Loss of Tax Exemption/Risk of Tax Audit of
Municipal Issuers .......................................... 100 Change in Tax Law............................................ 100 Failure to Maintain Credit Ratings .................... 101 Secondary Market .............................................. 101 Uncertainties of Projections, Forecasts and
Assumptions .................................................. 101 Other Risks ........................................................ 101

DEVELOPMENTS IN THE ELECTRICITY
MARKETS AND REGULATION .................. 101
Structure of the Energy Market Today .............. 101 The Power Enterprise’s Relationship to the
CAISO ........................................................... 102 Federal Law and Regulation .............................. 103 California State Law and Regulation ................. 105 Renewable Portfolio Standard ........................... 106 Resource Adequacy Requirements .................... 107 Energy Loading Order ....................................... 107 Community Choice Aggregation Service .......... 108
Energy Storage .................................................. 108 State Law Requirements Affecting Investor-
Owned Utilities.............................................. 108 Future Regulation and Other Factors ................. 109

CONSTITUTIONAL, STATUTORY AND
CHARTER LIMITATIONS ............................ 109
State Law Limitations ........................................ 109 Charter Limitations ............................................ 111 Initiative Measures and Charter Amendments ... 111
LITIGATION ........................................................ 111 TAX MATTERS ................................................... 112 CERTAIN LEGAL MATTERS ............................ 113
RATINGS .............................................................. 113 UNDERWRITING ................................................ 114 FINANCIAL STATEMENTS ............................... 115 CONTINUING DISCLOSURE ............................. 115 MUNICIPAL ADVISOR ...................................... 115 INDEPENDENT PRICING CONSULTANT ....... 116
MISCELLANEOUS .............................................. 116 APPROVAL AND DELIVERY ............................ 117

APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

APPENDIX B SFPUC POWER ENTERPRISE FINANCIAL STATEMENTS

APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL

APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE

APPENDIX E SECURITIES DEPOSITORY AND BOOK-ENTRY SYSTEM

1 OFFICIAL STATEMENT
$__________*

PUBLIC UTILITIES COMMISSION OF

THE CITY AND COUNTY OF SAN FRANCISCO
POWER REVENUE BONDS, 2023 SERIES A

INTRODUCTION
This Introduction is qualified in its entirety by reference to the more detailed information included and referred to elsewhere in this Official Statement. The offering of the 2023A Bonds to potential investors is made only by means of the entire Official Statement. Terms used in this Introduction and not otherwise defined have the respective meanings assigned to them elsewhere in this Official Statement, including “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
General
This Official Statement, including the cover page and Appendices hereto, is provided to furnish certain information in connection with the offering by the Public Utilities Commission of the City and County of San Francisco (the “SFPUC”) of its Power Revenue Bonds, 2023 Series A (the “2023A Bonds”).

Authority for Issuance
The SFPUC is issuing the 2023A Bonds pursuant to authority granted by the Charter (the “Charter”) of the City and County of San Francisco (the “ City”), ordinances passed by the Board of Supervisors of the City (the “Board of Supervisors”) authorizing the issuance and sale of power revenue bonds and other forms of indebtedness of the SFPUC, a resolution adopted by the SFPUC governing body (the “Commission ”) on September __, 2023, and a Trust Indenture, dated as of May 1, 2015, as amended and supplemented (the “ Master Indenture”), including as supplemented by a Third Supplemental Trust Indenture, dated as of October 1, 2023 (the “ Third Supplemental Indenture” and, together with the Master Indenture, the “ Indenture”), each by and between the SFPUC and U.S.

Bank Trust Company, National Association as trustee (the “Trustee”).

The San Francisco Public Utilities Commission and the Power Enterprise The SFPUC is a department of the City responsible for the maintenance, operation and development of three utility enterprises: (i) the Water Enterprise, (ii) the Wastewater Enterprise and (iii) Hetch Hetchy Water an d Power and CleanPowerSF. The Water Enterprise provides drinking water to retail customers in San Francisco, to certain retail customers outside of San Francisco and to wholesale customers in three other Bay Area (defined below) counties. The Wastewater Enterprise provides wastewater and stormwater collection, treatment and disposal services to residential, commercial, and industrial customers in San Francisco and three municipal sewer service providers serving residents and businesses in northern San Mateo County. For financial purposes, Hetch Hetchy Water and Power and CleanPowerSF is comprised of three funds: (i) Hetch Hetchy Water, (ii) Hetch Hetchy Power (known as, and referred to in this Official Statement as, the “Power Enterprise”) and (iii) CleanPowerSF.

Hetch Hetchy Water operates and maintains the Hetch Hetchy Water and Power Project, including the O’Shaughnessy Dam, the Hetch Hetchy Reservoir, the Canyon and Mountain Tunnels, the Kirkwood, Moccasin and Holm Powerhouses, Cherry Lake and its dam, Lake Eleanor and its dam, the related water storage and transportation and hydroelectric generating facilities down to and including the Moccasin Powerhouse, all located in Yosemite National Park, Stanislaus National Forest and Tuolumne County, the rights to which were granted to the City by the Raker Act of 1913 (the “ Raker Act”), and the related transmission facilities down to the City of Newark, California (“Newark”) (collectively, the “ Hetch Hetchy Project ”). The Power Enterprise provides hydroelectric, solar, and other power, serving City municipal customers, the Modesto Irrigation District (“MID”) and the Turlock Irrigation District (“TID” and, collectively wi th MID, the “ Districts”), and other public agencies and retail customers, and

* Preliminary, subject to change.

2 provides pedestrian and streetlight services . The Power Enterprise also operates and maintains the natural gas and electric utilities systems on Treasure Island/Yerba Buena Isla nd pursuant to an agreement with Treasure Island Development Authority (“ TIDA”). See “THE PUBLIC UTILITIES COMMISSION,” “THE HETCH HETCHY PROJECT” and “THE POWER ENTERPRISE.” CleanPowerSF (“ CleanPowerSF”), a Community Choice Aggregation (“ CCA”) program that began serving customers in May 2016, is a “Separate System” under the Indenture. CleanPowerSF is financially independent from the Power Enterprise, with ability to set rates and charges with adequate revenues, and to issue debt to support its operation s and future projects. See “THE PUBLIC UTILITIES COMMISSION – Organization, Purposes and Powers – CleanPowerSF.” Several Hetch Hetchy Project facilities are joint assets and are used for both water transmission and power generation and transmission, benef iting both Hetch Hetchy Water and the Power Enterprise (the “ Joint Facilities”).

All publicly-owned utility power sales revenues from providing hydroelectric, solar, and other power, all operating and capital costs benefiting the Power Enterprise, and 55% of the combined operating and capital costs of the Joint Facilities are allocated to the Power Enterprise. O perating and capital costs benefiting Hetch Hetchy Water and 45% of the combined operating and capital costs of the Joint Facilities are allocated to Hetch Hetchy Water. Hetch Hetchy Water’s expenses are paid primarily from charges for service paid by the Water Enterprise, and are not secured by Revenues of the Power Enterprise.

The following chart shows the organizational structure of the SFPUC’s three enterprise funds:

(Remainder of Page Intentionally Left Blank)

3 San Francisco Public Utilities Commission
Enterprise Funds Organization Chart

__________
(1) “Hetch Hetchy Water and Power and CleanPowerSF” is comprised of three funds: (i) Hetch Hetchy Water, (ii) Hetch Hetchy Power (known as, and referred to in this Official Statement as, the “Power Enterprise”), and (iii) CleanPowerSF. (2) Hetch Hetchy Water operates and maintains the Hetch Hetchy Project, which provides water for distribution through the Water Enterprise and hydroelectric power for delivery through the Power Enterprise. (3) The Power Enterprise is responsible for all SFPUC power utility commercial transactions and in-City power operations. (4) Several Hetch Hetchy Project facilities are joint assets and are used for both water transmission and power generation and transmission, benefiting both Hetch He tchy Water and the Power Enterprise. All publicly-owned utility power sales revenues from providing hydroelectric, solar, and other power, all operating and capital costs benefiting the Power Enterprise, and 55% of the combined operating and capital costs of the Joint Facilities are allocated to the Power Enterprise.

Operating and capital costs benefiting Hetch Hetchy Water and 45% of the combined operating and capital costs of the Joint Facilities are allocated to Hetch Hetchy Water. Hetch Hetchy Water’s expenses are paid primarily from charges for service paid by the Water Enterprise, and are not secured by Revenues of the Power Enterprise. (5) CleanPowerSF is a “Separate System” under the Indenture and financially independent from the Power Enterprise.

References to the Power Enterprise in this Official Statement do not include CleanPowerSF.

The 2023A Bonds are secured by a pledge of Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits (each defined below). The 2023A Bonds are not secured by or payable from the revenues of the Water Enterprise, the Wastewater Enterprise or CleanPowerSF, or the revenues allocated to Hetch Hetchy Water.

Purposes
The 2023A Bonds are being issued to (i ) refund approximately $117.7 million * principal amount of and
interest on Commercial Paper Notes issued to finance a portion of the costs of various capital projects benefiting the Power Enterprise, (ii) fund capitalized interest on the 2023A Bonds through [May/November] 1, 20__*, and (iii) pay costs of issuance of the 2023A Bonds.

See “PLAN OF FINANCE” and “POWER ENTERPRISE CAPITAL PROGRAM – Ten-Year Capital Plan – Application of Proceeds of 2023A Bonds.”

* Preliminary, subject to change.

San Francisco
Public Utilities
Commission
Water Enterprise(4) Wastewater
Enterprise
Hetch Hetchy
Water and Power and
CleanPowerSF(1)
Hetch Hetchy
Water(2)(4)
Hetch Hetchy Power
(the “Power
Enterprise”)(2)(3)(4)
CleanPowerSF(5)

4 Security for the Bonds
Under the Indenture, the SFPUC has irrevocably pledged the Revenues of its Power Enterprise, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, to the payment of principal of, premium, if any, and interest on any parity revenue bonds issued under the Indenture, including the 2023A Bonds (collectively, the “ Bonds”). The 2023A Bonds, all other Bonds and any other parity obligatio ns permitted by the Indenture are secured by a parity lien on Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits. See “SECURITY FOR THE BONDS.” The 2023A Bonds are special limited obligations of the SFPUC. Th e SFPUC is not obligated to pay the principal of, premium, if any, or interest on the 2023A Bonds from any source of funds other than Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits.

Neither the general funds of the SFPUC nor the funds of any SFPUC enterprise (other than the Revenues and the funds pledged therefor under the Indenture) shall be liable for payment of the 2023A Bonds. The SFPUC has no taxing power. The General Fund of the City is not liable for the payment of the principal of, premium, if any, or interest on the 2023A Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, premium, if any, or interest on the 2023A Bonds. The 2023A Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or of the SFPUC or any of its income or receipts, except Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits. The 2023A Bonds are not secured by or payable from the revenues of the Water Enterprise, the Wastewater Enterprise or CleanPowerSF, or the revenues allocated to Hetch Hetchy Water. See “SECURITY FOR THE BONDS.” Outstanding and Future Parity Obligations
The 2023A Bonds are the third Series of Bonds to be issued under the Master Indenture . The SFPUC has previously issued two Series of Bonds : (i) its Power Revenue Bonds, 2015 Series A (Green Bonds) (the “ 2015A Bonds”), and its Power Revenue Bonds, 2015 Series B (the “ 2015B Bonds” and together with the 2015A Bonds, the “2015AB Bonds”) and (ii ) its Power Revenue Bonds, 2021 Series A (Green Bonds) (the “ 2021A Bonds”), and its Power Revenue Bonds, 2021 Series B (the “ 2021B Bonds” and together with the 2021A Bonds, the “ 2021AB Bonds”). As of September 1, 2023, the 2015AB Bonds and the 2021AB Bonds are outstanding in the aggregate principal amount of $158,910,000 ( collectively, the “ Outstanding Bonds ”). There are currently no other obligations of the SFPUC payable from Revenues on a parity with the Outstanding Bonds and the 2023A Bonds.

The SFPUC may issue additional Series of Bonds under the Master Indenture and may incur additional obligations payable f rom Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, on a parity with the payment of the Outstanding Bonds and the 2023A Bonds. See “SECURITY FOR THE BONDS – Additional Series of Bonds” and “– No Senior Obligations; Other Parity Obligations.” Proposed Transaction with Pacific Gas & Electric Company In September 2019, in connection with the bankruptcy of Pacific Gas & Electric Company (“ PG&E”) and PG&E Corporation, the City submitted a non -binding indication of interest to purchase substantially all of PG&E’s electric distribution and transmission assets needed to provide retail electric service to all electricity customers within the geographic boundaries of San Francisco. PG&E has not indicated a willingnes s to sell any such assets.

The City remains interested in acquiring these assets from PG&E, and on July 27, 2021, submitted a petition to the California Public Utilities Commission (“ CPUC”) for a formal determination of the fair market value of PG&E’s assets the City is interested in acquiring . On April 10, 2023, the City filed direct testimony of four expert witnesses with the CPUC regarding the specific assets under consideration for acquisition and the value of such assets. No transaction has been consummated, and neither the SFPUC nor the City are able to predict whether a transaction will be consummated or the final terms thereof if consummated. For more information regarding the proposed transaction, see “THE PUBLIC UTILITIES COMMISSION – Proposed Transaction with Pacific Gas & Electric Company.”

5 Certain Risk Factors
Investment in the 2023A Bonds is subject to material risks. For a general overview of certain risk factors which should be considered, in addition to other matters set forth in this Of ficial Statement, in evaluating an investment in the 2023A Bonds, see “CERTAIN RISK FACTORS.” Continuing Disclosure
The SFPUC has covenanted for the benefit of the Owners (as defined herein) and Beneficial Owners of the 2023A Bonds to provide certain financial information and operating data not later than March 31 following the end of its Fiscal Year (presently June 30), beginning on March 31, 2024, with the report for Fiscal Year 2022- 23, and to provide notices of the occurrence of certain enumerated event s. These covenants have been made to assist the Underwriters in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the “ Rule”). See “CONTINUING DISCLOSURE” and “APPENDIX D – FORM OF CONTINUING DISCLOSURE CERTIFICATE.”
Other Matters
Brief descriptions of the 2023A Bonds, the security and sources of payment for the 2023A Bonds, the SFPUC, and the Power Enterprise are provided herein. Such descriptions do not purport to be comprehensive or definitive. Definitions of certain capitalized terms used herein may be found in “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” All references made to various documents herein are qualified in their entirety by reference to the forms thereof, all of which are available for inspection at the office of the SFPUC at:

San Francisco Public Utilities Commission
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
Attention: Chief Financial Officer and Assistant General Manager, Business Services (415) 554-3155
THE 2023A BONDS
General
The 2023A Bonds will be dated their date of delivery and will accrue interest from the date of delivery at the rates per annum set forth on the inside cover page of this Official Statement. Interest on the 2023A Bonds is payable on May 1 and November 1 of each year, beginning May 1, 2024. Interest on the 2023A Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

The 2023A Bonds will mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement. The 2023A Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple of $5,000.

Securities Depository and Book-Entry Only System
The 2023A Bonds will be issued in fully registered form, registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York, as the Owner of the 2023A Bonds.

So long as DTC, or its nominee, Cede & Co., is the registered owner (“ Owner”) of the 2023A Bonds, all payments on the 2023A Bonds will be made directly to DTC. Disbursement of such payments to the DTC Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners of the 2023A Bonds will be the responsibility of the DTC Participants. See “APPENDIX E – SECURITIES DEPOSITORY AND THE BOOK-ENTRY SYSTEM.”

6 Redemption*
Optional Redemption . The 2023A Bonds maturing on and after November 1, 20__ are subject to redemption prior to their respective stated maturity dates, at the option of the SFPUC, from any source of available funds, as a whole or in part, in Authorized Denominations, on any date on or after [May/November] 1, 20__, and if in part by lot within such maturity of 2023A Bonds, at a Redemption Price equal to 100% of the principal amount of 2023A Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption . The 2023A Bonds maturing on November 1, 20__, and November 1, 20__, are further subject to redemption prior to their stated maturity, in part by lot, from Mandatory Sinking Fund Payments required to be made by the SFPUC as specified below to be deposited in the 2023 Series AB Bond Retirement Account, on each November 1 on or after November 1, 20__, and November 1, 20__, respectively, at a Redemption Price equal to the principal amount thereof to be redeemed and acc rued interest thereon to the date fixed for redemption, without premium.

The 2023 Series A Term Bonds maturing on November 1, 20__ shall be redeemed from Mandatory Sinking Fund Payments in the following principal amounts on the dates indicated below.

Redemption Date
(November 1) Principal Amount
$

†
__________
† Maturity

The 2023 Series A Term Bonds maturing on November 1, 20__ shall be redeemed from Mandatory Sinking Fund Payments in the following respective principal amounts on the dates indicated below.

Redemption Date
(November 1) Principal Amount
$

†
__________
† Maturity

In the event less than all of the Term Bonds of a single maturity are purchased or called for optional redemption, the Mandatory Sinking Fund Payments for such Term Bonds to be reduced shall be specified by the SFPUC.

Selection of 2023A Bonds for Redemption. If less than all of the 2023A Bonds are called for redemption, the maturities of the 2023A Bonds to be redeemed (in whole or in part) shall be determined by the SFPUC . Subject to DTC’s procedures relating to the selection of bonds for redemption (see “APPENDIX E – SECURITIES DEPOSITORY AND THE BOOK- ENTRY SYSTEM”), whenever less than all of the 2023A Bonds of any one maturity are called for redemption, the Trustee will select the 2023A Bonds of the maturity to be redeemed from the Outstanding 2023A Bonds of that maturity. For purposes of such selection, 2023A Bonds will be deemed to be made up of $5,000 portions of principal.

* Preliminary, subject to change

7 Notice of Redemption. Notice of redemption will be mailed by the Trustee at least thirty (30) days but not more than sixty (60) days prior to the redemption date, to DTC (so long as the DTC Book- Entry System is used).

The actual receipt by the owner of any 2023A Bond of notice of such redemption is not a condition precedent to redemption, and failure to receive a redemption notice or any defect in a redemption notice will not affect the redemption or the validity of the proceedings for the redemption of such 2023A Bonds. See “APPENDIX E – SECURITIES DEPOSITORY AND THE BOOK-ENTRY SYSTEM.”
Conditional Redemption; Rescission of Notice of Redemption . In the case of optional redemption of 2023A Bonds, the notice of redemption may state ( i) that it is conditioned upon the deposit of money, in an amount equal to the amount necessary to effect the redemption with the Trustee no later than the redemption date, or (ii ) that the SFPUC retains the right to rescind such notice on or prior to the scheduled redemption date (in either case, a “Conditional Redemption”), and such notice and optional redemption will be of no effect if such money is not deposited or if the notice is rescinded. The SFPUC may, at its option, prior to the date fixed for redemption in any notice of Conditional Redemption, rescind and cancel such notice of redemption by written request to the Trustee and the Trustee will give notice of such cancellation to the recipients of the notice of redemption being cancelled.

Effect of Redemption . When notice of redemption has been duly given as described above, and moneys for payment of the redemption price are held by the Trustee, the 2023A Bonds called for redemption will, on the redemption date designated in such notice, become due and payable at the redemption price specified in such notice; and from and after the date so designated interest on the 2023A Bonds called for redemption will cease to accrue, and such 2023A Bonds will no longer be entitled to any benefit or security under the Indenture, and the Owners of said 2023A Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof .

The Trustee, upon surrender for payment of any of said 2023A Bonds, will pay such 2023A Bonds at the redemption price, together with accrued interest thereon. All 2023A Bonds redeemed will be cancelled upon surrender and no 2023A Bonds will be issued in place thereof.

Defeasance
The obligations of the SFPUC and the pledge, lien, covenants and agreements of the SFPUC made or provided for in the Indenture will be fully discharged and satisfied as to any 2023A Bond and such Bond will no longer be deemed outstanding thereunder if certain conditions set forth in the Indenture are satisfied. See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Discharge and Defeasance.”

PLAN OF FINANCE
The 2023A Bonds are being issued to (i ) refund approximately $117.7 million * principal amount of and
interest on Commercial Paper Notes issued to finance a portion of the costs of various capital projects benefiting the Power Enterprise, (ii) fund capitalized interest on the 2023A Bonds to [May/November] 1, 20__*, and (iii) pay costs of issuance of the 2023A Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS.” For a description of the projects being refinanced through the refunding of the Commercial Paper Notes, see “POWER ENTERPRISE CAPITAL PROGRAM – Ten-Year Capital Plan – Application of Proceeds of 2023A Bonds.”

* Preliminary, subject to change.

8 ESTIMATED SOURCES AND USES OF FUNDS
Proceeds of the 2023A Bonds are expected to be applied approximately as set forth below:
2023A Bonds
Sources
Par Amount $
[Net] Original Issue [Premium/Discount]
Total Sources of Funds $

Uses
Refunding of Commercial Paper Notes $
Deposit to 2023 Capitalized Interest Account(1)
Costs of Issuance(2)
Underwriters’ Discount
Total Uses of Funds $
_______________
(1) To pay interest of the 2023A Bonds to [May/November] 1, 20__. (2) Including amounts for rating agency fees, fees for legal services, fees for municipal advisor, fees for independent pricing consultant, Trustee’s fees and expenses, printing costs, and other costs relating to the issuance of the 2023A Bonds.

SECURITY FOR THE BONDS
Pledge of Revenues
General. Under the Indenture, the SFPUC has pledged and placed a lien and charge upon the Revenues of the Power Enterprise, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, to the payment of the Bonds, which consist of any parity revenue bonds issued under the Indenture, including the 2023A Bonds, and any additional Series of Bonds. This pledge is subject to the flow of funds contained in the Indenture, as described below. See “– Flow of Funds.”
No facilities of the Power Enterprise or the SFPUC have been pledged or mortgaged for, nor do they otherwise secure, payment of the Bonds.

Pursuant to Section 5451 of the California Government Code, the pledge of, lien on and security interest in Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, granted by the Indenture to secure the payment of the Bonds is valid and binding in accordance with the terms thereof from the time such pledge was made, such Revenues being immediately subject to such pledge, and such pledge constituting a lien and security interest immediately attaching to such Revenues and effective, binding and enforceable against the SFPUC, its successors, cr editors and all others asserting rights therein to the extent set forth and in accordance with the terms of the Indenture irrespective of whether those parties have notice of such pledge and without the need for any physical delivery, recordation, filing or other further act. Such pledge, lien and security interest are not subject to the provisions of Article 9 of the California Uniform Commercial Code.

For definitions of capitalized terms used herein and not otherwise defined, see “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Definitions.” Power Enterprise. The Indenture defines “Power Enterprise” as the SFPUC’s Power Enterprise, existing as of the date of the Master Indenture to provide electric power and related services to the City and its departments, agencies and commissions as well as other customers both in and outside of the City, including that portion of the Hetch Hetchy Project allocable to power generation, all other power generation, transmission and distribution facilities and related facilities, streetlights, property and rights constituting a part of the Power Enterprise, and any and all additions, improvements, betterments, renewals, replacements and repairs thereto and extensions thereof, but shall not include: (a) the Water Enterprise, (b) the Wastewater Enterprise, or (c) any Separate System.

9 The Indenture defines the “Hetch Hetchy Project” as the Hetch Hetchy Water and Power Project, including the O’Shaughnessy Dam, the Hetch Hetchy Reservoir, the Canyon and Mountain Tunnels, the Kirkwood, Moccasin and Holm Powerhouses, Cherry Lake and its dam, Lake Eleanor and its dam, the related water storage and transportation and hydroelectric generating facilities down to and including the Moccasin Powerhouse, all located in Yosemite National Park, Stanislaus National Forest and Tuolumne County, the rights to which were granted to the City by the Raker Act, and the related transmission facilities down to Newark.

The Indenture defines a “Separate System” as any electric power or energy generation, transmission, distribution or other facilities, property and rights that may be, after the date of the Master Indenture, purchased, constructed or otherwise acquired by the SFPUC where the revenues derived from the ownership and operation of which shall be pledged to the payment of bonds or other obligations for borrowed money issued or incurred to purchase, construct or otherwise acquire such facilities, property and rights and shall not be included in Revenues and the operation and maintenance expenses with respect to which shall not be included in Operation and Maintenance Expenses. CleanPowerSF is a “Separate System” under the Indenture.

Net Revenues. The Indenture defines “Net Revenues” as, for any Fiscal Year (or other designated tw elve- month period) all of the Revenues in such Fiscal Year (or other designated twelve -month period), less all Operation and Maintenance Expense and Priority R&R Fund Deposits, if any, for such Fiscal Year (or other designated twelve - month period).

For purposes of the Indenture, “Revenues” means all revenues, rates and charges received and accrued by the SFPUC for electric power and energy and other services, facilities and commodities sold, furnished or supplied by the Power Enterprise, together with income, earnings and profits therefrom (including interest earnings on the proceeds of any Bonds pending application thereof), as determined in accordance with GAAP. Revenues shall include payments to the Power Enterprise from any Separate System maintained by the SFPUC on or with respect to loans made by the Power Enterprise to such Separate System. Revenues shall not include (a) proceeds from the issuance of any obligations for borrowed money, (b) amounts loaned to the Power Enterprise, (c) Swap Agreement Receipts, (d) proceeds from taxes, (e) customer deposits while retained as such, (f) contributions in aid of construction, (g) gifts, (h) grants, (i) insurance or condemnation proceeds that are properly allocable to a capital account, (j) non-cash revenues or gains that may be required or permitted under GAAP, including mark -to-market gains and deferred revenues, (k) money received by the SFPUC as the proceeds of the sale of any portion of the properties of the Power Enterprise, (l) amounts by their terms not available for the payment of Operation and Maintenance Expenses or principal and interest on the Bonds, (m) Refundable Credits, (n) revenues of any Separate System (including CleanPowerSF), (o) Water Enterprise revenues and (p) Wastewater Enterprise revenues.

For purposes of the Indenture, “Operation and Maintenance Expenses” means the costs of the proper operation, maintenance and repair of the Power Enterprise and taxes, assessments or other governmental charges lawfully imposed on the Power Enterprise or the Revenues, or payments in lieu thereof, as determined in accordance with GAAP. Operation and Maintenance Expenses shall include the payment of pension charges and proportionate payments to such compensation and other insurance or outside reserve funds as the SFPUC may establish or the Board of Supervisors may require with respect to employees of the Power Enterprise, as provided in Section 16.103(a) of the Charter. Operation and Maintenance Expenses shall also include repairs and maintenance costs that constitute operating expenses in accordance with GAAP. Operation and Maintenance Expenses shall not include (a) any allowance for amortization, depreciation or obsolescence, (b ) operation and maintenance expenses of the Water Enterprise, (c) operation and maintenance expenses of the Wastewater Enterprise, (d) operation and maintenance expenses of any Separate System (including CleanPowerSF) , (e ) any expense for which, or to the extent to which, the SFPUC is or will be paid or reimbursed from or by any source that is not included or includable as Revenues, (f ) losses from any sale or other disposition of Power Enterprise assets, and (g) non-cash losses and costs that may be required or permitted under GAAP, including deferred expenses and unrealized mark- to-market losses.

For purposes of the Indenture, “Priority R&R Fund Deposits” means, for any Fiscal Year or other designated twelve-month period, the amount, if any, required by the Charter to be deposited into the Reconstruction and Replacement Fund from Revenues prior to deposits in such Fiscal Year into the Bond Fund. The SFPUC has determined that no Priority R&R Fund Deposits are presently required. Priority R&R Fund Deposits could, however, be required in the future.

10 For purposes of the Indenture, “Refundable Credits” means amounts payable by the federal government under direct-pay subsidy programs substantially similar to the Build America Bond program under Section 54AA of the Internal Revenue Code of 1986, as amended (the “Code”).

The Indenture defines “Swap Agreement Payments” as the regularly scheduled net amounts required to be paid by the SFPUC to the Qualified Counterparty pursuant to a Swap Agreement and “Swap Agreement Receipts” as the regularly scheduled net amounts required to be paid by a Qualified Counterparty to the SFPUC pursuant to a Swap Agreement. The SFPUC has not entered into any Swap Agreements payable from Revenues. See “ – No Senior Obligations; – Other Parity Obligations.”
Limited Obligations
The 2023A Bonds are special limited obligations of the SFPUC . The SFPUC is not obligated to pay the principal of, premium, if any, or interest on the 2023A Bonds from any source of funds other than Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Depo sits.

Neither the general funds of the SFPUC nor the funds of any SFPUC enterprise (other than the Revenues and the funds pledged therefor under the Indenture) shall be liable for the payment on the 2023A Bonds. The SFPUC has no taxing power. The General Fund of the City is not liable for the payment of the principal of, premium, if any, or interest on the 2023A Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, premium, if any, or interest on the 2023A Bonds. The 2023A Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or of the SFPUC or any of its income or receipts, except Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits . The 2023A Bonds are not secured by or payable from the revenues of the Water Enterprise, the Wastewater Enterprise or CleanPowerSF, or the revenues allocated to Hetch Hetchy Water.

Flow of Funds
In the In denture, the SFPUC covenants and agrees that it will pay into the Revenue Fund as received all Revenues and further covenants and agrees that all Revenues shall be trust funds in the hands of the SFPUC and shall be used and applied as provided by the Indenture, solely for the purposes of operating and maintaining the Power Enterprise and paying all costs, charges and expenses in connection therewith and for the purpose of making repairs, renewals and replacements to the Power Enterprise and constructing add itions, betterments and extensions thereto, and for the purpose of paying the Bonds, the Swap Agreement Payments, if any, and all other charges or obligations against the Revenues of whatever nature now or hereafter imposed thereon by law or contract . All such disbursements and deposits must be made in accordance with the provisions of the Charter, including Section 16.103 thereof.

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

First, for the payment of Operation and Maintenance Expenses; Second, for any Priority R&R Fund Deposits;
Third, for deposit in the Interest Account of each Bond Fund; Fourth, for deposit in the Bond Retirement Account of each Bond Fund; Fifth, for deposit in the Reserve Fund (as applicable); Sixth, (i) for the payment of principal and premium, if any, and interest on any Subordinate Obligations; (ii) for deposit into a reserve fund securing any Subordinate Obligations; (iii) for Swap Agreement Payme nts pursuant to Swap Agreements entered into by the SFPUC with respect to any Subordinate Obligations; and (iv) for payment to any financial institution or insurance company providing any letter of credit, line of credit, or other

11 credit or liquidity facility, including municipal bond insurance and guarantees, that secures the payment of principal of or interest on any Subordinate Obligations; in each case in any order of priority within this paragraph which may be hereafter established by the SFPUC by resolution;
Seventh, for any Additional R&R Fund Deposits into the Reconstruction and Replacement Fund; Eighth, for any necessary or desirable capital additions or improvements to the Power Enterprise; Ninth, for any payment under a Take -or-Pay Power Purchase Agreement that does not constitute an Operation and Maintenance Expense;
Tenth, for any payment under a Swap Agreement that does not constitute a Swap Agreement Payment; and Eleventh, for 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.

Rate Covenant; Rates and Charges
In the Indenture, the SFPUC has covenanted to fix, establish, mai ntain and collect rates and charges for electric power and energy and other services, facilities and commodities sold, furnished or supplied through the Power Enterprise, which shall be fair and nondiscriminatory and adequate, together with other revenues of the Power Enterprise, to provide the SFPUC with Revenues sufficient to satisfy the covenants described in the next paragraph. The SFPUC will not be required to impose rates and charges in violation of (i) applicable provisions of the Raker Act or any s uccessor statute; (ii) any other applicable federal or state statutes or regulations; or (iii) any current or future contract or agreement between any City enterprise department, agency or commission, and its customers, tenants or other parties thereto . S ee “CERTAIN RISK FACTORS – Limitations on Rate -Setting” and “– Raker Act Requirements.”
In the Indenture, the SFPUC has covenanted that the Revenues in each Fiscal Year will be sufficient:
(i) To pay, to the extent not paid from other available moneys, (A ) the Operation and Maintenance Expenses during such Fiscal Year, (B) Annual Debt Service on the Bonds due and payable in such Fiscal Year, (C) the amounts, if any, required to be deposited into the Reserve Fund during such Fiscal Year and (D) any and all other amounts the SFPUC is obligated to pay or set aside from the Revenues by law or contract in such Fiscal Year;
(ii) To maintain a Bond Coverage Ratio of at least 1.00 to 1.00; and (iii) Together with Available Funds, to maintain a Bond Coverage Ratio of at least 1.25 to

1.00. The failure of the SFPUC to maintain the Bond Coverage Ratio in any Fiscal Year will not constitute a default in the observance of the covenants described above if, (i ) within 60 days after the SFPUC first determines that the Bond Coverage Ratio was not met or 60 days after the SFPUC’s receipt of audited financial statements showing that the Bond Coverage Ratio was not met (whichever is earlier), the SFPUC engages a Consulting Engineer to deliver a report to the SFPUC within 60 days after such engagement which includes recommendations as to how the SFPUC can increase Revenues and/or reduce Operation and Maintenance Expenses so as to satisfy the Bond Coverage Ratios; and if (ii) (A) within 120 days after receipt of the Consulting Engi neer’s report the SFPUC implements the recommendations set forth in such report, or (B) the report states that the Power Enterprise cannot generate Revenues and/or reduce Operation and Maintenance Expenses sufficiently to enable the SFPUC to maintain the B ond Coverage Ratios while satisfying the other covenants set forth in the Indenture and the SFPUC increases its Revenues and/or reduces its Operation and Maintenance Expenses to the extent otherwise recommended in such report, or (C) the SFPUC is prevented from taking any such action by order of any court of

12 competent jurisdiction. Notwithstanding the foregoing, failure for two consecutive Fiscal Years to maintain the Bond Coverage Ratios shall in all events constitute an Event of Default.

For purposes of the Indenture, “Bond Coverage Ratio” for any Fiscal Year means the ratio of (a) (i) Net Revenues in such Fiscal Year, plus (ii) Available Funds in such Fiscal Year, to (b) Annual Debt Service on the Outstanding Bonds in such Fiscal Year; “Annual Debt Servi ce” means, as of any date of calculation, for any Fiscal Year (or other designated twelve- month period) the amount of Principal and interest becoming due and payable on all Outstanding Bonds in such Fiscal Year (or other designated twelve- month period) computed as provided in the Indenture less the amount of any Refundable Credits due to the SFPUC with respect to interest coming due in such Fiscal Year; and “Available Funds” means any unencumbered amounts , including non- appropriated fund balances and reserves, and cash and the book value of investments held by the Treasurer of the City (the “ Treasurer”) for the Power Enterprise, that the SFPUC reasonably expects would be available, as of any date of calculation, to pay Principal of and interest on Bonds when due. See “APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
No Reserve Account for 2023A Bonds
No Reserve Account is being established that would secure the 2023A Bonds. The 2023A Bonds are not a Common Reserve Series secured by the Common Reserve Account.

Reconstruction and Replacement Fund
The Indenture creates a special fund of the SFPUC known as the “Power Enterprise Reconstruction and Replacement Fund,” to be held by the Treasurer and administered by the SFPUC. The SFPUC covenants and agrees to deposit and maintain in the Reconstruction and Replacement Fund an amount at least equal to the amount, if any, required to be on deposit therein pursuant to the Charter. Amounts in the Reconstruction and Replacement Fund shall be applied to pay costs of reconstruction and replacement of the properties constituting a part of the Power Enterprise due to physical and functional depreciation.

No Senior Obligations; Other Parity Obligations
The I ndenture prohibits the SFPUC from issuing or incurring any obligations (other than obligations constituting Operations and Maintenance Expenses) or issuing or creating additional indebtedness payable from Revenues senior to payment of the 2023A Bonds and from issuing or incurring any obligations or issuing or creating additional indebtedness payable from Revenues on a parity with the 2023A Bonds other than Bonds and Swap Agreements. The Indenture defines “Swap Agreement” as any financial instrument that (a) is entered into by the SFPUC with a party that is a Qualified Counterparty at the time the instrument is entered into; (b) is entered into with respect to all or a portion of a Series of Bonds ; (c) is for a term not extending beyond the final maturity of the Series of Bonds or portion thereof to which it relates; (d ) provides that the SFPUC shall pay to such Qualified Counterparty an amount accruing at either a fixed rate or a variable rate, as the case may be, on a notional amount equal to or less than the principal amount of the Series of Bonds or portion thereof to which it relates, and that such Qualified Counterparty shall pay to the SFPUC an amount accruing at either a variable rate or fixed rate, as appropriate, on such notional amount; (e ) provides that one party shall pay to the other party any net amounts due under such instrument; and (f ) which has been designated to the Trustee in the Supplemental Trust Indenture authorizing the issuance of the related Series of Bonds or portion thereof or in a Certificate of the SFPUC as a Swap Agreement with respect to such Bonds. The SFPUC has not entered into any Swap Agreements.

Additional Series of Bonds
The Charter and the Indenture authorize the issuance of additional Series of Bonds payable from Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, on parity with the Outstanding Bonds and the 2023A Bonds upon satisfaction of the conditions set forth therein.

13 The SFPUC expects to issue additional Series of Bonds to finance the costs of additional improvements to the facilities of the Power Enterprise (the “ Power Facilities ”). See “POWER ENTERPRISE CAPITAL PROGRAM.”
Charter Requirements. Under the Charter, the SFPUC may issue revenue bonds (including additional Series of Bonds ) relating to the Power Enterprise upon satisfaction of the requirements described under “OBLIGATIONS PAYABLE FROM REVENUES – Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues.”
Indenture Requirements. The Indenture provides that additional Series of Bonds secured on a parity with the Bonds may be issued for any lawful purpose if prior to the issuance of such additional Series of Bonds , the SFPUC has filed with the Trustee, among other documents, the following:
(a) A written opinion of Bond Counsel to the e ffect that (i) such Series of Bonds are valid and binding limited obligations of the SFPUC enforceable against the SFPUC in accordance with their terms and (ii) the Indenture, including the Supplemental Trust Indenture authorizing the issuance of such Series of Bonds , is a valid and binding obligation of the SFPUC enforceable in accordance with its terms; provided, that such opinions may be qualified to the extent that the enforceability of the Bonds and the Indenture, including the Supplemental Trust Indenture authorizing the issuance of such Series of Bonds , may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles;
(b) A Certificate of the SFPUC stating that (i) no Event of Default, nor any event or condition which with notice and/or the passage of time would constitute an Event of Default, has occurred and is continuing under the Indenture as of the date of issuance of such Series of Bonds and (ii) the issuance of such Series of Bonds , in and of itself, will not cause an Event of Default under the Indenture; (c) A Certificate of the SFPUC to the effect that provision has been made for the immediate deposit into the Reserve Account for such Series of Bonds of money, Authorized Investments, Reserve Account Credit Facility or Facilities or any combination of the foregoing in an aggregate amount equal to the Reserve Requirement, if any, for such Series of Bonds; and
(d) Either,
(i) A Certificate of the SFPUC stating that, in each of the first three full Fiscal Years after the sale of such Series of Bonds, projected Net Revenues:
(A) Plus Available Funds, are at least 1.25 times Annual Debt Service on the Outstanding Bonds, after giving effect to the issuance of such Series of Bonds , and (B) Are at least 1.0 times Annual Debt Service on the Outstanding Bonds, plus required deposits into the Reserve Fund, after giving effect to the issuance of such Series of Bonds; or
(ii) A Certificate of the SFPUC stating that Net Revenues from any twelve consecutive months of the prior twenty-four months:
(A) Plus Available Funds, are at least 1.25 times the Annual Debt Service on the Bonds Outstanding, after giving effect to the issuance of such Series of Bonds , and (B) Are at least 1.0 times Annual Debt Service on the Bonds Outstanding, plus required deposits into the Reserve Fund, after giving effect to the issuance of such Series of Bonds.

14 For purposes of paragraph (ii) the following adjustments may be made to Net Revenues for such period, if so stated in the Certificate of the SFPUC:
(I) An allowance for additional Revenues anticipated from any additions, extensions and improvements to the Power Enterprise to be acquired or constructed from proceeds of such or a prior Series of Bonds and for any changes in Operation and Maintenance Expenses resulting therefrom, that are not reflected in Net Revenues for such Fiscal Year, but only if such additional Revenues and changes in Operation and Maintenance Expenses represent a ful l twelve months’ change in Net Revenues attributable to such additions, extensions and improvements; and (II) An allowance for additional Revenues attributable to any increase in the rates and charges imposed by the SFPUC that (A) was in effect prior to the issuance of such Series of Bonds but which, during all or part of such Fiscal Year, was not in effect, or (B ) was adopted by the SFPUC prior to the issuance of such Series of Bonds and will be in effect within 90 days after such issuance, but in either case only if such additional Revenues represent a full twelve (12) months’ change in Net Revenues attributable to such increase in rates and charges.

Refunding Bonds may be issued by the SFPUC to provide funds sufficient for the payment of any or all of the following:
(1) The Principal, Purchase Price or Redemption Price of the Bonds or Original Bonds (as defined in the Indenture) to be refunded;
(2) All expenses incident to the purchase, call, redemption, retirement or payment of the Bonds or Original Bonds to be refunded;
(3) The costs of issuance of such Series of Refunding Bonds; (4) Interest on the Bonds or Original Bonds to be refunded to the date such Bonds or Original Bonds will be purchase, redeemed, retired or paid;
(5) Interest on such Series of Refunding Bonds from the date thereof to the date of purchase, redemption, retirement or payment of the Bonds or Original Bonds to be refunded; and (6) Any other lawful payment obligations, costs or expenses in connection with the issuance of the Refunding Bonds and the purchase, redemption, retirement or payment of the Bonds or Original Bonds to be refunded.

Refunding Bonds may be issued by the SFPUC only upon receipt by the Trustee of, among other things, the following:
(i) The documents specified in para graphs (a) and (c) above under this subcaption “– Indenture Requirements”; and
(ii) Either (A ) the document specified in paragraph (d) above under this subcaption “– Indenture Requirements”, or (B ) a Certificate of the SFPUC stating that the issuance of such Series of Refunding Bonds will not result in any aggregate increase in Annual Debt Service for the Bonds greater than $100,000 in any Fiscal Year that such Series of Refunding Bonds is scheduled to be Outstanding; and (iii) An opinion of Bond Counsel that (A) all liability of the SFPUC in respect of the Bonds to be refunded has ceased, terminated and been discharged, pursuant to the terms of the Master Indenture and the Supplemental Trust Indenture pursuant to which such Bonds were issued, and the Owne rs of such Bonds are entitled to payment of the Principal, Purchase Price or Redemption Price of and interest on such Bonds only out of the money or securities deposited with the Trustee for the payment of such Bonds or (B) all liability of the SFPUC in re spect of the Original Bonds to be refunded has ceased, terminated and

15 been discharged, pursuant to the terms of the resolution or resolutions pursuant to which such Original Bonds were issued, and the owners of such Original Bonds are entitled to payment of the principal, purchase price or redemption price of and interest on such Original Bonds only out of the money or securities deposited with the trustee for the owners of such Original Bonds for the payment of such Original Bonds.

Certain Obligations Payable as Operations and Maintenance Expenses The Indenture prohibits the SFPUC from entering into any Take -or-Pay Power Purchase Agreement payable from Revenues as an Operation and Maintenance Expense unless the SFPUC shall first deliver to the Trustee a Certificate of the SFPUC demonstrating compliance with the requirements set forth in paragraph (d) under “– Additional Series of Bonds – Indenture Requirements” for the first three full Fiscal Years following the Fiscal Year in which such Take-or-Pay Power Purchase Agreement will become effective.

The Indenture defines a “Take- or-Pay Power Purchase Agreement” as a contract (a) with a term of more than five years, (b ) pursuant to which the SFPUC is obligated (i ) to purchase capacity or energy from a generating facility, and (ii) to pay for such capacity or energy as an Operation and Maintenance Expense regardless of whether or not such capacity or energy is taken by or made available or delivered to the SFPUC, and (c ) the payments pursuant to which are directly pledged and applied to pay and secure debt obligations issued to finance such generating facility.

Subordinate Obligations; Obligations Not Payable from Revenues The Indenture permits the SFPUC to authorize and issue or incur, without limitation, bonds, notes, warrants, certificates or other obligations or evidences of indebtedness, the principal of or interest on which would be payable either (i ) from Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits and after and subordinate to the payment from Revenues of the principal of and interest on the Bonds, or (ii ) from moneys which are not Revenues. See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Obligations.”
Authorized Investments
The Indenture provides that moneys in all funds and accounts held by the Trustee under the Indenture shall be invested upon receipt in Authorized Investments as directed by the SFPUC. “Authorized Investments” means any obligations on investments in which the Treasurer may legally invest the SFPUC’s funds. For information regarding the investment of moneys held in the various funds and accounts of the SFPUC, see “FINANCIAL OPERATIONS – Investment of SFPUC Funds.”

16 OBLIGATIONS PAYABLE FROM REVENUES
Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues City Charter. The Charter authorizes the SFPUC to issue revenue bonds and commercial paper notes and other obligations payable from and secured by a pledge of Revenues . The Charter requires voter approval of revenue bonds issued by the SFPUC unless a specific exception to the voter approval requirement applies . See “– Proposition A,” “ – Reconstruction or Replacement of Existing Facilities,” “Renewable Energy and Energy Conservation” and “ – Refunding Bonds.” The 2023A Bonds are being issued pursuant to the authority granted by the specific exceptions to the voter approval requirement contained in such provisions of the Charter.

Proposition A. On June 5, 2018, voters of San Francisco approved Proposition A, amending Section 8B.124 of the Charter to authorize the issuance of revenue bonds, including notes, commercial paper or other forms of indebtedness, when authorized by ordinance approved by a two- thirds vote of the Board of Supervisors, for the purpose of reconstructing, replacing, expanding, repairing or improving water facilities, clean water facilities, power facilities or combinations of water, clean water and power facilities under the SFPUC’s jurisdiction.

Reconstruction or Replacement of E xisting Facilities . Section 9.107(6) of the Charter provides that no voter approval is required for bonds issued for the purpose of the reconstruction or replacement of existing water facilities or electric power facilities or combinations of water and electric power facilities under the jurisdiction of the SFPUC when authorized by resolution adopted by a three -fourths affirmative vote of all members of the Board of Supervisors.

Renewable Energy and Energy Conservation. Section 9.107(8) of the Charter provides that no voter approval is required for bonds issued to finance or refinance the acquisition, construction, installation, equipping, improvement or rehabilitation of equipment or facilities for renewable energy and energy conservation.

Refunding Bonds . Section 9.109 of the Charter authorizes the Board of Supervisors to provide for the issuance of bonds for the purpose of refunding revenue bonds without voter approval if the issuance and sale of such refunding bonds are expected to result in net debt service savings on a present value basis, calculated as provided by ordinance.

Ordinance No. 40-15. Ordinance No. 40-15 enacted the Public Utilities Commission Power Enterprise Revenue Bond Law. Ordinance 40-15 establishes procedures for the issuance of Power Enterprise revenue bonds and provides that “the City, including without limitation the [SFPUC], shall fix, establish, maintain, approve and collect rates and charges for electric power and energy and other services, facilities and commodities sold, fu rnished or supplied through the Power Enterprise, including on, for and from the City and its departments, agencies and commissions, to provide [Power Enterprise revenues] sufficient (a ) to pay all costs and expenses of the Power Enterprise, including without limitation debt service on [Power Enterprise revenue bonds], (b) to provide appropriate reserves therefor, and (c) to satisfy the debt service coverage and other requirements under each [indenture providing for the issuance of Power Enterprise revenue bonds].” Senior Obligations; Parity Obligations
The SFPUC has not issued or incurred any obligations (other than obligations constituting Operation and Maintenance Expenses) or issued or created additional indebtedness payable from Revenues senior to payment of the Bonds, including the 2023A Bonds.

The 2023A Bonds are the third Series of Bonds to be issued under the Master Indenture . The SFPUC has previously issued the 2015AB Bonds and the 2021AB Bonds . As of September 1, 2023, the Outstanding Bonds are outstanding in the aggregate principal amount of $ 158,910,000. There are currently no other obligations of the SFPUC payable from Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, on a parity with the Outstanding Bonds and the 2023A Bonds.

17 Subordinate Obligations
The Power Enterprise has previously issued and incurred and in the future may issue, bonds or notes or incur other obligations of the Power Enterprises secured by a pledge of and lien and charge on Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, junior and inferior to those securing repayment of the Bonds (the “Subordinate Obligations”).

In October 2011, the SFPUC issued $8,291,000 aggregate principal amount of taxable qualified energy conservation bonds (“ QECBs”) to fund certain qualified components for the SFPUC’s 525 Golden Gate Headquarters project . The QECBs mature in Fiscal Year 2027 -28 and the annual debt service relating to the QECBs, net of anticipated federal subsidy payments to the SFPUC, is $591,198.

In October 2015, the SFPUC issued $4,100,000 aggregate principal amount of new clean renewable energy bonds (“ NCREBs”) to fund certain qualified clean, renewable energy solar generation facilities at the Marina Middle School and the San Francisco Police Academy. The NCREBs mature in Fiscal Year 2032 -33 and the annual debt service relating to the NCREBs, net of anticipated federal subsidy payments to the SFPUC, on average, is $169,559.

The SFPUC has a commercial paper program to fund construction costs relating to Power Enterprise capital projects. The commercial paper program is authorized in the amount of $250 million for the SFPUC to issue commercial paper notes (the “Commercial Paper Notes ”). The Commercial Paper Notes are secured by two separate letters of credit, each with Bank of America, N.A., each in the amount of $125 million and each with a stated expiration date of March 6, 2026. See “CERTAIN RISK FACTORS – Commercial Paper Note Credit Facilities.” The SFPUC had approximately $ 117.7 million principal amount of and interest on Commercial Paper Notes outstanding as of September 13, 2023. Approximately $117.7 * million principal amount of and interest on
Commercial Paper Notes will be refunded with proceeds of the 2023A Bonds on or around _____, 2023.

The QECBs, NCREBs and the Commercial Paper Notes constitute Subordinate Obligations under the Indenture.

Contingent Payment Obligations
The Power Enterprise has no interest rate swaps, caps or hedges or other contingent pay ment obligations payable from Revenues. The Power Enterprise may in the future, however, incur contingent payment obligations payable from Revenues. Such contingent payment obligations may be payable on a parity with the Bonds if the conditions for the issuance of parity debt under the Indenture are satisfied. See “SECURITY FOR THE BONDS – No Senior Obligations; Other Parity Obligations.”
Power Purchase Agreements
In June 2009, the Power Enterprise entered into a 25- year power purchase agreement with SFCity1, LP, to purchase electricity generated from a solar photovoltaic project located at Sunset Reservoir. The facility achieved commercial operation in November 2010. In July 2013, Duke Energy (“ Duke Energy”) assumed ownership of the power purchase agreement. In accordance with the terms and conditions thereof, Duke Energy will sell and deliver, and the Power Enterprise will purchase and accept, all of the output of the project (the “ Sunset Solar Generating Project”).

Payments made by the Power Enterprise under its agreement with Duke Energy constitute Operation and Maintenance Expenses under the Indenture. See “SECURITY FOR THE BONDS – Pledge of Revenues – Net Revenues.” In Fiscal Years 2020 -21 and 2021-22, the Power Enterprise purchased approximately 6,598 megawatt- hours (“MWh”) of electricity for a total payment of $2.13 million and approximately 6,460 MWh of electricity for a total payment of $2.23 million, respectively. The SFPUC projects purchasing approximately 6,607 MWh of electricity for a total payment of approximately $2.25 million in Fiscal Year 2022-23.

* Preliminary, subject to change.

18 Other Obligations Payable from Revenues
The SFPUC completed the construction of a 13- story office building at 525 Golden Gate Avenue in San Francisco to house the administrative offices o f the SFPUC’s three utility enterprises, and moved into the building in July 2012. Total project costs were approximately $202 million and were financed with land and property sale proceeds, fund balances, grants and the proceeds of certificates of partic ipation (the “ 2009 Golden Gate COPs ”), representing interests in a City General Fund lease, executed and delivered in two series (one of which constitutes Build America Bonds) on October 7, 2009, in the aggregate principal amount of $167,670,000.

The final maturity date of the 2009 Golden Gate COPs is November 1, 2041. As of September 1, 2023, the principal amount outstanding of the 2009 Golden Gate COPs was $129,550,000. Pursuant to a memorandum of understanding between the City and the SFPUC, the SFPUC will reimburse the City General Fund for all debt service in connection with this City financing (net of Refundable Credits received). The SFPUC allocates such payment obligations internally among its three utility enterprises based on percentage usage. The Power Enterprise is responsible for 9.72% of such obligations, payable from Revenues on a basis subordinate to the payment of principal of and interest on the Bonds.

Revenue Bond Oversight Committee
On November 5, 2002, the voters of San Francisco adopted Proposition P, an ordinance that established the Public Utilities Revenue Bond Oversight Committee (“ RBOC”) to report publicly to the Mayor, the SFPUC and the Board of Supervisors regarding the expenditure of revenue bond proceeds on the repair, replacement, upgrading and expansion of the Wastewater Enterprise, the Water Enterprise and the Power Enterprise.

The RBOC has seven members appointed as follows : two by the Mayor, two by the Board of Supervisors, one by the City Controller, one by the Bay Area Water Users Association under the auspices of the Bay Area Water Supply and Conservation Agency. The seventh member is the City’s Budget Analyst or their representative. The work of the RBOC is funded by 1/20th of 1% of the gross bond proceeds of new money revenue bond issuances or sales to the extent permitted by law.

The RBOC’s current term expires on January 1, 2025.

The RBOC may, by majority vote of all its members, prohibit the issuance or sale of authorized SFPUC revenue bonds which have yet to be issued or sold if, after reviewing materials provided by the SFPUC and conducting its own independent audit, and after consultation with the City Attorney, the RBOC determines that revenue bond proceeds have been or are being spent on purposes not authorized by the authorizing bond resolution or otherwise in a manner amounting to an illegal expenditure or illegal waste of such revenue bond proceeds . The SFPUC may appeal such a decision to the Board of Supervisors within 30 days. The Board of Supervisors may overturn such a decision by the RBOC by a two- thirds vote of all members of the Board of Supervisors with evidence from the SFPUC of corrective measures satisfactory to the Board of Supervisors or may remand the decision to the RBOC for further consideration. To date, the RBOC has not prohibited the issuance or sale of any authorized SFPUC revenue bonds of the Wastewater Enterprise, the Water Enterprise or the Power Enterprise.

19 Debt Service Requirements
Set forth below are the annual principal, interest and total debt service requirements for the Outstanding Bonds and the 2023A Bonds:

Fiscal Year
Ending
June 30
Outstanding
Bonds(1)(2)
2023A Bonds
Principal
2023A Bonds
Interest(2)
Total Debt
Service(2)(3)
2024 $2,566,350
2025 9,615,750
2026 9,617,525
2027 9,612,650
2028 9,605,800
2029 9,606,050
2030 9,597,800
2031 9,604,975
2032 9,593,150
2033 9,592,375
2034 9,597,200
2035 9,598,675
2036 9,606,350
2037 9,614,675
2038 9,613,425
2039 9,617,275
2040 9,615,775
2041 9,618,475
2042 9,614,950
2043 9,614,725
2044 9,617,150
2045 9,616,700
2046 9,617,800
2047 9,618,000
2048 9,617,900
2049 9,615,000
2050 9,618,700
2051 9,618,400
Total(3) $262,063,600
_______________
(1) Comprised of 2015AB Bonds and 2021AB Bonds. See “OBLIGATIONS PAYABLE FROM REVENUES.” (2) Net of capitalized interest payments.
(3) Totals may not add due to rounding.

20 THE CITY AND COUNTY OF SAN FRANCISCO
THE FOLLOWING INFORMATION IS PROVIDED FOR CONVENIENCE ONLY. THE GENERAL

FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2023A BONDS, AND NEITHER THE CREDIT NOR THE TAXING POWER OF THE

CITY IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2023A BONDS. THE 2023A BONDS ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE, LIEN, OR ENCUMBRANCE UPON, ANY OF THE PROPERTY OF THE CITY.

General. San Francisco is the economic and cultural center of the San Francisco Bay Area and northern California. The limits of San Francisco encompass over 93 square miles, of which 49 square miles are land, with the balance consisting of tidelands and a portion of the San Francisco Bay (the “Bay ”). San Francisco is located at the northern tip of the San Francisco Peninsula, bounded by the Pacific Ocean to the west, the Bay and the San Francisco-Oakland Bay Bridge to the east, the entrance to the Bay and the Golden Gate Bridge to the north, and San Mateo County to the south. Silicon Valley is about a 40 -minute drive to the south, and the Napa -Sonoma wine country is about an hour’s drive to the north. The City estimates San Francisco’s population in fiscal year 2021- 22 was 804,534.

The San Francisco Bay Area consists of the nine counties contiguous to the Bay: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma Counties (collectively, the “Bay Area”).

The economy of the Bay Area includes a wide range of industries, supplyi ng local needs as well as the needs of national and international markets. Major business sectors in the Bay Area include technology, retail, entertainment and the arts, conventions and tourism, service businesses, banking, professional and financial services, corporate headquarters, international and wholesale trade, multimedia and advertising, healthcare and higher education. The California State Supreme Court is also based in San Francisco.

The COVID- 19 pandemic materially adversely affected the City’s population, finances and operations .

Many aspects of the City’s future finances and operations and the local economy have been and may continue to be materially adversely impacted by the COVID -19 pandemic . To date, City economic and tax revenue losses associated with the COVID -19 pandemic have been significant . While COVID -19 case rates have significantly declined, vaccination rates have increased, certain emergency orders have been lifted, and the national and local economy has been improving, the situation is still developing and the resulting impact on the City’s local economy, population, finances and operations remains unknown.

San Francisco has historically been a major convention and tourist destination. However, the COVID- 19 pandemic has significantly adversely impacted, and may continue to adversely impact tourism and convention activities in San Francisco. According to the San Francisco Travel Association, a nonprofit membership organization (“ SFTA”), approximately 21.9 million tourists visite d San Francisco in calendar year 2022, approximately 17.1 million tourists visited San Francisco in calendar year 2021, approximately 11.8 million tourists visited San Francisco in calendar year 2020 and approximately 26.3 million tourists visited San Francisco in calendar year 2019. SFTA also estimates that total spending, including spending from conventions, trade shows and group meetings, was $7.7 billion in calendar year 2022, $3.69 billion in calendar year 2021, $2.85 billion in calendar year 2020 and $10.29 billion in calendar year 2019.

San Francisco is also a leading center for financial activity in California . The headquarters of the Twelfth Federal Reserve District and the Eleventh District Federal Home Loan Bank are located in San Francisco.

San Francisco benefits from a highly skilled, educated and professional labor force . The City estimates the per-capita personal income of San Francisco for fiscal year 2021- 22 was $170,483. The San Francisco Unified School District (“SFUSD”), which is a separate legal entity from the City, operates 73 elementary schools, 13 middle schools, 17 high schools, 47 early education schools, and three County and Court schools . Higher education institutions located in San Francisco include the University of San Francisco, California State University – San Francisco, University of California – San Francisco (a medical school and health science campus) (“UCSF ”), UC College of the Law, San Francisco (formerly University of California Hastings College of the Law), the University of the Pacific’s School of Dentistry, Golden Gate University, City College of San Francisco (a public community college), the San Francisco Conservatory of Music, and the Academy of Art University.

21 San Francisco International Airport (“ SFO”), located 14 miles south of downtown San Francisco in an unincorporated area of San Mateo County, is owned by the City and is operated by the San Francisco Airport Commission (the “Airport Commission”), and is the principal commercial service airport for the Bay Area and one of the nation’s principal gateways for Pacific Rim traffic. As discussed above, the COVID -19 pandemic has significantly adversely impacted tourism and travel in the San Francisco Bay Area. In fiscal year 2021 -22, SFO served approximately 34.8 million passengers (compared to approximately 13.7 million passengers in fiscal year 2020-21, 40.5 million passengers in fiscal year 2019 -20 and 57.4 million passengers in fiscal year 2018 -19) and handled 545,335 metric tons of cargo (compared to 471,793 metric tons in fiscal year 2020 -21, 490,073 metric tons in fiscal year 2019-20 and 564,485 metric tons in fiscal year 2018-19). San Francisco is also served by the Bay Area Rapid Transit District (“BART”), an electric rail commuter service linking Sa n Francisco with the East Bay and the San Francisco Peninsula, including SFO), Caltrain (a conventional commuter rail line linking the City with the San Francisco Peninsula), and bus and ferry services between San Francisco and residential areas to the nor th, east and south of San Francisco. San Francisco Municipal Railway (“Muni”), operated by the San Francisco Municipal Transportation Agency (“ SFMTA”), provides bus and streetcar service within San Francisco (although since fiscal year 2019 -20, telecommuting resulting from emergency stay- at-home orders caused ridership into and within San Francisco to decline significantly compared to pre -pandemic levels). The Port of San Francisco (the “Port”), which admini sters 7.5 miles of Bay waterfront held in “public trust” by the Port on behalf of the people of California, promotes a balance of maritime- related commerce, fishing, recreational, industrial and commercial activities, and natural resource protection.

Government. San Francisco is a city and county chartered pursuant to Article XI, Sections 3, 4, 5 and 6 of the Constitution of the State of California and is the only consolidated city and county in California. Voters approved the City’s current Charter at the November 1995 election. The City is governed by a Board of Supervisors elected from 11 districts to serve four -year terms, and a Mayor who serves as chief executive officer, elected citywide to a four -year term. The City’s original budget for fiscal years 2022- 23 and 2023- 24 totals $14.0 billion and $13.9 billion, respectively. The General Fund portion of the original proposed budget is $6.8 billion in fiscal year 2022- 23 and $6.9 billion in fiscal year 2023 -24, with the balance allocated to all other funds, including enterprise fund departments, such as the Airport Commission, SFMTA, the Port Commission and the SFPUC .

According to the City’s Controller (the “ Controller”), at the start of fiscal year 2022 -23, total net assessed valuation of taxable property in San Francisco was approximately $328.6 billion.

City Financial Challenges . The COVID- 19 pandemic resulted in general negative effects on the City’s economy. In addition, the local, State and national economies have faced significant headwinds, including multiple interest rate increases by the Federal Reserve, continuing price inflation, volatile investment markets, and economic disruption resulting from the war in Ukraine and other factors . Furthermore, on February 28, 2023, the Controller issued its most recent report on the status of the re -opening of the City economy (the “ Controller’s Report”). The Controller’s Report noted that housing prices are continuing to fall faster in San Francisco than Statewide . The Controller’s Report also indicated that San Francisco continues to lag behind other metropolitan areas with respect to in-office attendance by workers in City businesses (a continuation of the remote work practices which became more prevalent during the pandemic).

22 THE PUBLIC UTILITIES COMMISSION
General
The SFPUC is a department of the City responsible for the maintenance, operation and development of three utility enterprises: (i) the Water Enterprise, (ii) the Wastewater Enterprise and (iii) Hetch H etchy Water and Power and CleanPowerSF. For financial purposes, Hetch Hetchy Water and Power and CleanPowerSF is comprised of three funds: (i) Hetch Hetchy Water, (ii) the Power Enterprise and (iii) CleanPowerSF. See “INTRODUCTION – The San Francisco Publi c Utilities Commission and the Power Enterprise” for a chart showing the organizational structure of the SFPUC’s enterprise funds.

The revenues of the Water Enterprise, the Wastewater Enterprise and CleanPowerSF, and the revenues allocated to Hetch Hetchy Water, as described under “– Organization, Purposes and Powers,” are not available for payment of the principal of, premium, if any, or interest on the Bonds, including the 2023A Bonds. See “SECURITY FOR THE BONDS – Pledge of Revenues.”
Organization, Purposes and Powers
The SFPUC has been established under and is governed by the provisions of the Charter, including the provisions respecting the priority of appropriations from enterprise revenues in Section 16.103 of the Charter.

Hetch Hetchy Water and Power . Hetch Hetchy Water and Power is comprised of two key components:

Hetch Hetchy Water, which operates and maintains the Hetch Hetchy Project, and Hetch Hetchy Power (known and referred to in this Official Statement as the “ Power Enterprise”), which is responsible for all SFPUC power utility commercial transactions and in -City power operations. The Hetch Hetchy Project provides water for distribution through the Water Enterprise and hydroelectric power for delivery through the Power Enterpr ise. A number of the facilities of the Hetch Hetchy Project are joint assets and are used for both water transmission and power generation and transmission, benefitting both Hetch Hetchy Water and the Power Enterprise. All power sales revenues are allocated to the Power Enterprise. Operating and capital costs benefitting the Power Enterprise and 55% of operating and capital costs that jointly benefit both Hetch Hetchy Water and the Power Enterprise are allocated to the Power Enterprise. See “THE POWER E NTERPRISE.” Operating and capital costs benefitting Hetch Hetchy Water and 45% of operating and capital costs jointly benefitting both Hetch Hetchy Water and the Power Enterprise are allocated to the SFPUC’s Water Enterprise.

The Power Enterprise was created in February 2005 as a separate system and accounting unit within Hetch Hetchy Water and Power. The Power Enterprise provides retail electric service to meet the municipal requirements of the City, including power to operate the SFMTA’s streetcars and electric buses, Zuckerberg San Francisco General Hospital and Trauma Center, City Hall, police stations, fire stations and schools, certain Port facilities, street and traffic lights, municipal buildings and other City facilities, such as SFO, and to certa in public agencies and retail customers and provides pedestrian and streetlight operation and maintenance services, energy efficiency, and distributed generation services to San Francisco residents and businesses and other customers. Additionally, the Power Enterprise is obligated to provide power to the Districts and to other customers consistent with prescribed contractual obligations and federal law. See “THE POWER ENTERPRISE.” CleanPowerSF. In May 2016, the SFPUC began serving customers through CleanPowerSF, a Community Choice Aggregation program. CleanPowerSF is a “Separate System” under the Indenture. Under CleanPowerSF, the SFPUC pools the electricity demands of many San Francisco residents and businesses that are retail electric distribution customers of PG&E, for the purpose of buying electricity on behalf of such customers . CleanPowerSF, which currently serves over 380,000 accounts, gives residential and commercial electricity consumers in San Francisco a choice of having their el ectricity supplied from clean renewable sources, such as solar, wind, and geothermal, at competitive rates. CleanPowerSF offers three products : the default “Green” product comprised of at least 50% California renewable portfolio standards (“ RPS”)-eligible renewable energy; the “SuperGreen” product comprised of 100% RPS -eligible renewable energy; and the “SuperGreen Saver” product comprised of 100% RPS - eligible renewable energy in which eligible low -income customers receive a 20% bill discount . CleanPowerSF is an opt-out program and customers can choose to use CleanPowerSF or stay with Pacific Gas & Electric Company’s

23 existing generation service . Since the SFPUC began serving customers through CleanPowerSF in 2016, the program has maintained an approximately 96% participation rate, or an approximately 4% opt -out rate.

The revenues of CleanPowerSF are not “Revenues” under the Indenture, and are not available to pay and do not secure the payment of the principal of, premium, if any, or interest on the Bonds, including the 2023A Bonds.

See “SECURITY FOR THE BONDS – Pledge of Revenues.”
Water Enterprise. Approximately 2.7 million people rely on water supplied by the SFPUC to meet their daily water needs through its Water Enterprise. The SFPUC serves as the retail water supplier for the City and is responsible for water deliveries to residents and institutions within the San Francisco city limits, as well as to a number of retail accounts outside of the San Francisco city limits. In addition, the SFPUC sells water to 26 wholesale customer entities in San Mateo, Alameda and Santa Clara counties pursuant to the Water Supply Agreement, which became effective in 2009 and was most recently amended and restated in 2021 (the “Water Supply Agreement”) and individual contractual agreements, and one additional wholesale customer pursuant to an individual contractual agreement.

The revenues of the Water Enterprise are not “Revenues” under the Indenture, and are not available to pay and do not secure the payment of the principal of, premium, if any, or interest on the Bonds, including the 2023A Bonds. See “SECURITY FOR THE BONDS – Pledge of Revenues.” Wastewater Enterprise . The Wastewater Enterprise’s collection and treatment system consists of a combined sewer collection system conveying sewage and stormwater flows within San Francisco to three water pollution control plants, also located within San Francisco. Treated effluent flows are then discharged through deep- water outfalls into the San Francisco Bay and Pacific Ocean. The Wastewater Enterprise also currently provides sewage treatment service on Treasure Island pursuant to contract and operates an onsite sewage and stormwater reclamation and treatment facility at the SFPUC headquarters at 525 Golden Gate Avenue.

The revenues of the Wastewater Enterprise are not “Revenues” under the Indenture, and are not available to pay and do not secure the payment of the principal of, premium, if any, or interest on the Bonds, including the 2023A Bonds. See “SECURITY FOR THE BONDS – Pledge of Revenues.” Commission Members
Under the Charter, the SFPUC is given exclusive charge of the operation and management of all water, wastewater and energy supplies and utilities owned or maintained by the City, as well as the real, personal and financial assets under the SFPUC’s jurisdiction. The SFPUC is governed by the Commission.

The Commission consists of five members appointed by the Mayor, subject to confirmation by a majority of the Board of Supervisors . Seat 1 is designated for a member with experience in environmental policy and an understanding of environmental justice issues . Seat 2 is designated for a member with experience in ratepayer or consumer advocacy. Seat 3 is designated for a member with experience in project finance . Seat 4 is designated for a member with expertise in water systems, power systems, or public utility management . Seat 5 is designated for an at-large member. Members are appointed for four -year terms and are eligible for reappointment . Members may be suspended by the Mayor and may be removed by a three -fourths vote of the Board of Supervisors for official misconduct.

The current members of the Commission and their appointment dates and expiration dates of their current terms are set forth below:

Name and Title Seat Appointment Date Term Expires
Newsha Ajami, President 1 February 4, 2021 August 1, 2024 Sophie Maxwell, Vice President 2 April 29, 2019 August 1, 2025 Tim Paulson 3 April 29, 2019 August 1, 2024
Anthony Rivera 5 October 11, 2022 August 1, 2024
Kate H. Stacy 4 October 18, 2022 August 1, 2026

24 Management
Management of the SFPUC is led by the General Manager. The General Manager is appointed by the Mayor from candidates submitted by the Commission. Once a ppointed by the Mayor, the General Manager serves at the pleasure of the Commission; however, the Commission also has Charter authority to employ the General Manager under an individual contract.

Brief biographies of the General Manager and principal members of the senior management of the SFPUC are set forth below.

Dennis J. Herrera . Dennis J. Herrera commenced serving as the General Manager of the SFPUC on November 1, 2021. Prior to his appointment, Mr. Herrera had been re-elected in November 2019 to a four-year term as City Attorney for the City and County of San Francisco. Mr. Herrera was first elected City Attorney in December 2001. Before becoming City Attorney, Mr. Herrera had been a partner in a private law firm and had served in the Clinton Administration as Chief of Staff of the United States Maritime Administration. He also served as president of the San Francisco Police Commission and was a member of the San Francisco Public Transportation Commission. Mr. Herrera earned a B.A. from Villanova University and a J.D. from George Washington School of Law.

Ronald P. Flynn . Ronald P. Flynn is the Deputy General Manager and Chief Operating Officer of the SFPUC. Appointed to this role in 2022, Mr. Flynn works with the General Manager on all policy and strategic initiatives, oversees the SFPUC’s daily operations, including busi ness services (finance, accounting, audits, customer services, information technology), external affairs (communications, legislative, community benefits, equity), and human resources. Prior to this position, Mr. Flynn served for almost 16 years in the San Francisco City Attorney’s Office under Dennis Herrera . For the last seven years he was the Chief Deputy City Attorney, where he oversaw the City’s litigation teams, as well as worked closely with departments and agencies, including the SFPUC, on procurement, financial, and litigation matters. He worked on Hetch Hetchy litigation, PG&E’s bankruptcy, and other SFPUC -related issues . Mr. Flynn previously served as Team Leader of the Construction and Public Contracting Team in the City Attorney’s Office, wo rking on many SFPUC projects, including the Water System Improvement Program. Mr. Flynn earned a B.Sc. from California Polytechnic State University, San Luis Obispo, an Ed.M from Harvard University, and a J.D. from University of California, Berkeley School of Law.

Nancy L. Hom. Nancy L. Hom is the Chief Financial Officer and Assistant General Manager for Business Services, providing direction and oversight for the Financial Services, Audit, Loans and Grants, Information Technology Services, Customer Services, and Strategy Innovation and Change bureaus. She has led several important bureaus of Business Services, including serving as the Assurance and Internal Control Director for 10 years; and more recently as the SFPUC’s Co -Deputy Chief Financial Officer . Ms. Hom has nearly 20 years of experience leading financial and governance teams in public agencies and has extensive knowledge of the City’s financial and accounting guidelines and systems, capital improvement projects and regulatory affairs. Prior to joining the SFPUC, she served as the Chief Financial Officer for the Department of Child Support Services and as a leader in the Office of the Controller’s Budget and Analysis division. Ms. Hom earned her bachelor’s degree in Business Administration from San Francisco State University, concentrating in Finance, Internal Audit, and Project Management. She also maintains two professional certifications from the Institute of Internal Auditors as a Certified Internal Auditor and Certified Risk Management Assurance professional.

Barbara Hale . Barbara Hale is Assistant General Manager for Power. Ms. Hale oversees the Power Enterprise, where she is responsible for all commercial arrangements associated with the purchase and sale of power, whether wholesale or retail, and operations of retail electric service programs. Prior to this role, Ms. Hale served as Analyst, Advisor to the President, Administrative Law Judge, and Division Director at the California Public Utilities Commission. Ms. Hale gradu ated cum laude from San Francisco State University with a B.A. in Economics, receiving special recognition for high achievement with the Department Honors Award, and pursued extensive graduate coursework in Applied Economics.

Masood Ordikhani . Masood Ordikhani serves as the Assistant General Manager, External Affairs and Chief Strategy Officer for the SFPUC. Previously, he served as the SFPUC’s first Chief Equity and Innovation Officer, leading the agency’s racial equity work. Prior to that ro le, he was the Director of Workforce and Economic

25 Program Services within the SFPUC’s Infrastructure Division. During his tenure in that role, Mr. Ordikhani and his team have developed and delivered several nationally recognized programs . Prior to joinin g the SFPUC, Mr. Ordikhani was the Deputy Director of the City’s Human Rights Commission. In addition, prior to his more than 14 years of public service, he was an attorney in private practice. He is a graduate of the University of California, Berkeley and UC College of the Law, San Francisco (formerly University of California Hastings College of the Law).

Stephen Robinson. Stephen Robinson is the Assistant General Manager for Infrastructure, where he is responsible for capital programs and project implementation for SFPUC facilities, including the Water System Improvement Program, the Sewer System Improvement Program, and the Hetchy Capital Improvement Program .

Previously, he was the Director of the Wastewater Enterprise Capital Program for SFPUC’s Infrastructure Division .

He is a Professional Civil Engineer and a UK Chartered Civil Engineer with over two decades of planning, design, construction, and management experience in the water/wastewater sector . Prior to joining SFPUC, Mr. Robinson worked with MWH/Stantec as a consultant and served in the British Army as a Royal Engineer Captain .

Mr. Robinson has a master’s degree in Civil Engineering and Management from the Queens University of Belfast, Northern Ireland.

Joel Prather . Joel Prather is the Acting Assistant General Manager of the Wastewater Enterprise. His professional background includes more than a decade at SFPUC Wastewater Enterprise, and over 20 years with the City. He started with San Francisco Public Works in the Bureau of Street and Sewer Repair and came to the SFPUC in 2011 as a Maintenance Planner . He held the position of Maintenance Manager for the past seven years, where he managed the day to day maintenance systems and practices for the wastewater treatment facilities. He earned a B.A. in urban studies from San Francisco State University.

Steven R. Ritchie. Steven Ritchie is the Assistant General Manager of the Water Enterprise, responsible for overseeing water system operations and planning from the Hetch Hetchy Project through the Regional Water System to the City Distribution Division . He is also responsible for the management of the SFPUC’s lands and natural resources. Mr. Ritchie was the Manager of Planning at the SFPUC from 1995 to 1998. Prior to his current assignment, he managed the South Bay Salt Pond Restoration Project, a multi -agency effort to restore 15,100 acres of valuable habitat in South San Francisco Bay, while providing for flood risk management and public access . In addition, Mr. Ritchie has worked at management positions at the San Francisco Bay Regional Water Quality Control Board (1987-1995), the CalFed Bay Delta Program (1998- 2000), and URS consultants (2000- 2004). He has a B.S. and M.S. in Civil Engineering from Stanford University.

Ongoing Investigations
In January 2020, the City’s former Director of Public Works, Mohammad Nuru, was criminally charged with public corruption, including honest services wire fraud and lying to Federal Bureau of Investigation (“ FBI”) agents. In February 2020, then- City Attorney Dennis Herrera and Controller Ben Rosenfield announced the initiation of a joint investigation stemming from the federal criminal charges against Mr. Nuru. The City Attorney’s Office focused on holding public officials and City vendors accountable. The Controller undertook a public integrity review of contracts, purchase orders, and grants to the City.

Mr. Nuru resigned from employment with the City in February 2020. In January 2022 , Mr. Nuru pled guilty to taking bribes from contractors, developers, and entities he regulated, including bribes from Walter Wong, a San Francisco construction company executive and permit expediting consultant, who ran or controlled multiple entities doing business with the City. In August 2022, the district court judge sentenced Mr. Nuru to 84 months in prison.

Mr. Wong was criminally charged in June 2020 with conspiring with City officials and laundering money.

As part of the criminal investigation into Mr. Nuru and Mr. Wong, the SFPUC received a federal, criminal, grand jury subpoena in June 2020 to produce docume nts, communications, contracts and records, including the complete personnel file of the SFPUC’s former General Manager, Harlan L. Kelly, Jr.

In November 2020, Mr. Kelly was charged in a criminal complaint with one count of honest services wire fraud. The complaint alleged that Mr. Kelly also engaged in a long- running bribery scheme and corrupt partnership

26 with Mr. Wong. The complaint further alleged that as part of the scheme, Mr. Wong provided items of value to Mr. Kelly in exchange for official acts by Mr. Kelly that benefited or attempted to benefit Mr. Wong’s business ventures. According to the criminal complaint against Mr. Kelly, Mr. Wong bribed Mr. Kelly with thousands of dollars in airfare, meals, jewelry, and travel expenses, as well as by making improvements to Mr. Kelly’s home.

Mr. Wong pled guilty in July 2020 and continues to cooperate with the ongoing federal criminal investigation. Mr. Wong has not been sentenced.

Mr. Wong settled civilly with the City in May 2021. As part of his civil se ttlement, he and his companies agreed to pay the City more than $300,000 in ethics fines and more than $1 million in restitution. The total restitution amount to the City includes $73,000 that he received through the SFPUC when Mr. Kelly was General Manager.

Mr. Kelly resigned from employment with the City, effective November 30, 2020. Michael Carlin, former- Deputy General Manager of the SFPUC, then served as the Acting General Manager of the SFPUC through October 31, 2021. Mr. Herrera began serving as General Manager of the SFPUC on November 1, 2021.

Since Mr. Nuru’s arrest in January 2020, the Controller’s Office, in consultation with the City Attorney, has issued 11 public integrity reviews, all of which can be found on the Controller’s website. Ten of the 11 reports focus primarily on City departments other than the SFPUC. The Controller’s Office’s December 9, 2021, Public Integrity Audit looked specifically at SFPUC’s Social Impact Partnership Program and made seven recommendations to strengthen internal controls and oversight. The SFPUC concurred with all seven of those recommendations, and as of December 2022, five of the seven recommendations had been implemented and two were in progress.

In October 2021, a criminal grand jury returned an indictm ent against Mr. Kelly and Victor Makras, a San Francisco real estate broker and property developer. Mr. Makras formerly served on several City boards and commissions, including the Port Commission, Police Commission, Public Utilities Commission, and Retir ement Board. In addition to the original charges against Mr. Kelly of conspiracy with Mr. Wong, the indictment added charges of bank fraud and bank fraud conspiracy related to a $1.3 million loan Mr. Kelly obtained from Quicken Loans.

Mr. Makras’ case was severed from Mr. Kelly’s, and in August 2022, a jury convicted Mr. Makras of bank fraud for his role in making false statements to the bank in support of the loan to Mr. Kelly. In December 2022, Mr. Makras was sentenced to three years of probation and fined $15,200.

On July 14, 2023, Mr. Kelly was convicted of one count of conspiracy to commit honest services wire fraud, one count of honest services wire fraud, and four counts related to charges stemming from a bank fraud scheme. The jury found Mr. Kelly not guilty of two honest services wire fraud counts. No sentence has been pronounced for Mr. Kelly.

The FBI investigation is ongoing, and the City can give no assurance when the FBI will complete its investigation.

Proposed Transaction with Pacific Gas & Electric Company In September 2019, in connection with the bankruptcy of PG&E and PG&E Corporation, the City submitted a non- binding indication of interest to PG&E and PG&E Corporation to purchase substantially all of PG&E’s electric distribution and transmission assets needed to provide retail electric service to all electricity customers within the geographic boundaries of San Francisco (collectively, the “ Targeted Assets”) for a purchase price of $2.5 billion. PG&E emerged from bankrupt cy on July 1, 2020. The City subsequently submitted a second non-binding indication of interest to PG&E in September 2020. PG&E has not indicated a willingness to sell any such assets. The City remains interested in acquiring these assets from PG&E, and on July 27, 2021, submitted a petition to the CPUC for a formal determination of the fair market value of PG&E’s assets the City is interested in acquiring. On April 10, 2023, the City filed direct testimony of four expert witnesses with the CPUC regarding the

27 specific assets under consideration for acquisition and the value of such assets. A transaction has not been consummated with PG&E, and neither the SFPUC nor the City are able to predict whether a transaction will be consummated or the final terms thereof, if consummated.

In the event the City purchases or otherwise acquires all or a substantial portion of the electric distribution and transmission assets of PG&E needed to provide retail electric service to all electricity customers within the geographic boundaries of the City, the Indenture requires that the SFPUC either operate such service as a Separate System or provide for all then Outstanding Bonds to be defeased or retired pursuant to applicable provisions of the Indenture in connection with such purchase or acquisition. In the Third Supplemental Indenture, the SFPUC covenants that it will not elect to operate such service as a Separate System unless the SFPUC has determined that such operation will not have a material adverse effect on the ho lders of, or the security pledged for the payment of, the Bonds.

Employee Relations
San Francisco. The City’s budget for fiscal years 2022- 23 and 2023 -24 included approximately 39,813 and 40,028 full-time and part -time budgeted and funded City positions, respectively . City workers are represented by 36 different labor unions . The largest unions in the City include the Service Employees International Union, Local 1021 (“ SEIU”) and the International Federation of Professional and Technical Engineers, Local 21 (“IFPTE”), which represent Power Enterprise employees.

Wages, hours and working conditions of City employees, including employees of the SFPUC, are determined by collective bargaining pursuant to State law (the Meyers -Milias-Brown Act, Calif ornia Government Code Sections 3500-3511) and the City Charter . San Francisco is unusual among California’s cities and counties in that nearly all of its employees, including managerial and executive -level employees, are represented by labor organizations.

Further, the City Charter requires binding arbitration to resolve negotiations in the event of impasse . If impasse occurs, the parties are required to convene a tripartite arbitration panel, chaired by an impartial third -party arbitrator, which sets the disputed terms of the new agreement . The award of the arbitration panel is final and binding. This process applies to almost all City employees . Since 1976, no City employees have participated in a union-authorized strike, which is prohibited by the Ci ty Charter. See “CERTAIN RISK FACTORS – Risks Related to Power Enterprise Operations and Facilities – Labor Actions.” The City’s employee selection procedures are established and maintained through a civil service system . In general, selection procedures and other merit system issues, with the exception of discipline, are not subject to arbitration. Disciplinary actions are generally subject to grievance arbitration, with the exception of sworn police officers and fire fighters.

In May 2019, the City negotiated three -year agreements (for fiscal years 2019 -20 through 2021- 22) with 27 labor unions, including IFPTE, which represent s Power Enterprise employees . For fiscal year 2019 -20, the parties agreed to wage increases of 3% on July 1, 2019 and 1% on December 28, 2019. For fiscal year 2020-21, the parties agreed to a wage increase schedule of 3% on July 1, 2020 and 0.5% on December 26, 2020, with a provision to delay the fiscal year 2020-21 adjustment by six months if the City’s deficit for fiscal year 2020- 21, as projected in the March 2020 update to the five -year financial plan, exceeds $200 million. Because the March 2020 update to the five-year financial plan projected a deficit for fiscal year 2020 -21 in excess of $200 million, the scheduled wage increases as described above were delayed by approximately six months . For fiscal year 2021-22, the parties agreed to a wage increase schedule of 3% on July 1, 2021 and 0.5% on January 8, 2022, with a provision to delay the fiscal year 2021 -22 increase by six months if the City’s deficit for fiscal year 2021 -22, as projected in the March 2021 update to the five -year financial plan, exceeds $200 million. The sche duled July 1, 2021 wage increase was implemented as the March 2021 update to the five-year financial plan did not project a $200 million deficit.

In May 2022, the City negotiated two-year agreements (for fiscal years 2022-23 and 2023-24) with 27 labor unions, including IFPTE, which represent s Power Enterprise employees. For fiscal year 2022-23, the parties agreed to a wage increase of 5.25% on July 1, 2022. For fiscal year 2023- 24, the parties agreed to wage increases of 2.5% on July 1, 2023, and 2.25% on January 6, 2024, with a provision to delay the fiscal year 2023 -24 adjustment by six

28 months if the City’s deficit for fiscal year 2023 -24, as projected in the March 2023 update to the five -year financial plan, exceeds $300 million. The scheduled July 1, 2023 wage increase was implemented as the March 2023 update to the five-year financial plan did not project a $300 million deficit.

SFPUC. The SFPUC currently employs approximately 2,300 of the City’s workers, of which approximately 6.8% work for the Power Enterprise . The Charter governs the SFPUC’s employment policies and authorizes the San Francisco Civil Service Commission to establish rules and procedures to implement those policies. Of the 36 labor unions representing City workers more broadly, 14 presently represent SFPUC employees.

Over the next five years, approximately 41.6% of the SFPUC workforce agency -wide will be eligible for retirement. A new generation of jobs will require workers with specialized training, skills and experience, while local hiring requirements will need to be observed. The SFPUC’s 2020 Strategic Sustainability Plan in cludes an “effective workforce” goal, which focuses on a number of workforce development and sustainability initiatives . The SFPUC also provides ethics training, diversity training, management training, environmental management system training, as well as fraud prevention and awareness training.

The following table summarizes the number of Power Enterprise employees covered by a memorandum of understanding (similar to a collective bargaining agreement), each of which expire on June 30, 2024.

TABLE 1

POWER ENTERPRISE

MEMORANDA OF UNDERSTANDING
Employee Bargaining Unit
Full-Time Equivalent
Employment(1)
Electrical Workers, Local 6 36
International Federation of Professional and Technical
Engineers, Local 21
76 Municipal Executives’ Association 19
SEIU Local 1021 10
Stationary Engineers, Local 39 1
Unrepresented Employees(2) 4
Total: 146
_______________
(1) Represents budgeted numbers as of July 1, 2023. Actual full-time equivalent employment totals will differ from the number of positions budgeted by the SFPUC for a variety of reasons, including certain requirements in the respective memoranda of understanding (similar to collective bargaining agreements) . See “FINANCIAL OPERATIONS – General – City Budget Process.”
(2) Not covered by a memorandum of understanding (similar to a collective bargaining agreement).

Source: SFPUC, Human Resources Services.

Employee Benefit Plans
Retirement System Plan Description. The San Francisco City and County Employees’ Retirement System (the “Retirement System” or “SFERS”) is charged with administering a defined -benefit pension plan (the “ Plan”) that covers substantially all City employees, including SFPUC employees, and certain other employees . The Retirement System was initially established by approval of City voters on November 2, 1920, and the State Legislature on January 12, 1921, and is curre ntly codified in the Charter . The Charter provisions governing the Retirement System may be revised only by a Charter amendment, which requires an affirmative public vote at a duly called election. The Retirement System is administered by the Retirement Board (the “Retirement Board ”). The Plan provides basic service retirement, disability and death benefits based on specified percentages of final average salary and provides cost -of-living adjustments after retirement. The Plan also provides pension cont inuation benefits to qualified survivors.

29 Funding Practices. Employer and employee (member) contributions are mandated by the Charter .

Sponsoring employers, including the SFPUC, are required to contribute 100% of the actuarially determined contribution approved by the Retirement Board. The Charter specifies that employer contributions consist of the normal cost (the present value of the benefits that SFERS expects to become payable in the future attributable to a current year’s employment) plus an amortization of the unfunded liability over a period not to exceed 20 years. The Retirement Board sets the funding policy subject to the Charter requirements.

The Retirement Board adopts the economic and demographic assumptions used in the annual valuations.

Demographic assumptions such as retirement, termination and disability rates are based upon periodic demographic studies performed by a consulting actuarial firm approximately every five years . Economic assumptions are reviewed each year by the Retirement Board after receiving an economic experience analysis from the consulting actuarial firm.

At the December 9, 2020, Retirement Board meeting, the Retirement Board adopted all recommended demographic assumptions from the experience study dated August 12, 2020, including, among others, updates to public plan mortality tables, lower price and wage inflation rates, from 2.75% to 2.50% and from 3.50% to 3.25%, respectively, effective for the July 1, 2020 actuarial valuation . At the November 10, 20 21, Retirement Board meeting, the Retirement Board lowered the assumed long -term investment earnings assumption from 7.40% to

7.20%, effective for the July 1, 2021, actuarial valuation. At the November 17, 2022, Retirement Board meeting, the Retirement Bo ard voted to maintain the actuarial assumptions at their current levels. The Retirement Board is expected to review economic and demographic assumptions next in November 2023.

While employee contribution rates are mandated by the Charter, sources of payment of employee contributions may be the subject of collective bargaining agreements with each union or bargaining unit . Since July 1, 2011, substantially all employee groups have agreed through collective bargaining for employees to contribute all employee contributions through pre-tax payroll deductions.

The following table shows total Retirement System liabilities, assets and percent funded for the last five actuarial valuations, as well as contributions for the fiscal years 2017-18 through 2021-22.

TABLE 2

CITY AND COUNTY OF SAN FRANCISCO
EMPLOYEES’ RETIREMENT SYSTEM
FISCAL YEARS 2017-18 THROUGH 2021-22
(IN THOUSANDS)
As of
July 1st
Actuarial
Liability
Market
Value of
Assets
Actuarial
Value of
Assets
Market
Percent
Funded
Actuarial
Percent
Funded
Employee
and
Employer
Contribution
in Prior
Fiscal Year
Employer
Contribution
Rates in
Prior Fiscal
Year(1)
2018 $27,335,417 $24,557,966 $23,866,028 89.8% 87.3% $ 983,763 23.46% 2019 28,798,581 26,078,649 25,247,549 90.6 87.7 1,026,036 23.31 2020 29,499,918 26,620,218 26,695,844 90.2 90.5 1,143,634 25.19 2021 31,905,275 35,673,834 30,043,222 111.8 94.2 1,245,957 26.90 2022 33,591,565 32,798,524 32,275,474 97.6 96.1 1,191,934 24.41 _______________
(1) Employer contribution rates are shown before required employer/employee cost -sharing provisions. Employer contribution rates for fiscal years 2022-23 and 2023-24 are 21.35% and 18.24%, respectively.

Source: SFERS’ audited year -end financial statements and required supplemental information . SFERS’ annual Actuarial Valuation Report dated July 1st.

Note: Information above reflects entire Retirement System, which covers substantially all City employees, including SFPUC employees, and certain other employees.

The City’s net pension asset was app roximately $2.4 billion for Fiscal Year 2021 -22. The amount allocable to the Power Enterprise, as of June 30, 2022, was approximately $17 million.

30 The SFPUC is required to contribute at an actuarially determined rate and allocates the applicable portions of such contribution to the separate enterprises, including the Power Enterprise . For Fiscal Years 2017 -18 through 2021-22, the SFPUC’s employee contribution rates varied from 7.5% to 13.0% as a percentage of gross covered salary. For Fiscal Years 2017 -18 through 2021- 22, the Power Enterprise has paid 100% of its required contributions. The contributions by the Power Enterprise required for Fiscal Years 2017- 18 through 2021- 22 are summarized in the following table:

TABLE 3

POWER ENTERPRISE RETIREMENT SYSTEM CONTRIBUTION
FISCAL YEARS 2017-18 THROUGH 2021-22
(IN THOUSANDS)
Fiscal Year
(Measurement
Period)
Employer
Contribution
Rates
Power Enterprise
Contribution
2017-18 23.5% $3,822
2018-19 23.3 3,756
2019-20 25.2 4,369
2020-21 26.9 5,048
2021-22 24.4 5,071
_______________
Source: SFERS Actuarial Valuation reports as of July 1, 2019, July 1, 2020, July 1, 2021 and July 1, 2022, and SFPUC audited financial statements.

Plan Financial Reports and Funded Status. 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 by writing to the San Francisco City and County Employees’ Retirement System, 1145 Market Street, 5th Floor, San Francisco, CA 94103, or by calling (415) 487-7000.

Health Care Benefits. The SFPUC participates in the City’s agent multiple employer defined benefit plan, which operates as a cost -sharing multiple employer defined benefit plan for the SFPUC (the “OPEB Plan”) . The OPEB Plan is maintained by the City and is administered through the City’s Health Service System and provides postemployment medical, dental and vision insurance benefits to eligible employees, retired employees, and surviving spouses. 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.

As prescribed under Governmental Accounting Standards Board (“ GASB”)Statement No. 75, Accounting and Financial Rep orting for Postemployment 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.

The provisions of GASB Stat ement No. 75 are effective for the Power Enterprise beginning in Fiscal Year 2017-18. The following table shows the components of the City’s annual OPEB allocations for the Power Enterprise for Fiscal Years 2019 -20 through 2021- 22, for the amount contributed to the plan, and changes in the City’s net OPEB obligation:

31 TABLE 4

ANNUAL OPEB OBLIGATION
FOR FISCAL YEARS 2019-20 TO 2021-22
(IN THOUSANDS)
2019-20 2020-21 2021-22
City’s reported net OPEB liabilities $3,915,815 $3,823,334 $3,691,122 Power Enterprise’s proportionate share of City’s contribution 1,204 1,136 1,192 Power Enterprise’s proportionate share of City’s OPEB liability 19,983 17,653 17,405 _______________
Source: SFPUC
The City’s OPEB net position liability was approximately $3.7 billion for Fiscal Year 2021 -22. The amount allocable to the Power Enterprise, as of June 30, 2022, was approximately $17 million.

The City issues a publicly available financial report on a City -wide level that includes the complete note disclosures and required supplementary information related to the City’s post -retirement 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, CA 94102, or by calling (415) 554-7500.

Pension and Health Care Cost Reforms. Voters implemented City employee pension and hea lth care cost reforms to help mitigate future cost increases. These include the following propositions:

Proposition B. Pr oposition B was a Charter amendment approved by voters in June 2008 that increased the years of service required to qualify for emplo yer-funded retiree health benefits for City employees who retire under SFERS and were hired on or after January 10, 2009. Previously, employees became eligible to participate in the retirement health care system after five years of service and the employer paid 100% of the contribution. Beginning with employees hired on or after January 10, 2009, employees remain eligible to participate in the retirement health care system after five years of service, however, no employer contributions are required until 10 years of service .

From 10 to 15 years of service, employers pay 50% of the contribution, from 15 to 20 years of service 75%, and for employees with 20 years or more of service, 100%.

Proposition B al so established a health care trust fund to pay for future costs related to retiree health care.

Employees hired on or after January 10, 2009, contribute up to 2% of their pre -tax pay, with employers contributing an additional 1%, to the health care trust fund. Proposition B also increased maximum pension benefits for employees retiring at and after age 60 and enhances cost of living increases for pensions.

Proposition C. P r oposition C was a Charter amendment approved by voters in November 2011 that changed the way the City and current and future employees share in funding SFERS pension and health benefits.

With regard to pension benefits, the base employee contribution rate remains at 7.5% for most employees when t
he City contribution rate is between 11% and 12% of City payroll . Employees making at least $ 50,000 will pay an additional amount up to 6% of compensation when the City contribution rate is over 12% of City payroll.

When the City contribution rate falls below 11%, employee contributions will be decreased proportionately.

Proposition C creates new retirement plans for employees hired on or after January 7, 2012 that : (1 ) for miscellaneous employees, increased the minimum retirement age to 53 with 20 years of service or 60 with 10 years; (2) for safety employees, kept the minimum retirement age at 50 with five years of service, but increased the age for maximum benefits to 58; (3) for all employees, limited covered compensation, calculated final compensation from a three year average, and changed the multipliers used to calculate p ension benefits; and (4) for miscellaneous employees, raised the age of eligibility to receive vesting allowance to 53 and reduced by half the City’s contribution to vesting allowances.

With regard to health benefits, elected officials and employees hired on or before January 9, 2009, contribute up to 1% of compensation toward their retiree health care, with matching contribution by the City. For

32 employees or elected officials who left the City workforce before June 30, 2001, and retire after January 6, 2012, Proposition C requires that the City contributions toward retiree health benefits remain at the same levels they were when the employee left the City workforce.

Proposition C also limits cost of living adjustments (“ COLA“) for SFERS retirees; however, in 2015, the Court of Appeals held in a suit against the City brought by a retiree organization, Protect Our Benefits v. City and County of San Francisco, 235 Cal. App. 4 th 619 (2015) that certain changes to payment of suppl emental cost of living allowances imposed by Proposition C could not be applied to current City employees and those who retired after November 1996 when the supplemental cost of living allowance provisions were originally adopted, but could be applied to S FERS members who retired before November 1996. This decision is now final and its implementation increased the July 1, 2016 unfunded actuarial liability by $429.3 million for Supplemental COLAs granted retroactive to July 1, 2013 and July 1, 2014.

On July 13, 2016, the Retirement Board adopted a resolution to exempt members who retired before November 6, 1996, from the “fully funded” provision related to payment of Supplemental COLAs under Proposition C. The resolution directed that retroactive payments for Supplemental COLAs be made to these retirees. After the Retirement Board adopted said resolution, the Retirement System published an actuarial study on the cost to the fund of payments to the pre‐1996 retirees . The study reports that the two retroactive supplemental payments will trigger immediate payments of $34 million, create additional liability for continuing payments of $114 million, and cause a new unfunded liability of $148 million. This liability does not include the Supplemental COLA payments that may be triggered in the future . Under the cost sharing formulas in Proposition C, the City and its employees will pay for these costs in the form of higher yearly contribution rates . The City Controller has projected the future cost to the City and its employees to be $260 million, with over $200 million to be paid in the next five fiscal years . The City obtained a permanent injunction to prevent SFERS from making Supplemental COLA payments to these members who retired before November 6, 19 96. The Superior Court’s injunction was affirmed by the Court of Appeal.

THE HETCH HETCHY PROJECT
General
The Hetch Hetchy Project impounds and delivers to the Water Enterprise water for approximately 2.7 million Bay Area residents and is forecasted to generate an average of 1,250,000 MWh of clean, renewable electricity annually for the next 10 years , which the Power Enterprise uses to serve its customers and for wholesale sales when generation exceeds customer demand. The Hetch Hetchy Project is comprised of approximately 384.3 megawatts (“MW”) of nameplate capacity hydroelectric generating facilities in the Sierra Nevada and foothills of Tuolumne County, California . The Hetch Hetchy Project includes multiple water storage and water conveyance facilities (tunnels, pipelines, penstocks), generation facilities and transmission and associated transmission facilities from Hetch Hetchy Valley to Newark. See Figure 1-1 “Hetch Hetchy Power System.” History
As early as the 1880s, the City began looking to the Sierra Nevada and the Tuolumne River in what is now Yosemite National Park as a possible source of water for San Francisco and the Bay Area. Hetch Hetchy Valley, which is located on the Tuolumne River in Yosemite National Park, was first recommended as a reservoir site at the turn of the 20th Century in a United States Geological Survey Study. Then- City Mayor James D. Phelan made the first filings for water rights and reservoir rights -of-way in the Tuolumne River watershed as a private citizen, transferring those filings to the City in 1903.

Following the 1906 earthquake, the City again sought water rights and reservoir rights -of-way in the Tuolumne River watershed and began to develop a preliminary design for what would become the Hetch Hetchy Project. It also entered into negotiations with the Districts to protect the Districts’ existing water rights and to provide them a share of the hydroelectricity to be produced by the Hetch Hetchy Project, at cost -based rates.

33 The Raker Act, enacted in 1913 (38 Stat. 242), granted rights of way to the City over federal lands in Yosemite National Park, Stanislaus National Forest, and unclassified public lands for purposes of constructing and operating the Hetch Hetchy Project, conceived by the City to provide water to t he Bay Area and generate hydroelectricity as part of water delivery operations. Major facilities in place under authorized Raker Act rights of way issued by the United States Department of the Interior include O’Shaughnessy Dam and Hetch Hetchy Reservoir on the Tuolumne River in Yosemite National Park; Eleanor Dam and Reservoir in Yosemite National Park; Cherry Dam and Lake Lloyd in Stanislaus National Forest; Kirkwood, Holm, and Moccasin Powerhouses; and appurtenant facilities such as tunnels, penstocks a nd regulating reservoirs and electric transmission facilities. See “– Hydroelectric Generation.”
The Raker Act grants the City the right to develop generation as part of the Hetch Hetchy Project and to sell electricity for beneficial use, first to meet San Francisco municipal needs, then the Districts municipal and agricultural pumping needs, and finally for commercial purposes, provided that in each case such electricity may not be sold to a private corporation or individual for resale.

Wholesale electricity deliveries to the Districts are on an “as available” basis and are required by the Raker Act o nly after satisfying the City’s own municipal needs. Any additional excess electricity supplies are sold to certain end -user retail customers and then on the wholesale market to public entities consistent with the requirements of the Raker Act. The Raker Act does not restrict the City’s purchase, use and sale of non- Hetch Hetchy Project electricity. See “THE POWER ENTERPRISE – Wholesale Electricity Sales.” Hydroelectric Generation
The Hetch Hetchy Project is comprised of approximately 384.3 MW of large-s cale hydroelectric facilities.

The following table shows a timeline of Hetch Hetchy Project powerhouse improvements and impacts on installed capacity at the Hetch Hetchy Project.

TABLE 5

HETCH HETCHY PROJECT GENERATION RESOURCES

POWERHOUSE TIMELINE
Date
Event
Capacity Increases /
(Decreases) in MW
1918 Early Intake Powerhouse commences operation 3.0
1923 O’Shaughnessy Dam completed --
1925 Moccasin Powerhouse begins operations 80.0
1938 O’Shaughnessy Dam raised 85.5 feet --
1960 Holm/Cherry Powerhouse commences operation 148.5
1967 Kirkwood Powerhouse (1st and 2nd units) commences operation 71.1 1967 Early Intake Powerhouse is removed (3.0)
1969 New Moccasin Powerhouse replaces prior one 20.0
1986 Moccasin Low-head commences operation 3.8
1988 Kirkwood Powerhouse (3rd unit) commences operation 36.5 2005 Holm units 1 and 2 refurbished 16.5
2007 Kirkwood units 1 and 2 refurbished 7.9
Total Installed Capacity: 384.3
_______________
Source: SFPUC
The Hetch Hetchy Project includes three large reservoirs and three large hydroelectric powerhouses . The reservoirs, Cherry Lake, Lake Eleanor and the Hetch Hetchy Reservoir, have an aggregate water storage capacity of approximately 660,000 acre-feet. The powerhouses, Holm Powerhouse, Kirkwood Powerhouse and Moccasin Powerhouse, have an aggregate nameplate capacity of approximately 380.5 MW. Holm Powerhouse has two generating units, totaling approximately 165 MW in nameplate capacity, and relies on gravity -driven water flowing downhill from Cherry Lake. Kirkwood Powerhouse has three generating units, with an aggregate nameplate

34 capacity of approximately 115 MW. Moccasin Powerhouse has two generating units, with an aggregate nameplate capacity of approximately 100 MW. Bo th Kirkwood and Moccasin rely on gravity- driven water flowing downhill from the Hetch Hetchy Reservoir. There is also a smaller, gravity driven in -line 3.8 MW hydroelectric unit near Moccasin Powerhouse, Moccasin Low -head. The Moccasin Low-head Powerhouse was damaged during a storm in March 2018 and is not currently operational; however, it is scheduled to be operational by December 2023.

The combined generating capacity of these facilities is approximately 384.3 MW, about 97% of the Power Enterprise’s aggregate 416 .6 MW of controlled generation capacity. Annual Hetch Hetchy Project generation is forecasted to generate an average of 1.25 million MWh of clean, renewable electricity annually for the next 10 years, which represents on average approximately 105% of the Power Enterprise’s firm retail load. These multiple, sizable hydroelectric generating units, and ready access to California energy markets through available transmission resources, provide the Power Enterprise with redundancy to address both planned and unexpected outages, helping to ensure reliable, firm service for its customers.

Transmission and Distribution
Electricity generated by the Hetch Hetchy Project is transmitted through SFPUC‐owned and operated transmission lines, consisting of approximately 110 miles of 115 kilovolt (“ kV”) and 50 miles of 230 kV transmission tower miles, plus four substations/switchyards. The SFPUC transmission segments are described in the following table.

TABLE 6

HETCH HETCHY PROJECT TRANSMISSION LINE SEGMENTS
Lines No.

Voltage
Transmission Line Alignment /
Segment
Year Put into
Operation
Approximate Length
(miles)
1 & 2 230 kV Holm Powerhouse to SFPUC’s Intake
Switchyard
1961 1.6
3 & 4 115 kV Moccasin Switchyard to PG&E’s
Newark Substation
1925 98.3
5 & 6 230 kV Intake Switchyard to SFPUC’s
Moccasin Switchyard
1961 20.1
Moccasin Switchyard to SFPUC’s
Warnerville Substation
1961 28.3
7 & 8 115 kV SFPUC’s Warnerville Substation to
Modesto Irrigation District’s
Standiford Substation
1961 12.5
9 & 10 230 kV Kirkwood Powerhouse to SFPUC’s
Intake Switchyard
1964 0.7
11 230 kV Kirkwood Powerhouse to SFPUC’s
Intake Switchyard
1987 0.7
_______________
Source: SFPUC
The transmission facilities also interconnect with PG&E’s transmission and distribution systems to deliver SFPUC generated or purchased power to customers of the Power Enterprise in and around San Francisco. The Hetch Hetchy Project has a small amount of load connected directly to its system, averaging less than 2.5 MW, with a 10 MW peak during water pumping operations to support both Hetch Hetchy Water and Power operations, and the Water Enterprise’s municipal water operations.

35 Approximately 75% of the Hetch Hetchy Project’s generating capacity is connected to its 230 kV system via Intake Switchyard and Warnerville Substation. Intake Switchyard is a 230 kV switchyard configured using main and auxiliary buses . The switchyard was initially put into service in about 1961. Intake Switchyard provides the main accumulation, switching, and transmission point for the Holm and Kirkwood powerhouses ( Lines 1 and 2 from Holm Powerhouse and Lines 9, 10 and 11 from Kirkwood Powerhouse) . A failure of any critical component within this switchyard represents a significant loss of electric generation and transmission capability . From Intake Switchyard, electricity is transmitted to the SFPUC’s Warnerville Substation via Lines 5 and 6. The Warnerville Substation, put in operation in about 1961, is segregated into three areas : 230 kV yard, 115 kV yard, and PG&E 230 kV tap yard. The 230 kV yard has a main and transfer bus configuration and consists of two incoming lines, Lines 5 and 6, three 230/115 kV transformers, and two tap lines for PG&E. The 115 kV system has a main bus, two transformer positions and two line positions, Lines 7 and 8 towards MID’s Standiford Substation.

The remaining 25% of the Hetch Hetchy Project’s capacity is normally connected to another 115 kV sub system at the Moccasin Switchyard which interconnects with PG&E’s Newark Substation via two 115 kV lines, Lines 3 and 4. Taps off of these lines connect to Turlock Irrigation District at TID’s Oakdale Substation, and the Calaveras Substation serving Water Enterprise facilities in Sunol. The Moccasin Powerhouse can be connected to either the 115 kV or 230 kV systems.

Approximately 39 miles of electric 22.4 kV and 2.4 kV distribution lines provide electricity to the Hetch Hetchy Project’s remote operations. The distribution is fed from the powerhouses, where electricity is generated at

13.8 kV then stepped up to 22.4 kV. At some remote sites, the electricity is stepped down to 2.4 kV for distribution.

Physical Condition of Facilities
In 2009, the SFPUC and its consultants began performing condition assessments for various Hetch Hetchy Project facilities and, since that time, have undertaken certain updates to the assessments. The following sections describe the physical condition of those facilities, as well as major capital projects relating to such facilities. Several of these capital projects are for Hetch Hetchy Project facilities that are joint assets and are used for both water transmission and power generation and transmission, benefiting both Hetch Hetchy Water and the Power Enterprise. 55% of the combined operating and capital costs of the Joint Facilities are allocated to the Power Enterprise and 45% of the combined operating and capital costs of the Joint Facili ties are allocated to Hetch Hetchy Water. For more information regarding the Joint Facilities , see “INTRODUCTION – The San Francisco Public Utilities Commission and the Power Enterprise.”
Generation Facilities
The SFPUC owns and operates multiple power generation assets, including high -head and low -head hydropower houses, which have been in operation since the 1960s. These assets are all operated and maintained within the Hetch Hetchy Project. Hetch Hetchy Water and Power is responsible for the maintenance and operation of multiple power generation assets, most of which are integral to its water delivery system. These assets include Holm Powerhouse, Kirkwood Powerhouse, Moccasin Powerhouse, and Moccasin Low Head Powerhouse. For a description of these assets, see “– Hydroelectric Generation.” Generally, civil assets, such as structures, dams, tunnels, and pipes, have a service life of up to 100 years, while mechanical and electrical equipment within powerhouses have a shorter service life of approximately 15 -20 years, depending on the equipment. For planning purposes, the SFPUC assumes expected life of equipment based on industry standards and manufacturer’s design life. Actual expected life of equipment may vary depending on different factors including, but not limited to, site conditions, run time, loading, and maintenance. The SFPUC has experienced equipment life expectancies beyond industry standards; however, as equipment ages and technology expires, obtaining replacement parts may become a challenge.

The cost and operational impact to the SFPUC of either a loss of a generating unit or the inability to generate from a powerhouse varies. For example, at Holm Powerhouse, there would be significant cost and operational impacts if either unit were not available for generation for a one -year period. At Kirkwood Powerhouse, the loss of one of the three units would have moderate cost and operational impacts; however, the loss of two of the

36 three units would become significant. Similarly, at Moccasin Powerhouse, the loss of either unit would have moderate cost and operational impacts; however, the loss of both units would be significant.

During the summer and fall period, each hydroelectric generation unit is taken out of service for two weeks to perform annual maintenance. Annual maintenance consists of inspections, testing and maintenance of the units.

Corrective maintenance activities that require a full system outage are also sometimes scheduled during the annual outage period; however, the SFPUC focuses on and prioritizes proactive maintenance activities.

SFPUC construction costs are generally higher than industry average, in part because of the remote location of Hetch Hetchy Project facilities. Large, active capital projects associated with the power generation assets, all of which are part of the 2024 Capital Plan, include, but are not limited to the following:
• Kirkwood Powerhouse Bypass Upgrades: The SFPUC water supply must be conveyed through Kirkwood Powerhouse. When powerhouse generating units are out of service (e.g., planned or unplanned outage), water flows through an energy dissipation system, or generator bypass, conveying water around the turbines at Kirkwood Powerhouse. The existing hydraulic bypass and energy- dissipation system cannot be operated for more than about two weeks without incurring significant damage. The SFPUC is updating the bypass system to ensure reliable water deliveries. The total budget for this project in the 2024 Capital Plan, as well as the current forecast, is $16.2 million. As of June 30, 2023, $0.09 million has been spent on this project. The project is currently on hold but is expected to resume in 2027-2028. This project is expected to be completed in 2035. • Moccasin Powerhouse Bypass Upgrade: Like Kirkwood Powerhouse, the SFPUC water supply is conveyed through the generating units at Moccasin Powerhouse, which must be bypassed during planned or unplanned outages. The existing hydraulic bypass and energy- dissipation system cannot be operated for more than about two weeks without incurring significant damage. The SFPUC is updating the bypass system to ensure reliable water deliveries. The total budget for this project in the 2024 Capital Plan is $27.4 million. The current forecasted cost is $40.7 million. As of June 30, 2023, $1. 2 million has been spent on this project. This project is expected to be completed in 2027. • Moccasin Powerhouse and Generator Step -Up R
ehabilitation: This project consists of three
components: (1) generator rehabilitation, which consists of replacing the e ntire generator and associated equipment; (2) generator step -up replacement, which consists of replacing two of the three existing generator step-up transformers, new foundations and oil containment, and relay upgrades; and (3) power plant systems upgrades, which consists of replacing the 480 Volt switchgear, 13.8 kilovolt switchgear, motor control centers, main control boards, protective relays, cooling water piping, and improving oil containment systems. The total budget for this project in the 2024 Capital Plan is $66.7 million. The current forecasted cost is $107 million. As of June 30, 2023, $30.4 million has been spent on this project. The generator step- up replacement project was completed in 2023. The generator rehabilitation project is expected to b e completed in 2025, and the power plant systems upgrades is expected to be completed in 2028.

Additionally, the SFPUC has an ongoing replacement and rehabilitation program funded at approximately $0.5-2.5 m
illion a year to provide inspections, condition assessments, design, environmental evaluations, and construction to sustain the reliability of its generation facilities.

Transmission and Distribution Facilities
Transmission. T h e Hetch Hetchy Project electricity delivery system includes transmission line s and switchyards/substations, including Lines 1/2, Lines 3/4, Lines 5/6, Lines 7/8, and Lines 9/10/11, Intake Switchyard, Moccasin Switchyard, Warnerville Substation, and Calaveras Substation. These assets vary in age, condition, and estimated service lif e remaining. For planning purposes, the SFPUC assumes expected life of equipment based on industry standards and manufacturer’s design life. Actual expected life of equipment will vary depending on a variety of factors, but the largest driver for a transmission system is site conditions.

37 A majority of the Hetch Hetchy Project’s transmission lines were built in the 1960s and have a remaining life expectancy of about 15 years, depending on equipment. However, Lines 3/4 were built in 1925 and have exceeded their expected life expectancy. Although Lines 3/4 are at end of life, the existing lines are acceptable for limited continued use with selective refurbishment. Lines 3/4 are important to the delivery of electricity by the Power Enterprise, and the SFPUC ant icipates that there would be moderate cost and operational impacts were they to go out of service. A complete rebuild will ultimately be required for long -term continued use of this transmission segment. The 2024 Capital Plan will include a condition assessment and strategic business planning for replacement and/or upgrade of the Power Enterprise’s transmission assets.

Transmission system reliability is affected by new, renewable generation being added to the California grid, or requests to interconnect with the SFPUC transmission system. Funding for these transmission system improvements will be collected from the developers, however, collection schedules do not always work with SFPUC construction schedules and the SFPUC may provide upfront funding that will be eventually paid back by the developers. To help mitigate the impacts of new renewable power generation being added to the California electrical grid, as well as resolve clearance detections, the SFPUC has an active project to reconductor Lines 7 and 8 . This project, which is part of the 2024 Capital Plan, is described below:
• Transmission Lines 7 and 8 Upgrades: This project includes the replacement of the existing 115 kilovolt conductors on Lines 7/8 from Warnerville to Standiford substations. The total budget for this project in the 2024 Capital Plan, as well as the current forecast, is $38.0 million. To date, the SFPUC has received $27.4 million in developer funding for this project, and anticipates collecting a total of $33.3 million in mitigation payments. As of June 30, 2023, $5.7 million has been spent on this project.

This project is expected to be completed in 2025.

To m
aintain the current level of reliability of these transmission lines, substantial future maintenance and upkeep will be required; currently these improvements are addressed with the SFPUC’s ongoing rehabilitation and replacement program, which is funded at about $3- 6 million per year. The rehabilitation and replacement program includes, but is not limited to inspections, condition assessments, design, environmental evaluations, and construction.

Hetch Hetchy Project substations/switchyards were built in the 1960s. Like the powerhouses, the SFPUC has experienced life expectancies beyond industry standards but is experiencing challenges obtaining replacement parts as the equipment ages and technology expires. In 2014, Intake Switchyard was rebuilt, and in 2019, the 115 kV side of the Warnerville Substation was rebuilt. Within the next 10 years, the remainder of the 230 kV side of the Warnerville Substation and Moccasin Switchyard are expected to be rebuilt. These projects, which are part of the 2024 Capital Plan, are described below:
• Warnerville Substation Rehabilitation: This project will rehabilitate the substatio n a nd includes
improvements to meet reliability requirements and intertie agreements. Upgrades include replacing three existing 3 -phase transformers with two larger rated transformers. In addition, other upgrades include new 115 kilovolt and 230 kilovolt disconnect switches and breakers, a new control room, a new perimeter fence, relays and controls, and improving the grading and grounding system. The total budget for this project in the 2024 Capital Plan, as well as the current forecast, is $34.3 million. The current forecasted cost is $36.1 million. As of June 30, 2023, $23.0 million has been spent on this project. This project is expected to be completed in 2026. • Moccasin Switchyard Rehabilitation: This project will rehabilitate the switchyard, including replacing the 115 kilovolt disconnect switches, replacing the 115 kilovolt bus configuration, replacing the 230 kilovolt disconnect switches, changing the 230 kilovolt bus configuration, replacing the 115 kilovolt circuit breakers, adding surge arresters, performing a fault study and a grounding study, improving switchyard grading, and replacing fencing. The total budget for this project in the 2024 Capital Plan, as well as the current forecast, is $9.7 million. As of June 30, 2023, $0.08 million has been spent on this project. This project is expected to be completed in 2028.

38 Intake Switchyard, Moccasin Switchyard and Warnerville Substation are imperative to transmit Hetch Hetchy Project generation to the grid. The SFPUC anticipates that there would be significant cost and operational impact if Intake Switchyard, Moccasin Switchyard or Warnerville Substation were inoperable.

Calaveras Substation feeds the SFPUC facilities at Sunol Valley Water Treatment Plant. Though the financial impact from loss of this substation would be small, the operational impact to the water operations would be significant. The substation is in good condition. Certain improvements at this facility were made to facilitate construction activities for the SFPUC’s Water System Improvem ent Program. However, due to growing power demands from SFPUC water facilities and redundancy concerns, capital improvements will be required at Calaveras Substation.

Furthermore, a condition assessment completed over the period between 2012 -2014 of the S FPUC’s transmission lines identified over 200 safety detections that did not meet National Electric Safety Code and/or CPUC General Order Number 95 minimum safety clearance criteria. In response to these findings, the SFPUC has increased maintenance and selective refurbishment activities to preserve and extend the operability of these lines and to meet regulatory requirements. See “POWER ENTERPRISE CAPITAL PROGRAM” and “CERTAIN RISK FACTORS – Risks Related to Power Enterprise Operations and Facilities – Operational Liability.” The Hetch Hetchy Project includes approxim ately 40 miles of power distribution system. Approximately 20 miles of the system were replaced after being destroyed in the 2013 Rim Fire. For more information about the 2013 Rim Fire and the impact of wildfires on the Power Enterprise, see “– Wildfire Considerations.” Additionally, the SFPUC has an ongoing replacement and rehabilitation program funded at approximately $1-2 million a year to provide inspections, condition assessments, design, environmental evaluations, and construction to sustain the reliability of the electric distribution system.

Reservoir and Dam Facilities
The Hetch Hetchy Project owns and operates six dams that are under the California Division of Safety of Dams (“DSOD”) jurisdiction. Five of these dams are associated with the SFPUC’s hydrogeneration facilities:

O’Shaughnessy Dam, Cherry Valley Dam, Eleanor Dam, Priest Dam and Moccasin Dam. The sixth dam is the Early Intake Dam. The SFPUC has an ongoing comprehensive dam safety program to monitor, inspect and maintain the dams to ensure public safety downstream. The extensive program establishes policies, objectives, and expectations as they relate to dam safety, including surveillance and monitoring programs. Emergency action plans for all applicable dams are maintained and reviewed and/or updated annually.

In 2018, then-Governor Brown ordered the DSOD to identify spillways in California associated with large high-hazard dams that could pose significant risk to the public if a spillway incident like the Oroville Dam in 2017 were to occur . This included condition assessments of the spillways for O’Shaughnessy Dam and Cherry Valley Dam. Spillway assessments were completed and submitted to DSOD in 2019 for their review.

In 2020, the SFPUC delivered to the DSOD a conceptual plan for implementing known dam safety projects over the next 15 years, known as the 15- Year Dam Safety Plan. The DSOD has reviewed and responded favorably to the conceptual plan. The SFPUC continues to make progress on the dam safety projects that are currently authorized under the existing capital program. Information regarding these facilities (dams, outlet piping, valves and spillways), including condition assessment and upcoming projects, are summarized below. The SFPUC takes into consideration climate change when evaluating new capital projects for its dams and reservoirs.

The DSOD categorizes the condition of each of the dams within its jurisdiction as: “satisfactory,” meaning no existing or potential dam safety deficiencies are recognized; “fair”, meaning no existing dam safety deficiencies are recognized for normal loading conditions, and rare or extreme hydrologic and/or seismic events may result in a dam safety deficiency; “poor,” meaning dam safety deficiency is recognized for loading conditions that may realistically occur, and remedial action is necessary; “unsatisfactory,” meaning a dam safety deficiency is recognized that requires immediate or emergency remedial action for problem resolution; or “not rated,” meaning the dam has not been inspected or is not under State jurisdiction.

39 Information regarding the six dams under DSOD jurisdiction, DSOD’s characterization of the dam’s condition, and certain large, active capital projects associated with the dams, all of which are part of the 2024 Capital Plan, are described below.

O’Shaughnessy Dam: O’ Shaughnessy Dam and the Hetch Hetchy Reservoir are in Yosemite National Park.

O’Shaughnessy Dam is a 312 foot -high above-streambed (430 feet above the lowest point in the foundation) gravity arch dam that impounds 360,360 a cre-feet (capacity with drum gates in use) of water along the main stem of the Tuolumne River, creating the Hetch Hetchy Reservoir. The dam was originally built in 1923 and raised in 1938. The Hetch Hetchy Reservoir collects water from the surrounding 459 square miles of the Hetch Hetchy watershed. Water from this reservoir is drafted through Kirkwood and Moccasin powerhouses. The DSOD categorizes the condition of O’Shaughnessy Dam as “satisfactory.” Release valves at O’Shaughnessy Dam need to be upgraded due to their age.

Large, active capital projects planned for rehabilitation of outlet works facilities and the diversion tunnel, which will improve the safety and functionality of the reservoir release system, are described below. • O’Shaughnessy Dam Outlet Works Phase I : This
project will include the replacement of two existing
instream flow release valves, improvements to access and drainage in the dam gallery and stairs, installation of new bulkheads for outlet intake, and planning for slide gate and drum gate improvements. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $48.0 million (55%, or $26.4 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $6.1 million has been spent on this project (55%, or $3.4 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2025. • O’Shaughnessy Dam Outlet Works Phase II : Th
is project will include replacement of a 72 -inch needle valve and rehabilitation of a 72- inch butterfly valve, replacement of six 60- inch needle valves and controls, rehabilitation of three drum gates, refurbishment of twelve slide gates, installation of a new diversion pipe isolation valve, and diversion tunnel rehabilitation. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, i s $98.0 million (55%, or $53.9 million, of which is allocated to the Power Enterprise). This project is expected to begin in 2026 and be completed by 2034.

Cherry Valley Dam: Ch er
ry Valley Dam is a 330 -foot-high earth and rock fill dam. Lake Lloyd, the reservoir impounded by Cherry Valley Dam, stores approximately 273,500 acre -feet. The dam was built in 1955.

Water from the Cherry watershed is used for downstream flow obligations and power generation at Holm Powerhouse. The DSOD categorizes the condition of Cherry Valley Dam as “satisfactory.” The SFPUC completed a needs assessment report for Cherry Dam, which defined the need for capital improvements, primarily to address spillway deficiencies and the intake tower’s inability to handle seismic loads. The SFPUC is prioritizing the spillway scope of work. This project, which is part of the 2024 Capital Plan, is described below:
• Cherry Dam Spillway – Sho
rt-Term Improvements: This project includes improvements downstream of the concrete spillway structure that will accommodate higher flows. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $24.9 million (55%, or $13.7 million, of whic h is allocated to the Power Enterprise). As of June 30, 2023, $1.5 million has been spent on this project (55%, or $0.82 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2027. An additional project to address the intake tower and long- term improvements to the spillway is also expected to be initiated within 15 years.

Eleanor Dam: El ean
or Dam is a 70 -foot concrete buttressed arch dam. Lake Eleanor stores approximately 27,113 acre-feet (capacity with flashbo ards). The dam was built in 1918. Water from the Lake Eleanor is diverted (gravity or pumping) to Lake Lloyd and used for downstream flow obligations and power generation at Holm Powerhouse. The DSOD categorizes the condition of Eleanor Dam as “satisfactor y.” In 2015- 2016, the SFPUC completed a needs assessment report for Eleanor Dam, which identified the need for multiple capital improvements.

There were two primary issues identified: (1) condition of the bridge over the top of dam; and (2) erosion and scour due to the dam overtopping. First, the bridge over the top of the dam is showing signs of distress and needs to be

40 repaired or replaced soon. In addition to access, the bridge serves as a critical structure to maintain the dam’s structural integrity dur ing an earthquake. Second, the capacity of the existing spillway is not adequate, resulting in the overtopping of the dam. Over the years, this has resulted in some erosion and scour on the downstream side of the dam. To address these issues, the SFPUC is planning the following project, which is part of the 2024 Capital Plan:
• Eleanor Dam Rehabilitation :

This project will address the cracking and spalling of concrete, exposed rebar, leakage through the arch barrels, cracks and erosion of the spillway concret e, and spillway capacity. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $28.6 million (55%, or $15.7 million, of which is allocated to the Power Enterprise). This project is expected to begin late 2023 and to be completed in 2031.

Priest Dam: Prie s t Dam is a 160 -foot-high earth and rock dam that impounds a storage volume of 1,706 acre-feet. The dam was built in 1923. Priest Reservoir is a regulating reservoir and stores Hetch Hetchy water before it reaches the Moccasin Powerhouse via the Moccasin Power Tunnel. The DSOD categorizes the condition of Priest Dam as “satisfactory.” Priest Dam has a long history of issues related to settlement and deflection. The SFPUC has an ongoing rehabilitation and replacement program that focuses on performing a geotechnical exploration of the dam, updating the stability analysis, and installing new instrumentation to monitor and document the movement of the dam under varying reservoir storage conditions to (i) update the current surveillance and monitoring plan for the dam; and (ii) serve as the technical basis for future capital improvements that may be necessary.

In addition, wildfire can impact the water quality of water that could enter Priest Reservoir. For more infor
mation about the impact of wildfires on the Power Enterprise and the SFPUC’s mitigation efforts, see “ – Wildfire Considerations.”
Moccasin Dam: Moccasin Dam is a 70 -foot-hi gh earth and rock dam that impounds a storage volume of 552 acre-feet. The dam was built in 1929. This is a regulating reservoir for Moccasin Low -head powerhouse. The DSOD categorizes the condition of Moccasin Dam as “fair.” The lower rating is the impact of a flood event in 2018, which required a reevaluation of the design flood. To increase the rating to “satisfactory”, the SFPUC will be required to increase the release capacity of the system to meet the requirements of the updated design flood, which is now approximately double the flood of record. To address this, the SFPUC is planning the following project, which is part of the 2024 Capital Plan:
• Moccasin Dam and Reservoir Long -Ter
m Improvements: This project has been initiated to construct a new concrete spillway with adequate flow capacity along the alignment of the existing auxiliary spillway and additional flood protect ion to the Moccasin project facilities. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $73.2 million (55%, or $40.2 millio n, of which is allocated to the Power Enterprise). As of June 30, 2023, $1.9 million has been spent on this project (55%, or $1.1 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2028.

Early Intake Dam : Early I
ntake Dam is a single -curvature concrete arch structure, constructed between 1923 and 1924 to direct deliveries from the Tuolumne River into Mountain Tunnel for San Francisco water customers. The dam is reaching the end of its design life. Engineering studies concluded that permanent repair of the alkali aggregate reaction concrete is not feasible, and the dam should be replaced. The DSOD categorizes the condition of Early Intake Dam as “fair” due to the condition of the dam. To address these issues, the SFPUC is planning the following project, which is part of the 2024 Capital Plan:
• Early Intake Dam Interim and Long -Term
Improvements: The Early Intake Dam Interim Improvement
project was initially developed to provide short -term improvements to the dam, but will now provide the needed engineering alternative studies to determine the scope and cost for the long- term remediation, as well as planning to address the deterioration and structural concerns of the existing dam. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power

41 Enterprise. The total budget for these combined projects, as well as the current forecast, is $91.5 million (55%, or $50.3 million, of which is allocated to the Power Enterprise) . As of June 30, 2023, $0.56 million has been spent on this project (55%, or $0.30 million, of which is allocated to the Power Enterprise). This Early Intake Dam Interim Improvement project is expected to be completed in 2023, with work continuing under the Early Intake Dam Long- Term Improvement project. The long -term project scope of replacing the deteriorated Early Intake Dam with a new concrete dam or diversion structure is expected to be completed in 2031.

In addition, the SFPUC has an ongoing rehabili tation and replacement program funded at approximately $0.5-1.5 million a year to continue inspections, condition assessments, design, environmental evaluations, and as - needed construction to meet the DSOD dam assessment requirements. Projects for power as set dams (Priest Dam) and joint asset dams (O’Shaughnessy, Eleanor, Early Intake, and Cherry dams) have been included in the 2024 Capital Plan and are ongoing.

Conveyance Facilities
Penstocks: The SFPUC performs internal inspections on its penstocks that als o convey the SFPUC’s water supply approximately every 20 years to proactively find potential vulnerabilities before major problems occur.

Penstocks that are for power generation only are inspected less frequently. Over the next several years, the SFPUC will be reevaluating its penstock inspection and maintenance program to ensure a systematic approach to managing these assets. The effort will review current inspection and maintenance activities, including frequency. Information regarding the penstocks a nd certain large, active capital projects associated with the penstocks, all of which are part of the 2024 Capital Plan, are described below.
• Kirkwood Penstock: Built in 1964, the Kirkwood Penstock conveys water from Canyon Power Tunnel to Kirkwood Powerhouse. In response to a portion of the Kirkwood Penstock foundation experiencing significant movement in 1984 and 2007, the SFPUC completed a risk assessment for the asset.

Multiple short-term risk reduction measures were recommended, including installation of an automated monitoring system and pre -procurement of long- lead replacement couplings, both of which have been completed. The SFPUC monitors penstock movement. Although there has been no significant movement, small movements indicate an ongoing stabilit y issue. The SFPUC will continue to monitor the foundation with the goal of deferring the need for a large capital project for at least 20 years. • Moccasin Penstock: The Moccasin Penstocks convey water from Moccasin Power Tunnel, downstream of Priest Reserv oir, to Moccasin Powerhouse. Moccasin Penstock was built in 1925, with new sections completed in 1969. A condition assessment in 2011 identified numerous deficiencies, including deficiencies in the hammer -forged welded steel segments, as well as degradatio n of the concrete anchor/saddle system.
o Moccasin Penstock Rehabilitation: This project includes (i) rehabilitation of anchor blocks, penstock coating, penstock saddles, air valves, large -diameter butterfly valves, bifurcation section, and flow meters; and (ii) upgrading the electrical system, power transformers, the standby generator at West Portal Valve House, and the bulkhead isolation valves in the surge tower.

Because this project is for a Joint Facility, 55% of the project costs are allocated to the P ower Enterprise. The total budget for this project, as well as the current forecast, is $47.3 million (55%, or $26.0 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $7.2 million has been spent on this project (93%, or $6.7 mil lion, of which is allocated to the Power Enterprise). This project is expected to be completed in 2028. • Holm Penstock: Built in 1960, the Holm Penstock conveys water from Cherry Power Tunnel to Holm Powerhouse. No work is planned for Holm Penstock.

Tunnels: The SFPUC performs internal inspections on its tunnels that also convey the SFPUC’s water supply approximately every 15 years to proactively find potential vulnerabilities before major problems occur.

Tunnels that are for power generation only are inspected less frequently. Information regarding the tunnels and

42 certain large, active capital projects associated with the tunnels, all of which are part of the 2024 Capital Plan, are described below.
• Canyon Power Tunnel: Built in 1965, Canyon Power Tunnel is a 10.8 mile- long t unnel that conveys water from O’Shaughnessy Dam to Kirkwood Penstock, feeding Kirkwood Powerhouse. Most of the tunnel is horseshoe -shaped and measures approximately 14 feet by 14.5 feet. Canyon Power Tunnel includes two adits, North Mountain and Hetch Hetchy Adit. In 2007 and 2008, Hetch Hetchy Water and Power staff observed increased leakage at the Hetch Hetchy Adit weir. During a five- day shutdown in January 2009, temporary repairs to the concrete plug in the Hetch Hetchy Adit of the tunnel were undertaken to reduce the 200 to 300 gallons per minute exiting from cracks and deteriorated concrete in the plug. Canyon Tunnel was last inspected in 2009 and is in very good condition, but rehabilitation work is required at the Hetch Hetchy Adit. o Canyon Tunnel - He
tchy Adit Rehabilitation : This project will replace the Hetch Hetchy Adit with a new concrete -gated structure. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $15.0 million (55%, or $8.2 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $1.3 million has been spent on this project (55%, or $0.73 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2026.
• Early Intake Bypass Tunnel and Pipeline: The Early Intake Bypass Tunnel and Pipeline conveys water from Kirkwood Powerhouse directly into the Mountain Tunnel. The bypass consists of a tunnel on the northern side of the Tuolumne River, leading to a steel pipe crossing the Tuolumne River to Mountain Tunnel on the southern side. The 1,725- foot tunnel is horseshoe -shaped, varying in diameter from 10 feet to 14.6 feet. The water exits the Early Intake Bypass Tunnel, entering a 293- foot-long, 9.5 foot - diameter pipeline that crosses over the Tuolumne River. The Early Intake Bypass Tunnel and Pipeline was last inspected in 2019 and found to be in satisfactory condition. • Mountain Tunnel: Built between 1917 and 1925, Mountain Tunnel extends 19.2 miles from Early Intake Dam to Priest Reservoir. Most of the tunnel is horseshoe -shaped, and measures approximately 14 feet by 14.5 feet. The first 7.2 miles of Mountain Tunnel west from Early Intake are unlined, except for small, lined areas at each adit and a short section approximately 400 feet east of South Fork Adit.

Nine of the remaining 12 miles of tunnel are lined. This asset was inspected in 2007, 2008, 2017 and 2019.
o Mountain Tunnel Improvement Project : Th is
project includes rehabilitation of the tunnel
under the Mountain Tunnel Improvement Project for which construction started in 2021 and will continue through December 2026. As an improvement to the system, the SFPUC is constructing a new flow control facility within the Mountain Tunnel, installed just above Priest Reservoir. The purpose of the facility will be to maintain constant pressure and thus reduce wear and tear on the tunnel during operation. In addition, the Priest Adit Tunnel is being constructed to provide access to Mountain Tunnel without having to drain Priest Reservoir, providing operational flexibility. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $118.8 million (55%, or $65.3 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $76.8 million has been spent on this project (55%, or $42.3 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2027.
• Moccasin Power Tunnel: Moccasin Power Tunnel is a 1- mile-long t unnel that conveys water from
Priest Reservoir to the Moccasin Penstocks (leading to Moccasin Powerhouse). Most of the tunnel is horseshoe-shaped, and measures approximately 13 feet by 13 feet. Moccasin Power Tunnel was last inspected during in 2019 and found to be in satisfactory condition.

43 • Eleanor-Che rry Tunnel : Eleanor -Cherry Tunnel is a 1.1- mile-long tunnel that conveys water from Lake Eleanor to Lake Lloyd. The tunnel is horseshoe -shaped, and measures approximately 8.5 feet by

8.5 feet. Eleanor -Cherry Tunnel was inspected within the last 10 years. The tunnel was found to be in satisfactory condition. The Cherry Reservoir Pump Station contains ten pumps that draw water from Lake Eleanor to Lake Lloyd. Five of these pumps are inoperable and the remaining five pumps are at continued risk of failure.
o Cherry-Ele
anor Pumps : This project is to replace and upgrade the pumps, transformer, and pump motor starters in Cherry Pump Station, and to install a programmable logic controller, a SCADA system, and fiber optics. The existing m otor control center building will be improved. The total budget for this project, as well as the current forecast, is $40.2 million.

This project is expected to start in 2025 and to be completed in 2031. • Cherry Power Tunnel: Cherry Power Tunnel is a 5.6- mile-long t unnel that conveys water from Lake Lloyd to Holm Penstock. Most of the tunnel is horseshoe -shaped, and measures approximately 12 feet by 12.5 feet. Cherry Power tunnel was last inspected in 2000 and found to be in satisfactory condition.

Work was performed on the tunnel to improve efficiency (reduce tunnel friction losses).

In addition, the SFPUC has an ongoing rehabilitation and replacement program to continue inspections, condit
ion assessments, design, environmental evaluations, and as -needed construction to sustain the reliability of water conveyance assets with capital improvements. Projects for power- funded water conveyance assets (Kirkwood Penstock, Holm Penstock, Cherry Power Tunnel and Cherry Pump Station, Priest Gate Tower, Priest Canal, Moccasin Power Tunnel and surge tower, West Portal, and Moccasin Penstock) and joint -funded water conveyance assets (Canyon Tunnel and adits, Can- yon Portal, Mountain Tunnel Headgates, Early Intake Bypass, Mountain Tunnel Diversion Access at Early Intake, Mo untain Tunnel shafts and adits, South Fork Crossing and adits, and Priest Reservoir Bypass) are included in the 2024 Capital Plan and are ongoing.

Utilities
The Hetch Hetchy Project includes buildings/offices, roads and bridges to access facilities, and other utilities including water and wastewater systems, communications, and security. Information regarding various facilities, roads and bridges, and other utilities is described below.

Facilities: The SFPUC is responsible for over 80 buildings, structures, facilities, and systems, many of which were constructed in the early 1900s to facilitate the construction of the Hetch Hetchy Regional Water System.

Capital improvements are needed to provide employees and staff with safe, comfortable, a nd efficient facilities.

Large, active capital projects associated with facilities, all of which are part of the 2024 Capital Plan, include, but are not limited to the following:
• Moccasin Old Powerhouse Hazard Mitigation: The Moccasin Old Powerhouse was co nstr ucted in
1926 and abandoned in the 1960s and is currently used for storage of large equipment and critical spares. The building has multiple structural and nonstructural issues, including cracks, spalling of structural concrete, water intrusion, broken windows, settlement, hazardous materials, and seismic deficiencies. This project will design and install mitigation measures to prevent the building from collapsing and to prevent hazardous materials from contaminating Moccasin Reservoir. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $17.4 million (55%, or $9.6 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $0.58 million has been spent on this project (55%, or $0.32 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2028.
• Moccasin Engineering and Records Building: Hetch Hetchy Water and Power pr ojec t operation and
administration is in Moccasin, California, with facilities including buildings, office trailers, warehouses, shops, laboratories, and sheds. Many of these existing facilities are deteriorating, do not meet current building codes, and are incurring increased maintenance costs. This project will design

44 and construct a 25,000 square -foot, two-story building to create adequate office space for current and future staff. In addition, new records and archives space and new server space will be included.

Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $60.7 million (55%, or $33.4 million, of which is allocated to the Power Enterprise). This project started in early 2023 and is expected to be completed in 2031.

In addition, the SFPUC has an ongoing rehabilitation and replacement program funded at approximately $1-2 million a year to continue inspections, condition assessments, design, environmental evaluations, and as - needed construction to maintain facilities along the system.

Roads and Bridges: The SFPUC is responsible for maintaining access roads to all upcountry facilities, electric transmission towers, and San Joaquin pipelines. There are approximately 14 bridges, 40 miles of paved roads, and hundreds of miles of unpaved roadways that provide access to Hetch Hetchy Project facilities. Up- country paved roads are also used by the public. Large, active capital projects associated with roads and bridges, all of which are part of the 2024 Capital Plan, include, but are not limited to the following:
• Holm Bridge Rehabilitation: Ac
cess to Holm Powerhouse is off Cherry Oil Road via the Holm Bridge.

The 136-foot bridge is a three-span, continuously supported bridge that requires replacement to address seismic and current Caltrans design standard deficiencies. The total budget for this project, as well as the current forecast, is $11.7 million. This project is expected to begin in 2030 and to be completed in 2036.
• Bridge Replacement : T he
Lake Eleanor Dam Bridge and the O’Shaughnessy Adit Access Bridge require substantial modification or re -placement. The Lake Eleanor Dam Bridge is a structural component of the dam a nd is integral to the structural/seismic integrity of the dam. The O’Shaughnessy Adit Access Bridge is downstream of O’Shaughnessy Dam and provides access to Canyon Tunnel. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $29.4 million (55%, or $16.2 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $2.8 million has been spent on this project (55%, or $1.6 million, of which is allocated to the Power Enterprise). This project is expected to be completed in 2027.

In addition, the SFPUC has an ongoing rehabilitation and replacement program funded at approximately $1-2 m
illion a year to continue inspectio ns, condition assessments, design, environmental evaluations, and as - needed construction to maintain the various roads and bridges along the system.

Other Utilities: The SFPUC is responsible for maintaining various utility -relat ed assets along the Hetch Hetchy Project system. Large, active capital projects associated with other utilities, all of which are part of the 2024 Capital Plan, include, but are not limited to the following:
• Moccasin Wastewater Treatment Plant: The Moccasin Wastewater Treatment Plan provide s primary treatment of wastewater from Moccasin Compound prior to discharging treated water to a nearby spray field. The current treatment plant was constructed in the 1970s and has been in continuous operation since its installation. It has reache d the end of its reliable service life and is becoming increasingly maintenance intensive. This project will replace the existing plant with a package two -train sequence batch reactor plant, upgrade the electrical and flow monitoring system, flow equalizat ions, SCADA instrumentation and automation features, and related site improvements. Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $12.0 million (55%, or $6.6 million, of which is allocated to the Power Enterprise). As of June 30, 2023, $1.4 million has been spent on this project (55%, or $0.78 million, of which is allocated to the Power Enterprise). This projected is expecte d to be completed in 2026.

45 • eFleet Infrastructure Improvements : In 2017, the Board of Supervisors approved Ordinance 115- 17, which required that the City fleet passengers transition to zero- emission vehicles, and encourages the selection of zero -emission vehicles in other classes as technology improves. This project will perform a suitability study for electrifying Hetch Hetchy Project’s fleet. Based on findings, the SFPUC will determine vehicle specifications and evaluate charging infrastructure required to support the effort.

Because this project is for a Joint Facility, 55% of the project costs are allocated to the Power Enterprise. The total budget for this project, as well as the current forecast, is $3.2 million (55%, or $1.8 million, of which is alloca ted to the Power Enterprise). This project is expected to begin in late 2023 and to be completed in 2025.

Hetch Hetchy Project Operations
Gener
al
The Hetch Hetchy Project provides two utility services with distinct ratepayers: water and power. Several facilities operated by Hetch Hetchy Project staff are joint assets used for both water storage and transmission and electric generation and transmission, benefitting both Hetch Hetchy Water and Power Enterprise operations.

Operating and capital costs that jointly benefit both ratepayer groups are allocated 45% to the Water Enterprise and 55% to the Power Enterprise.

Water First Policy
The Hetch Hetchy Project is operated as a combined water storage and conveyance and electric generation and transmission system. The Water Enterprise and the Power Enterprise coordinate operation of the Hetch Hetchy Project to ensure reliable utility services are provided by the combined system. Pursuant to State statute, the Charter and the terms of the Water Supply Agreement , the SFPUC operates the Hetch Hetchy Project pursuant to a “water first” policy to optimize the reliability and quality of its water deliveries and ensure that hydroelectric generation does not cause any reasonably anticipated adverse impact on water service. Power is generated when water is delivered to meet water system operational requirements.

Hetch Hetchy Project reservoir operations are guided by two principal objectives : collection of Tuolumne River water runoff for diversion to the Bay Area; and fulfillment of the SFPUC’s downstream release obligations .

To ensure water supply, Hetch Hetchy Project reservoirs remain high through the early winter, until snowmelt runoff is forecasted to fill all Tuolumne reservoirs. When the forecasted snowmelt is certain to be in excess of the fill volume, the reservoirs may be drawn down, generating electricity, without risking water supply. Similarly, the Bay Area reservoirs included in the regional water system serving San Francisco and the Water Enterprise’s wholesale customers (the “Regional Water System ”) are operated to conserve watershed runoff. As such, reservoirs are drawn down early in the winter period to capture storms and reduce the potential for spilling water out of the reservoirs. In the spring, the Hetch Hetchy Project water that may be drawn down (snowmelt) is often transferred to three of the Bay Area reservoirs that can receive the water, so that any unused local reservoir storage is filled prior to July 1.

Typically, this policy requires that more water be delivered by the Hetch Hetchy Project to lower -level reservoirs in spring, when electricity prices tend to be lower than they are in the summer and fall. Therefore, in an average year, the Power Enterprise has excess generation to sell in the first half of the year and generally supplements its own generation with purchases of wholesale electricity to meet demand during the second half of the year. Nevertheless, consistent annual water needs and water deliveries create consistent “base load” electricity generation to meet almost all of the Power Enterprise’s annual retail customer load requirements. In addition, reservoir levels are flexible and, to the extent possible, are strategically managed to generate power when most valuable. The Power Enterprise accounts for the costs of projected power purchases, including seasonal differential in electricity prices, in its budget and reflects such costs in the rates it charges customers. See “– Variability of Hydroelectric Generation” and “CERTAIN RISK FACTORS – Changes in Energy Prices.”

46 Licensing and Regulation
FERC Regulation
Under the Federal Power Act, the Federal Energy Regulatory Commission (“ FERC”) is responsible for the licensing of hydroelectric plants within the United States. The Raker Act, which authorized rights-of-way on federal lands necessary for the Hetch Hetchy Project, predates the Federal Power Act. Hetch Hetchy Project hydroelectric facilities are on rights-of-way granted under the Raker Act. In addition, the Federal Power Act specifically exempts from FERC regulation those Hetch Hetchy Project facilities subject to the Raker Act. See “DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION – Federal Law and Regulation – Federal Energy Regulatory Commission.”
Downstream from the Hetch Hetchy Project, the Districts own and operate a hydroelectric generating plant located at the Don Pedro Reservoir on the Tuolumne River (the “ New Don Pedro Project”). The New Don Pedro Project is subject to FERC reg ulation and is currently undergoing re -licensing. The SFPUC has a water banking arrangement with the Districts that allows the SFPUC to “advance” water owed to the Districts to satisfy their entitlements through storage in the Don Pedro Reservoir for the Districts’ later use, thus improving the water flows (and the timing of related electric generation) from Hetch Hetchy Project facilities upstream on the Tuolumne River.

See
“– FERC Proceeding Regarding Relicensing of the New Don Pedro Project.” California Public Utilities Commission Regulation
The CPUC establishes standards that apply to transmission and distribution facilities to ensure the safety of employees and the general public. The CPUC applies these standards to publicly-owned utilities (“POUs”) as well as privately owned utilities, even though POUs are generally not subject to CPUC jurisdiction. The standards concern all aspects of maintaining and operating transmission and distribution facilities, including vegetation management, clearances, line-loading, inspections, and reporting.

Dam Operation; Dam Safety
In 1929, the California Legislature enacted legislation providing for supervision over non- federal dams in California. The statutes place the supervision of the safety of non- federal dams and reservoirs under DSOD jurisdiction. Dams under DSOD jurisdiction are artificial barriers, together with appurtenant work, including outlet towers that are 25 feet or more in height or have an impounding capacity of 50 acre- feet or more. Any artificia l barrier not more than six feet in height, regardless of storage, or that has a capacity not more than 15 acre-feet, regardless of height, is not considered jurisdictional.

The DSOD reviews plans and specifications for the construction of new dams or for the enlargement, alteration, repair or removal of existing dams, under applications, and must grant written approval before the owner can proceed with construction . The DSOD routinely inspects operating dams to assure that they are adequately maintained. The DSOD also conducts investigations of selected dams and directs the owners to conduct additional investigations and detailed safety evaluations when necessary. DSOD dam inspection orders have included dams operated by Hetch Hetchy Water. See “—Physical Condition of Facilities – Reservoir and Dam Facilities.” The SFPUC has an ongoing comprehensive dam safety program to monitor, inspect and maintain dams to ensure public safety downstream . The program establishes policies, objectives and expectations relating to dam safety, including a surveillance and monitoring program . The SFPUC has adopted long- term commitments relating to the operation of its dams. Such commitments include, but are not limited to: operating dams and appurtenant structures in a manner that keeps them operationally and structurally safe; maintaining dams in a safe and non- defective condition to prevent degradation and maintain serviceability; conducting regular preventive and corrective maintenance activities; addressing nonroutine, specialized, and large -scale dam maintenance work and studies through the SFPUC’s capital program; performing routine surveillance, monitoring, and reporting of dam conditions; inspecting dams once a year, as deemed necessary or prescribed by protocols; operating adit valves and

47 emergency release valves for each dam once per year; and preparing emergency action plans for each applicable dam.

FERC Proceeding Regarding Relicensing of the New Don Pedro Project FERC licenses the New Don Pedro Project, owned and operated by the Districts . The City helped fund the original construction of the New Don Pedro Project in exchange for a 570,000- acre-foot “water bank” account allowing the SFPUC to receive water credits for advanced releases from the Hetch Hetchy Project to the New Don Pedro Reservoir.

The current FERC license for the New Don Pedro Project expired in 2016, and the Districts are now operating under an annual license that incorporates the conditions of their prior license. The Districts initiated the process to relicense the New Don Pedro Project using FERC’s Integrated Licensing Process in 2010 . Relicensing is a lengthy process, stretching over several years and open to public participation . It is estimated the process may cost up to $50 million to complete, which costs are split for certain studies between the Districts and the SFPUC pursuant to an existing agreement . The Districts submitted an Amended Final License Application (“ AFLA”) for the New Don Pedro Project on October 11, 2017.

The Districts are also working through an initial licensing proceeding for the La Grange Diversion Dam (the “La Grange Project”), which is located on the Tuolumne River, two miles downstream of the New Don Pedro Project. The Districts also submitted their Final License Application (“ FLA”) for the La Grange Project on October 11, 2017. The City has no legal or contractual responsibilities regarding the ownership or operation of the La Grange Project and is not subject to the licensing conditions for the La G range Project.

National Environmental Policy Act (“ NEPA”) and California Environmental Quality Act (“ CEQA”) environmental review must be completed before licenses can be issued . On July 7, 2020, FERC released the Final Environmental Impact Statement (“ FEIS”) for both the AFLA for the New Don Pedro Project and the FLA for the La Grange Project. The FEIS presents a “staff recommendation” that is mostly aligned with the Districts’ AFLA.

Under section 401 of the federal Clean Water Act, FERC cannot issue a new license for a hydroelectric project until a state’s water quality agency issues a certification stating that the new license will comply with the applicable water quality requirements (the “401 Certification”) or, alternatively, FERC determines that the state has waived its authority to issue a 401 Certification. The ongoing water quality control plan voluntary agreement process is designed, in part, to draft the terms of the 401 Certification that would be included as part of the FERC license in lieu of a requirement set forth in the “Phase 1” Amendment to the Water Quality Control Plan (the “ 2018 Plan Amendment ”) adopted by the California State Water Resources Control Board (the “ SWRCB”) in 2018 to release of 40% of the “unimpaired flow” on the three San Joaquin River tributaries from February through June in every water year type, whether wet, normal, dry, or critically dry . However, in January 2021, the SWRCB issued a final 401 Certification that sets a flow schedule more onerous than the 2018 Plan Amendment . The SFPUC and the Districts jointly filed a petition for reconsideration at the SWRCB in February 2021 . The SWRCB did not respond to these petitions and the City and the Districts consequently filed related lawsuits challenging th e 401 Certification.

In addition, the Districts have challenged FERC to find that the SWRCB has waived its authority to issue a 401 Certification. Both the administrative and judicial proceedings are ongoing. The challenges to the SWRCB’s issuance of th e 401 Certification remain pending. The United States Court of Appeals for the District of Columbia Circuit decided the Districts’ waiver lawsuit unfavorably to the Districts, and, in April 2023, the United States Supreme Court denied the Districts’ petition for certiorari, fully resolving this case.

A 1995 Don Pedro Project Settlement Agreem ent (“Settlement Agreement”) and a 1996 Order by FERC (“1996 Order”) established increased water flows on the Tuolumne River to protect fisheries and riparian resources .

A restoration plan (“Restoration Plan”) adopted in 2000 guides planning, funding and implementation efforts . The Restoration Plan calls for a series of projects with a combined estimated cost of $25 million to improve river channel, riparian, and fisheries conditions within a 27- mile stretch of the Tuolumne River corridor below the La Grange Diversion Dam. Four of the ten priority projects were completed with available State and federal funding.

More recently, the City and the Districts as well as other non -governmental organizations have been working on implementing additional habitat restoration projects related to the Restoration Plan.

48 Pursuant to a then-existing agreement between the City and the Districts, the City might have been liable to provide a portion of the increased flows mandated under the 1995 Settlement Agreement . Instead, the City and the Districts entered into a new agreement (the “Side Agreement ”) whereby the Districts agreed to provide all flows ordered by FERC to implement the Settlement Agreement until FERC issues a new license for the New Don Pedro Project in exchange for which the City pays the Districts $3.5 million per year, subject to an escalation clause applied to keep pace with inflation. Pursuant to the terms of its agreement with the Districts, the City may withdraw from the agreement upon one year’s notice.

The term of the Side Agreement runs until FERC issues a new license for the New Don Pedro Project .

License conditions, such as water -release requirements, could change under a new license . Changed release requirements could adversely affect the availability of Tuolumne River water to the SFPUC and incidental hydroelectric generation. To prevent these potentially adverse effects to its operations on the Tuolumne River, the SFPUC is seeking to extend the existing Side Agreement so that it would remain i n effect after the New Don Pedro Project FERC license is renewed.

FERC has not yet provided a schedule for relicensing.

WECC/NERC Requirements
FERC has adopted mandatory electric reliability standards developed by the North American Electric Reliability Corporation (“NERC”) and enforced in the western region of the United States by the Western Electric Coordinating Council (“ WECC”). These standards require all entities that are a part of the bulk power system to demonstrate their ability to ensure reliability for all operations. The SFPUC is required to register and demonstrate compliance (or plans to mitigate non- compliance) in several operational areas. The SFPUC has established a compliance program that includes regular training of staff, systematic in spection and monitoring of operations and facilities, regular audits of compliance and mitigation plans, and regular reporting to senior management. NERC regulations are specified by operational function and require entities to register for each applicabl e function. The SFPUC is registered for several functions, including those applicable to transmission owners and operators and generation owners and operators. The SFPUC is audited by WECC every three years on the program . See “DEVELOPMENTS IN THE ELECT RICITY MARKETS AND REGULATION – Federal Law and Regulation – Federal Energy Regulatory Commission.”
Recent Storms
Early winter storms at the end of 2022 and beginning of 2023 caused damage to some Hetch Hetchy Project facilities . The storms damaged multi ple water and joint assets on the Hetch Hetchy Water and Power system, with most of the damage occurring to paved and unpaved access roads. The SFPUC continued to deliver high-quality drinking water to its retail and wholesale customers throughout the storm events, and power generation and transmission continued uninterrupted. Watershed roads in Tuolumne, Alameda, and San Joaquin counties experienced erosion, sinkholes and slides and are awaiting repairs for access to be reestablished. Under the terms of the Raker Act, Hetch Hetchy Water and Power is responsible for maintenance of cert ain right of way roads. Two of these roads, Cherry Lake Road and Hetch Hetchy Road, experienced complete and partial road failures, and an emergency contract in the amount of $11.5 million has been awarded to complete the necessary repairs prior to the next winter storm season . Hetch Hetchy Project crews were able to maintain access to critical facilities throughout the storm events. Additional reported damages include erosion adjacent to the headgate structure of the Early Intake Dam and damage to the Moccasin Creek bypass pipe.

The SFPUC anticipates that both short - and long-term capital projects will be required to rebuild roads and complete repairs to damaged facilities . Total cost of damages is expected to be at least $40 million; however, final costs will not be known until at least fall 2023. The SFPUC anticipates it will be able to pay such costs from reserves, revenues of the Power Enterprise and Water Enterprise, and/or proceeds of existing Power Enterprise and Water Enterprise bonds. The City has applied for federal and State disaster relief funding, and the SFPUC plans to seek reimbursement for qualified expenses.

49 Wildfire Considerations
Wildfire Mitigation Plan
The CPUC created the Fire- Threat Map for California (the “Fire- Threat Map ”). The Fire-Threat Map shows areas where there is an increased risk for utility associated wildfires and where utility infrastructure and operations will have stricter fire -safety regulations. The Fire -Threat Map is comprised of the High Fire Threat District, which is made up of two maps: A Tier 1 High Hazard Zones (“ HHZs”) and a Tier 2 and Tier 3 fire -threat areas. Tier 1 HHZs, based on the United States Forest Service and California Department of Forestry and Fire Protection joint map of Tree Mortality, are zon es near communities, roads, and utility lines, and are a direct threat to public safety. Tier 2 fire -threat areas outline areas where there is a higher risk (including likelihood and potential impacts on people and property) from utility related wildfires. Tier 3 fire-threat areas outline areas where there is an extreme risk (including likelihood and potential impacts on people and property) from utility related wildfires.

The SFPUC owns and operates about 94 miles of overhead electrical lines that are located within the CPUC’s Tier 1 HHZs. The lines are primarily located in the Sierra Nevada, surrounding foothills and on the Peninsula. The Hetch Hetchy Project and electric transmission and other facilities operated by Hetch Hetchy Project staff are primarily located in the Sierra Nevada and surrounding foothills, where wildfire is a risk, especially within the Stanislaus National Forest.

The Hetch Hetchy Project has both power transmission and distributions lines within certain high fire - threat areas. App roximately 26% (42.6 miles) of the transmission lines are in Tier 2, and 2% (3.3 miles) of the transmission lines are in Tier 3. The remaining 72% of the transmission lines are outside of the High Fire Threat District. All Hetch Hetchy Project distribution lines are in Tier 2 (approximately 39 miles).

As required by the CPUC, the SFPUC maintains a Wildfire Mitigation Plan (the “Wildfire Mitigation Plan”) which describes the numerous programs that the SFPUC has in place to construct, maintain and operate its electrical facilities in order to minimize the risk that its equipment could be the origin or contributing source for a catastrophic wildfire. The Wildfire Mitigation Plan is reviewed by an independent evaluator, approved by the SFPUC Commission, and submitted to the California Wildfire Safety Advisory Board on or before July 1, of each year. The SFPUC’s Wildfire Mitigation Plan was most recently reviewed in 2023, and an independent evaluator has determined that the SFPUC’s Wildfire Mitigation Plan is co mprehensive and meets the statutory requirements of Section 8387 of the California Public Utilities Code for publicly owned electric utilities.

Impact of Wildfires on the Power Enterprise
Wildfires can adversely impact the Power Enterprise in two distinct ways. First, wildfires can damage Hetch Hetchy Project facilities and disrupt the operation of, or cause damage to, electric generation and transmission facilities. As one example, in 2013, the Rim Fire, one of the largest wildfires on record in the Sierra Nevada, burned over 257,135 acres. The Rim Fire passed through an area containing two of the Hetch Hetchy Project’s electric generating stations, the Kirkwood and Moccasin Powerhouses, which combined generate approximately 57% of the electricity produc ed by the Hetch Hetchy Project, and reached the southern edge of the Hetch Hetchy Reservoir, which supplies 85% of San Francisco’s drinking water. Other critical infrastructure, including electricity transmission and distribution lines, switch yards, and s tructures, was in the wildfire’s direct path prior to full containment in October 2013. The Rim Fire inflicted approximately $40 million in damages to the Hetch Hetchy Project and other facilities in the Sierra Nevada region. The Hetch Hetchy Project electric generation system was also interrupted by the effects of the Rim Fire for a period of 43 days. To serve its retail load and maintain safety and reliability during this period, the SFPUC purchased power on the open market, including using existing ba nked electricity with PG&E. The total cost to the SFPUC of such power purchases and banked power usage was approximately $1.7 million. The SFPUC is pursuing cost recovery to recoup losses through the Federal Emergency Management Agency’s and the State of California Governor’s Office of Emergency Services’ Public Assistance Grant programs, as well as purchased property insurance coverage for mission critical assets. To date, the SFPUC has made progress in recovering most costs related to the power purchases through insurance and is working towards collecting further reimbursements for damages caused by the Rim Fire. See “FINANCIAL OPERATIONS – Risk Management and Insurance.” Endpoint delivery of electricity to Power Enterprise retail and wholesale

50 customers remained unaffected and the Rim Fire did not have an adverse impact on drinking water quality, despite some ash having been observed falling into the Hetch Hetchy Reservoir.

Second, wildfires attributable to Hetch Hetchy Project facilities may result in liability for damage to private property. For more information, see “CERTAIN RISK FACTORS – Inverse Condemnation.” Wildfire Mitigation Strategies
The SFPUC has evaluated prevention and response strategies and established capital projects designed to mitigate the threat of wildfire posed by overhead electrical lines. Such projects, which are part of the SFPUC’s ongoing replacement and rehabilitation program related to wildfire mitigation efforts, include (i) reconductoring, increasing safe-clearance distances, undergrounding, and adding alternative power supplies in some areas designated by the CPUC as High Fire Threat District zones to reduce the Hetch Hetchy Project’s overhead electrical line footprint, and (ii) developing fire breaks near and/or arou nd other facilities, which will require clearing certain amounts of vegetation on either side of identified access rounds to ground level and is expected to include herbicide treatments to prevent re- growth as part of periodic maintenance. The ongoing replacement and rehabilitation program is funded at approximately $2.0 million a year to provide condition assessments, design, environmental evaluations, and construction.

Another one of the SFPUC’s wildfire mitigation strategies is de -energization during c ritical fire weather conditions. The SFPUC owns two water treatment plants, Sunol Valley Water Treatment Plant (the “ SVWTP”) and Harry Tracy Water Treatment Plant (the “HTWTP ”). SFPUC transmission lines feed the SVWTP. In the event SFPUC must de-energize the transmission lines that feed the SVWTP, the portion of the transmission system outside of the de -energization zone can be back fed from the PG&E electrical grid. The Power Enterprise would incur additional costs to continue to provide service to HTW TP were this backfeed method implemented. In the event of both public safety power shutoffs (“ PSPS”) by PG&E and SFPUC de -energization, SVWTP could operate on backup generation. Unlike SVWTP, which is connected to SFPUC transmission lines, the Power Enter prise serves the HTWTP under a transmission service agreement with PG&E. Backup generation is available at the HTWTP in the event of a PG&E PSPS event.

Safety and Security
The safety and security of Hetch Hetchy Project facilities is maintained via a combination of regular inspections by SFPUC employees, electronic monitoring and analysis of unusual incident reports. Most above - ground facilities operated and maintained by the SFPUC are controlled -access facilities with fencing, signage and gates. Additionally, closed circuit television surveillance systems and security officers may be deployed at certain times, as dictated by the security situation, the City, and federal re quirements. Smaller, above ground and subterranean pumping stations operated and maintained by the SFPUC are locked with padlock or internal locking mechanisms, and most are monitored via access/intrusion alarms and are also regularly inspected by SFPUC employees. Security requirements are frequently inspected, evaluated and audited in accordance with current policies and procedures. Improvements to the current security system are continually evaluated as changes in technology or threats occur. The electronic operations and controls have been evaluated and designed to reduce exposure using a series of technology systems enhancements and integration in accordance with SFPUC Security Design Procedures.

51 Variability of Hydroelectric Generation
As is the case for nearly all hydroelectric generating assets, generation at the Hetch Hetchy Project is subject to annual and seasonal variations in precipitation. Typically, in the spring, hydroelectric generation at the Hetch Hetchy Project is higher than in other parts of the year as collected water and snowmelt flows through the Hetch Hetchy Project and the Regional Water System to satisfy customer draws and fill reservoirs at lower elevations, while electrical demand within the western region of the United States is generally lower than it is during most other parts of the year . Conversely, in the late summer and fall, with substantially less snowmelt and, on average, decreased precipitation, hydroelectric generation at the Hetch Hetchy Project declines due to con comitant decreases in water flow through the Hetch Hetchy Project. At the same time, electrical demand from western regional users increases. In an average year, the Power Enterprise has excess generation to sell in the first half of the year, and generally purchases wholesale electricity during the second half of the year to meet its electricity demand.

See “– Hetch Hetchy Project Operations – Water First Policy” and “CERTAIN RISK FACTORS – Changes in Energy Prices.”
Due to the critically dry period from October 2019 to September 2021, the SWRCB issued a curtailment order in August 2021 restricting the SFPUC’s ability to capture inflow to its reservoirs which feed the Kirkwood, Moccasin and Holm powerhouses. The curtailment order forces a shift in gener ation from fall to winter months, at release rates which likely exceed generator capacities and reduce the SFPUC’s total annual generation from these powerhouses. However, due to the extremely wet winter, the curtailment order impacted generation operatio ns from August 2021 through mid -November 2022. The curtailment order was rescinded in April 2023. See “– Hetch Hetchy Project Operations – Water First Policy” and “CERTAIN RISK FACTORS – Changes in Energy Prices.” The following graph shows Hetch Hetchy Project generation and sales for calendar year 2022:

_______________
Source: SFPUC
Over the past 10 years, the Hetch Hetchy Project generated an average of 1,253,000 MWh per year, with an average of 744,000 MWh generated in the first six months (January -June) to satisfy average customer load of 484,546 MWh during the same period, and an average of 508,000 MWh generated in the second six months (July- December) to satisfy average customer load of 476,944 MWh during the same period.

Precipitation conditions also vary on an annual basis. The Hetch Hetchy Project is geographically located in an environment subject to periodic drought conditions. Since 1921, seven multi -year droughts have been recorded in the Hetch Hetchy Project area. The Tuolumne Basin was recently in a drought from water years 2020 to 2022, the second driest three -year period on record. During dry years in the Hetch Hetchy Project area, the share of purchased power as a percentage of Power Enterprise customers’ load increases’. For example, in water years 2020 to 2021, a two -year period in which 56% of average historical annual precipitation fell in the Hetch Hetchy Project area, purchased power represented a total of 1% of the Power Enterprise’s total power delivered, and in water year 2014, a year in which 62% of average historical annual precipitation fell in the Hetch Hetchy Project area, purchased

52 power represented 4% of the Power Enterprise’s total power delivered. Because of the prevalence of hydroelectric generating resources in the western and particularly northwestern portions of the United States, regional drought conditions of the type experienced in such regions in water years 2013 and 2014 can also impact the overall cost of purchased power. The SFPUC cannot predict when drought conditions will begin or end, or the frequency or severity of any future drought conditions.

Had current system generation been in place throughout the past 93 years, models indicate the Hetch Hetchy Project would have produced an annual maximum generation of approximately 2,500,000 MWh (in a wet year similar to a year like 1983) and a minimum of approximately 900,000 MWh (in a critically dry year similar to a year like 1977), while currently serving an average retail customer load of 1,000,000 MWh. With climate change, Hetch Hetchy Project generation has decreased since 2000, and is estimated at about 1, 250,000 MWh of electricity annually. Even during drought conditions, the Hetch Hetchy Project has freque ntly generated enough electricity to meet its retail load obligations, but had less excess generation available for wholesale sales, effectively reducing revenues from wholesale market transactions. See “THE POWER ENTERPRISE – Load and Electricity Supply Resource Management; Wholesale Electricity Trading.” The following graph shows simulated and actual annual generation of the Hetch Hetchy Project applying current system generation capability to historical hydrology since 1921. This interannual variability is expected for this area and is an expected consequence of climate change. The Power Enterprise continues to meet its load obligations through supplemental wholesale power purchase.

_______________
Source: SFPUC

53 The following graph shows the Hetch Hetchy Project generation by powerhouse from 2016 through 2022.

The Power Enterprise continues to meet its load obligations through supplemental wholesale power purchase.

_______________
Source: SFPUC

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54 THE POWER ENTERPRISE
General
The SFPUC has provided electricity services to retail customers and California irrigation districts since the 1920s in accordance with the terms of the Raker Act. Pursuant to the Raker Act, the City developed a system of hydroelectric facilities, transmission facilities and other electric utility infrastructure to serve its customers. See “THE HETCH HETCHY PROJECT.” The City also built and owns certain transmission and distribution facilities that are not part of the Hetch Hetchy Project . Since at least 1945, the SFPUC has purchased transmission and distribution services from PG&E through a FERC -approved wholesale agreement to transmit and deliver electricity to its City customers.

In 2005, as part of an agency -wide reorganization, the SFPUC created the Power Enterprise as a separate electric utility enterprise to complement the Water and Wastewater Enterprises. Although the Power Enterprise is functionally organized as a separate enterprise withi n the SFPUC’s overall structure, the Hetch Hetchy Project is operated as a combined water storage and conveyance and electric generation and transmission system. See “THE HETCH HETCHY PROJECT.”
In 2016, the SFPUC began serving customers through CleanPowerSF, a Community Choice Aggregation program. Under CleanPowerSF, the SFPUC pools the electricity demands of San Francisco residents and businesses that are retail electric distribution customers of PG&E for the purpose of buying electricity on behalf of such customers. CleanPowerSF is a “Separate System” under the Indenture.

The Power Enterprise schedules, purchases, sells, transmits and distributes electricity to meet the needs of more than 6,000 retail and wholesale accounts, including 19% of the total electricity consumed within San Francisco (with 58% provided by CleanPowerSF and the remaining 23% by PG&E and electricity service providers through a State-authorized direct access program). The Power Enterprise’s customers include:
• municipal departments, including the City’s fire houses, hospitals, municipal transit rail system, water and wastewater treatment facilities, SFO, recreational facilities, maritime facilities, public housing and City streetlights and traffic signals;
• the SFUSD;
• tenants in City-owned properties, including tenants of the Port and SFO; • Phase I of the Hunters Point Shipyard redevelopment project and tenants of TIDA on the former Naval Station Treasure Island and Yerba Buena Island;
• other new developments including Mission Rock and Pier 70; • SF Housing Authority, Rental Assistance Demonstration projects; and • commercial customers and developments including the Salesforce Transit Center in downtown San Francisco, and Digital Realty, a data center transferred from PG&E retail service to the Power Enterprise.

The Power Enterprise also owns, operates and maintains half of the streetlights in San Francisco and supplies electricity to the other half, which are owned and maintained by PG&E.

The Power Facilities include the power -related assets of the Hetch Hetchy Project, 25 solar arrays and two biogas facilities, transmission lines, and numerous distribution facilities. The Power Enterprise currently has 136 full-time positions, an operating budget of $220.4 million for Fiscal Year 2023-24, and a capital budget of about $41.9 million for power facilities and the power portion of combined water and power facilities. The Power Enterprise’s revenues for Fiscal Years 2021 -22 and 2022- 23 were approximately $185 million and $___._ million,

55 respectively. Power Enterprise revenues currently support approximately 80% of the SFPUC’s costs of operating the Hetch Hetchy Project, including maintenance and capital improvements relating t o the Hetch Hetchy Project.

See “THE HETCH HETCHY PROJECT – Hetch Hetchy Project Operations” and “FINANCIAL OPERATIONS.” Power Service in San Francisco
San Francisco’s electricity needs are met by four primary providers . CleanPowerSF is the largest suppl ier of electricity in San Francisco, serving approximately 60% of the total load within San Francisco. In addition, approximately 18% of the total load within San Francisco is supplied by the Power Enterprise, 11% of the total load within San Francisco is supplied by third- party electric service providers through direct bilateral power contracts, and the remaining 11% of the total load within San Francisco is supplied by PG&E. The above percentages include electricity usage for all of San Francisco and SFO, which is located outside San Francisco city boundaries in unincorporated San Mateo County and served by the SFPUC. In 2008, the City established a goal to have greenhouse gas (“GHG”)-free electric service by 2030, to be realized in part by generating, deploying and procuring all of the SFPUC’s electricity needs from renewable and zero -GHG electric energy sources. PG&E is currently the dominant provider of distribution services in San Francisco, with SFPUC owning the distribution system serving The Shipyard development, and portions of the distribution system serving the Treasure Island and Yerba Buena Island development.

The SFPUC is currently constructing an SFPUC -owned t ransmission and electrical distribution facility along the Bayside of San Francisco, known as the Bay Corridor Transmission and Distribution (“ BCTD”) project, in support of the Power Enterprise’s long- term business plan of owning in- city distribution to pr ovide electric service to existing and future customers in San Francisco. The BCTD project consists of (i ) a 230 kV underground transmission line, (ii) a 15 kv distribution system and (iii) a 75 MVA 230/15 kV substation. The BCTD project is interconnected with PG&E at the Potrero Substation at 230 kV. The SFPUC will own the 230 kV transmission line from the Potrero Substation to the BCTD distribution substation, the Davidson Substation, where the voltage is transformed to 12.47 kV for delivery to custome rs. The BCTD will serve retail customers along the southeastern waterfront of San Francisco, including the Pier 70 development, the Mission Rock development, the Southeast Treatment Plant, the UCSF clinic and garage, the Mariposa pump station, the Southeast Community Center and the Water Enterprise’s new City Distribution Division facility.

Pacific Gas & Electric Company
Incorporated in California in 1905, PG&E is a for -profit, an investor-owned natural gas and electric utility company, with a service area in California that extends from Eureka in the coastal north to Bakersfield in the south, and from the Pacific Ocean in the west to the Sierra Nevada in the east, although porti ons of the area are served by other for -profit investor -owned utilities and municipally-owned utilities. PG&E moved its headquarters from San Francisco to Oakland, California in 2022. While PG&E is the largest provider of electric distribution services within San Francisco, the Power Enterprise now provides over 75% of the electricity consumed in San Francisco via the Power Enterprise and CleanPowerSF, combined.

PG&E is regulated primarily by the CPUC and FERC. The CPUC has jurisdiction over the rates and terms and conditions of service for PG&E’s retail electricity and natural gas distribution operations, electric generation, and natural gas transportation and storage. FERC has jurisdiction over the rates and terms and conditions of service governing PG &E’s electric transmission operations, interstate natural gas transportation contracts and Wholesale Distribution Tariff (the “ Tariff”) services. The federal Nuclear Regulatory Commission oversees the licensing, construction, operation, and decommissioning of PG&E’s nuclear generation facilit y. PG&E is also subject to the jurisdiction of other federal, State, and local governmental agencies in certain matters.

The SFPUC interfaces with PG&E in multiple ways, as described below. • The Power Enterprise is a w holesale customer of PG&E for transmission and distribution services within San Francisco. In Fiscal Years 2021 -22 and 2022- 23, the Power Enterprise paid PG&E approximately $22.3 million and $29.0 million, respectively, for its distribution services. The Power Enterprise is also a customer of PG&E streetlight services, and currently pays PG&E approximately

56 $1.9 million per year to operate and maintain the 17,925 PG&E-owned streetlights in San Francisco.

While the SFPUC pays PG&E directly for wholesale dis tribution services, it pays CAISO tariffed “postage stamp” rates for transmission services on PG&E owned transmission lines . The Power Enterprise provides electricity for streetlights, traffic signals and certain unmetered loads in San Francisco. See “FINANCIAL OPERATIONS – Rate-Setting Process; Rates – PG&E Rates” and “CERTAIN RISK FACTORS – Risks Related to Power Enterprise Operations and Facilities – Interconnection Delays and Costs.”
• Power Distribution, Metering and Billing for CleanPowerSF . PG&E also provides metering, data transfer and billing services to CleanPowerSF, pursuant to State statute implemented through rules and regulations adopted and enforced by the CPUC. PG&E provides retail transmission and distribution services and consolidated billing services to CleanPowerSF customers. CleanPowerSF customers pay PG&E for all electric services charges (generation, transmission and distribution) and PG&E transfers customer payments received for CleanPowerSF electric generation service to the SFPUC. • Regulator. The franchise agreement s between the City and PG&E, approved by the Board of Supervisors on December 26, 1939, grant PG&E non- exclusive franchises to provide electric and gas service in San Francisco and authorize use of public rights -of-way in connection therewith. The City, including the SFPUC, regularly issues permits to PG&E for work on or use of City property to improve its systems. For example, PG&E is a permitted user of some of the SFPUC’s watershed lands.
• Competitor to Power Enterprise. Neither the Raker Act nor PG&E’s franchise agreement s impose any limitations on the City’s ability to serve retail electric customers. The SFPUC and PG&E compete to serve load and offer competing products . The Power Enterprise provides bundled electric services through the Power Enterprise’s publicly owned utility and provides generation services through CleanPowerSF. Both business lines provide other services such as distributed energy resources, decarbonization and energy efficiency services.

PG&E filed for Chapter 11 bankruptcy on January 29, 2019, and subsequently emerged from bankruptcy on July 1, 2020. In connection with PG&E’s bankruptcy, the City submitted a non- binding indication of interest to PG&E to purchase substantially all of PG&E’s electric distribution and transmission assets needed to provide retail electric service to all electricity customers within the geographic boundaries of San Francisco. A transaction has not been consummated to dat e. The City remains interested in acquiring these assets from PG& E. For more information, see “THE PUBLIC UTILITIES COMMISSION – Proposed Transaction with Pacific Gas & Electric Company.

Electric Service Providers (Direct Access)
Direct access service in California was established following the restructuring of California’s electric industry in 1998 through Assembly Bill 1890 ( 1996) (“AB 1890”) and allows qualified large investor-owned utility customers to purchase their electricity directly from qualified suppliers through bilateral contracts, subject to utility - specific load caps. The investor -owned utility continues to be responsible for transmission and distribution under CPUC tariffs. In San Francisco, although fewer than 800 customers continue to pa rticipate in the direct access program, given their large size, their combined electricity usage constitutes approximately 11% of total electricity usage and includes about 60% of PG&E’s largest customers within San Francisco, including certain downtown office buildings, large department stores, industrial customers , the University of California and the California State University system. Residential and small commercial customers of investor -owned utilities are not eligible for participation in the direct access program. None of the Power Enterprise’s customers are eligible to participate in the State’s direct access program as the program is only available to investor-owned utility retail customers.

CleanPowerSF Service
The Power Enterprise is responsible for the operation of CleanPowerSF, a Community Choice Aggregation program. Under CleanPowerSF, the SFPUC pools the electricity demands of many San Francisco residents and

57 businesses that are retail electric distribution customers of PG&E for the purpose of buying electricity on behalf of such customers. CleanPowerSF, which currently serves over 380,000 accounts, gives residential and commercial electricity consumers in San Francisco a choice of having their electricity supplied from clean renewable sour ces, such as solar, wind, and geothermal, at competitive rates . CleanPowerSF offers three products : the default “Green” product comprised of at least 50% RPS -eligible renewable energy; the “SuperGreen” product comprised of 100% RPS-eligible renewable energy; and the “SuperGreen Saver” product comprised of 100% RPS -eligible renewable energy in which eligible low -income customers receive a 20% bill discount. As required by State law, CleanPowerSF is an opt-out program and customers can choose to use CleanPowerSF or stay with PG&E’s existing generation service. Since the SFPUC began serving customers through CleanPowerSF in 2016, the program has maintained an approximately 96% participation rate, or an approximately 4% opt -out rate.

CleanPowerSF is a “Separate System” under the Indenture. CleanPowerSF cannot provide service to Power Enterprise customers; under State law, CCAs cannot operate within the service areas of local publicly owned electric utilities.

Power Enterprise Service
The Power Enterprise is responsible for the marketing, sale, transmission, and delivery of all the clean energy products produc ed by the Hetch Hetchy Project and other power produced by the SFPUC. The Power Enterprise balances that supply with purchases or sales to meet customer demand. The Power Enterprise distributes, meters, provides outage response and call center services and prepares the electric bills for its customers, comprised of City offices, facilities and their tenants, ranging from neighborhood police stations and fire houses, the Ferry Building, and City Hall, to SFO, Zuckerberg San Francisco General Hospital and T rauma Center, wastewater pumping and treatment facilities, the Regional Water System facilities, and the SFMTA. The Power Enterprise is also the full- service electricity provider to new developments like The Shipyard, The Bristol, and the Salesforce Transit Center. The Power Enterprise also provides gas and electric services to former Naval Station Treasure Island, by agreement with TIDA. See “– Power Enterprise Customers.” The Power Enterprise operates and maintains many miles of distribution system to provide reliable electric service to its customers.

The Power Enterprise provides the full complement of electricity services to its customers, which includes implementing energy efficiency improvements and on- site renewable power generation , and operatin g programs to encourage customer actions like reducing usage on high demand days to help with system reliability, and rebates for customer investment in clean technology. The Power Enterprise has developed and owns 3.525 MW of rooftop solar projects. The Power Enterprise has also developed certain in -City solar generation and methane gas -fired co- generation facilities. See “– Power Supply Resources.” The Power Enterprise owns, operates, manages and maintains approximately half of all streetlights and related circuitry throughout San Francisco.

The Power Enterprise’s operations and planning are guided by several policy objectives, including:
• Ensuring compliance with the Raker Act;
• Preserving the ability to operate, maintain, repair and improve SFPUC -owned facilities and providing safe and reliable electric service;
• Maximizing the value received from Hetch Hetchy Project electricity supply; and • Continuing to support other valuable City and community goals, such as reducing the City’s carbon footprint, increasing the reliability of the City’s electricity supply, and encouraging conservation and sustainable technologies.

Power Supply Resources
The Power Enterprise meets its customers’ electricity requirements with a combination of (1 ) generation from the SFPUC -owned Hetch Hetchy Project, (2 ) generation at renewable projects in San Francisco owned by the Power Enterprise and (3) market purchases. See “THE HETCH HETCHY PROJECT.”

58 The Power Enterpris e portfolio is comprised of approximately 416.6 MW of renewable electricity generating capacity serving approximately 150 MW of retail load.

TABLE 7

POWER GENERATION RESOURCES
Hetch Hetchy Project Large Hydro (96% of Total)
Powerhouse Capacity (MW) Units
Holm 170 2
Kirkwood 125 3
Moccasin 110 2
Total 405 7

Other Renewable (4% of Total)
Source Capacity (MW)
Solar (local) 8.5
Biogas (local) 3.1(1)
Total 11.6
_______________
(1) A portion of the current biogas generation is expected to be taken offline in connection with the P3 Biogas Utilization Project. See “– Solar, Biogas, Wind” below.

Source: SFPUC
Solar, Biogas, Wind
In addition to the generation resources of the Hetch Hetchy Project, the Power Enterprise has developed, owns, and maintains 3.525 MW of rooftop solar projects on property in San Francisco. Solar generation capacity is distributed among the 28 municipal solar installations listed in the table below.

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59 TABLE 8

SOLAR GENERATION RESOURCES
Project Date Online Location Output

1. Moscone Convention Center Mar. 2004 747 Howard St. 676 kW

2. Southeast Wastewater Treatment Plant Oct. 2005 750 Phelps St. 255 kW

3. Maxine Hall Neighborhood Medical Center Dec. 2007 1301 Pierce St. 32 kW

4. North Point Wet-Weather Facility Dec. 2007 111 Bay St. 241 kW

5. City Distribution Division Dec. 2007 1990 Newcomb Ave. 134 kW

6. Chinatown Public Library Jan. 2008 1135 Powell St. 10 kW

7. San Francisco International Airport Mar. 2008 Terminal 3 456 kW

8. MUNI Maintenance Yard Oct. 2011 1095 Indiana St. 106 kW

9. Chinatown Public Health Center Nov. 2011 1490 Mason St. 24.5 kW

10. Tesla Water Treatment Facility Mar. 2012 Tracy, CA 32 kW

11. SFPUC Headquarters Jun. 2012 525 Golden Gate Ave. 164 kW

12. Alvarado Elementary School Nov. 2012 625 Douglass St. 50 kW

13. MUNI Ways and Structures Sep. 2013 700 Pennsylvania Ave. 101 kW

14. Louise M. Davies Symphony Hall Mar. 2014 201 Van Ness Ave. 182 kW

15. North Beach Library Jul. 2014 850 Columbus Ave. 11.7 kW

16. Thurgood Marshall High School Jun. 2015 45 Conkling St. 87.3 kW

17. SF City Hall Jul. 2015 1 Carlton B Goodlett St 82 kW

18. Cesar Chavez School Mar. 2016 825 Shotwell St 53.7 kW

19. Downtown High School Aug. 2016 693 Vermont St. 47 kW

20. Starr King Elementary School Aug. 2019 1215 Carolina St. 32 kW

21. Burton High School Dec. 2019 400 Mansell St. 141 kW

22. South Van Ness Ave. Oct. 2020 49 South Van Ness Ave. 68 kW

23. SFPD Academy Dec. 2020 350 Amber Drive 156 kW

24. Visitacion Valley Middle School Aug. 2021 1971 Visitacion Ave 98 kW

25. Opera House Solar Jan. 2022 301 Van Ness Ave. 90 kW

26. Southeast Health Center Dec. 2022 2403 Keith St. 72 kW

27. Marina Middle School April 2023 3500 Fillmore St. 52 kW

28. Alameda Creek Watershed Center July 2023 Sunol, CA 71 kW _______________
Source: SFPUC
In addition, the Power Enterprise partnered with Duke Energy, a private solar developer, to build a large - scale, local solar facility on the SFPUC’s Sunset Reservoir. The facility achieved commercial operation in November 2010. The Power Enterprise has ent ered into a long-term power purchase agreement for the output of this 5 MW Sunset Solar Generating Project. See “OBLIGATIONS PAYABLE FROM REVENUES – Power Purchase Agreements” and “– Power Purchases.”
The Power Enterprise expects to install additional solar assets as part of its solar portfolio. Generally, the Power Enterprise aims to install two -to-three new solar assets with 150 -300 kW of output every Fiscal Year, subject to its ability to identify suitable rooftop space in a dense urban environment and b uildings that can structurally support a roofing system that can accommodate a new solar electric system.

The SFPUC also operates two biogas generation facilities, located at the Wastewater Enterprise’s Southeast and Oceanside Wastewater Treatment Plants, with a combined capacity of approximately 3.1 MW or approximately 1% of the Power Enterprise’s aggregate generation capacity. Such facilities generate clean, renewable energy from the gas byproducts of the wastewater decomposition process . Currently, the biogas from the digesters at the Southeast Treatment Plant is used to produce heat and power to support a portion of the plant operation. The Wastewater Enterprise is currently pursuing a P3 Biogas Utilization Project intended to develop new facilities to treat and upgrade biogas from Southeast Treatment Plant digesters to natural gas quality and sell the biogas and related energy credits. Such sales would not be undertaken by the Power Enterprise or result in additional Power Enterprise Revenues. As a result of this change in end use of the biogas, the Wastewater Enterprise will require

60 additional power and natural gas to replace that previously provided by the existing digester biogas, and to support a new Southeast Plant Biosolids Digester Facilities which is targeted for substantial completion in late 2027.

Power Purchases
The Power Enterprise supplements its resource portfolio with long- term and short-term power purchases to meet retail customer demand. The SFPUC has entered into several long -term power purchase agreements to help meet its electricity requirements:
• Western Area Power Administration – The SFPUC has entered into a long-term power agreement with the Western Area Power Administration (“ WAPA”) wherein WAPA provides supplemental power and portfolio management services for customer needs on Treasure Island and Yerba Buena Island (“ TI/YBI”). Through the agreement, WAPA provides full load service and scheduling coordinator services for TI/YBI. The contract allocates a percentage of WAPA’s base resources and supplemental electricity to the SFPUC to meet the existing needs of TI/YBI. Additionally, the WAPA agreement provides for transmission access on the Central Valley Project Transmission System for such allocation. The contract expires on December 31, 2054. • Sunset Reservoir Photovoltaic –The SFPUC has entered into an agreement with Duke Energy to finance, construct, own, operate and maintain a 5 MW solar photovoltaic generating plant on the rooftop of the SFPUC -owned North Storage Basin Res ervoir and certain adjacent land on the Sunset Reservoir property and to sell all electricity generated by such project to the SFPUC though a 25-year power purchase agreement that expires in November 2035. The power purchase agreement provides that the SFPUC will purchase all electricity produced by the Sunset Solar Generating Project at specified contract prices. The contract provides an option for the SFPUC to buy the solar facility at a predetermined price on or after 7 or 15 full years fro m the actual commercial operation date, which occurred in November 2010.

When electricity from its owned generation resources and long- term purchased power are not sufficient to meet electricity demand, the Power Enterprise supplements its resources with m edium- and short -term power purchases through month- ahead, day -ahead and spot purchases on the California Independent System Operator (“CAISO”) market. All market purchases are subject to established risk management practices and guidelines, including trading limits and counterparty credit requirements.

Wholesale Electricity Sales
The Raker Act requires the City to sell electricity from the Hetch Hetchy Project first to meet the City’s own pumping and municipal needs, then, as available, to meet the pumping and municipal needs of the Districts, and lastly, as available, the City may sell excess electricity for commercial purposes. The Raker Act does not limit the type of commercial end-use customer that SFPUC may supply; electricity may be sold to any retail/commercial end - use customer. However, such electricity may not be sold to a private corporation or individual for resale. E xcess Hetch Hetchy Project electricity has generally been sold to other public utilities , the CAISO, and CCAs.

In 1988, the SFPUC entered into a long -term power sales agreement with the Districts. The SFPUC subsequently amended the terms of the agreement with each of the Districts. The agreement with MID was renegotiated in 2008 to remove the Power Enterprise’s obligation to provide firm power to MID and to modify MID’s rights to excess electricity from the Hetch Hetchy Project by requiring MID to pay reasonable prices for such electricity when available . The SFPUC’s agreement with MID expired on June 30, 2015, and was subs equently extended through December 31, 2017. In 2005, the SFPUC amended the terms of the agreement with TID . The amended agreement between the SFPUC and TID terminates the Power Enterprise’s obligation to provide TID firm power at below market costs. The SFPUC’s agreement with TID also expired on June 30, 2015, and was subsequently extended through December 31, 2017. Although the agreements with MID and TID have expired, they have not been terminated. See “FINANCIAL OPERATIONS – Rate-Setting Process; R ates– Contractual Rate - Setting Actions.” The SFPUC will continue to comply with the Raker Act by making hydroelectricity generated by the Hetch Hetchy Project available at cost to MID and TID for agricultural pumping and municipal loads after the

61 expiration of the power sales agreement, as electricity is available. See “CERTAIN RISK FACTORS – Raker Act Requirements.” In recent years, neither MID nor TID have purchased hydroelectricity generated by the Hetch Hetchy Project. In the event the Districts renew their interest in such purchases, the SFPUC will prepare a rate, and provide electricity as it is available, consistent with Raker Act requirements.

The SFPUC previously entered into a long- term agreement with the Riverbank Local Redevelopment Authority (the “Riverbank LRA”) to provide firm power to the Riverbank LRA to serve electric load at the former Riverbank Army Ammunition Plant (the “ RAAP”). The agreement expired in 1991; however, the SFPUC continued to provide firm service under the same terms and conditions . The Riverbank LRA has since mostly converted the RAAP to civilian and commercial uses, and the site is now known as the Riverbank Industrial Complex (the “ RIC”). In 2019, the Riverbank LRA and the SFPUC agreed to a short -term term sheet speci fying new rates and terms of service. The SFPUC is currently providing service to the Riverbank LRA for the RIC under a revised term sheet specifying, among other things, rates and annual rate increases through June 2025. Total electric sales to the Rive rbank LRA in Fiscal Years 2019- 20 and 2020- 21 were approximately 5,567 MWh and 6,065 MWh respectively. This was expected to more than double with the addition of a new tenant to the RIC in mid-2021. Total electric sales to the RIC for Fiscal Years 2021-22 and 2022-23 were approximately 19,000 MWh, and 21,265 MWh, respectively. See “ – Power Enterprise Customers – Wholesale Customers.” Load and Electricity Supply Resource Management; Wholesale Electricity Trading The Power Enterprise manages Hetch Hetchy Project generation with market power purchases as needed to meet retail load in real time and by season to account for the variability of available hydroelectric generation. As a net-long generator, variation in annual generation is covered by fund balances which are replenished in normal - and high-precipitation years. Seasonal variability in hydroelectric generation is addressed through seasonal market power sales and purchases. In the second half of the calendar year, the Power Enterprise has his torically purchased wholesale electricity to meet, on average, approximately 15% of its needs. During dry years, when less Hetch Hetchy Project generation is available, the Power Enterprise’s market exposure increases, historically by an additional 5% on average of its retail needs. See “THE HETCH HETCHY PROJECT – Variability of Hydroelectric Generation.”
The following chart shows the last four years of historical Hetch Hetchy Project generation and Power Enterprise customer demand on an annual basis.

_______________
Source: SFPUC

62 The SFPUC has adopted an Energy Trading Risk Management Policy applicable to the wholesale purchases and sales of electricity by the SFPUC to balance loads and resources in the near -term. The policy sets parameters for trades that include guidelines for load forecasting, counterparty eligibility, transaction authorizations, documentation and reporting requirements, and other transaction limitations.

Transmission and Distribution
Since at least 1945, the SFPUC has purchased transmission and distribution services from PG&E through a FERC-approved wholesale agreement to transmit and deliver electricity to its City customers. The SFPUC currently purchases transmission service from PG&E under the CAISO tariff and distribution servi ce under PG&E’s Tariff on file with the FERC . Although the SFPUC owns and operates transmission and distribution facilities within and outside of San Francisco, it lacks a comprehensive distribution system to serve its customers. The SFPUC uses the Tariff to serve almost all of its customers in San Francisco – largely City agencies and related public entities, City properties and tenants on those properties, and entities providing services on behalf of or in coordination with the City. In addition, the S FPUC uses the Tariff to serve other types of customers including the Salesforce Transit Center and the new development, The Shipyard. The SFPUC also serves or will serve other customers, including the developments at Pier 70 and Mission Rock, without using the Tariff.

See “DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION – Federal Law and Regulation.”
Current transmission and distribution rates are pursuant to the FERC -approved tariffed rates for transmission service through the CAISO Open- Access Transmission Tariff and distribution service through PG&E’s Tariff. The Power Enterprise’s adopted two -year budget through Fiscal Year 2021- 22, and all financial projections, include the anticipated cost increases . The cost estimate is $71.3 million for Fis cal Year 2023 -24 and projected to increase on average 7.9% per year from Fiscal Year 2024-25 through Fiscal Year 2032-33.

SFPUC-owned Transmission Service
The SFPUC owns and maintains both 115 kV and 230 kV transmission lines extending from the generation units of the Hetch Hetchy Project. See “THE HETCH HETCHY PROJECT.” These transmission lines connect with the CAISO system and to two other balancing authorities : (i) the Balancing Authority of Northern C alifornia, which covers MID, and (ii ) TID, which operates as its own balancing authority . See “DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION – The Power Enterprise’s Relationship to the CAISO.” The SFPUC also provides transmission- level service t o RIC via a tap from the SFPUC’s 115 kV transmission system located just north of the main RIC site. The SFPUC service to SFO is also at transmission level via two SFPUC substations connected to PG&E- owned transmission lines. In addition, the Harry Tracy P lant and Crystal Springs Pump Station receive SFPUC transmission level service connected through switchgear to PG&E - owned transmission lines. All of these customers are located outside the geographic boundaries of San Francisco.

In-City Distribution
PG&E owns and operates most of the electric distribution infrastructure within San Francisco and, except for Trans Bay Cable, PG&E also owns all of the high -voltage transmission lines entering San Francisco. The Power Enterprise serves customers through City- owned distribution networks at large City -owned properties (for example, properties operated by the Port, SFMTA, and the SFPUC’s water treatment and wastewater facilities). The Power Enterprise has completed the installation of additional distribution facilities to serve new retail customers at The Shipyard (Phase 1 of the Hunters Point redevelopment project), the early phases of the Treasure Island and Yerba Buena Island redevelopment project, and at the Salesforce Transit Center. The SFPUC distribution fa cilities (lines and switchgear) directly interconnect to PG&E’s distribution network, but they are not adequate to provide service to all SFPUC customers.

Through an agreement with TIDA, the Power Enterprise also maintains the existing electric distributio n system at the former Naval Station Treasure Island, on behalf of TIDA . The existing system on the property was

63 installed and owned by the United States Navy and was transferred to TIDA pursuant to a memorandum of agreement between TIDA and the Navy. In an agreement with the Navy, Caltrans and TIDA, Caltrans installed two electric submarine cables from Oakland to Treasure Island. In an agreement with TIDA, the SFPUC paid Caltrans for the installation of the cables subject to reimbursement and has the ri ght to take title to the submarine electric cables which provide electricity to Treasure Island from the East Bay . TIDA has entered into a development agreement for the redevelopment of the property, which includes construction of new utility infrastructure and will transfer to the SFPUC the new utility infrastructure after the facilities are inspected and accepted by the City through the street dedication process with the Board of Supervisors. Until the assets are transferred to the SFPUC through such dedication process, the SFPUC may serve permanent customers using the new infrastructure and facilities through a license agreement between the developer and the SFPUC. Under a license agreement, the developer will continue to own the substructures and the S FPUC will own and maintain the electrical facilities within the substructures. The SFPUC is currently serving new customer accounts utilizing the license method.

Operational Control
The Power Enterprise plans for and operates within resource adequacy, RPS, and other retail regulatory requirements for peak demand of 160 MW and an annual electricity requirement of 1,00 0,000 MWh of retail load.

The Power Enterprise provides scheduling services on a non- stop basis. Electricity supplies are firmed and shaped to retail loads with market purchases and sales (at hourly, daily, monthly and longer term periods). Scheduling coordinator services and certain federal reliability requirements are independent of sales volumes, strategy and retail/wholesale mix. See “DEV ELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION – Federal Law and Regulation.” Power Enterprise staff handles trading, scheduling, settlements, risk management, and long-term resource planning with capacity largely independent of sales volumes, strate gy, and retail/wholesale mix.

In Fiscal Years 2020 -21 and 2021- 22, due in part to the COVID -19 pandemic, retail load was approximately 821,391 MWh and 890,229 MWh, respectively. Peak demand in Fiscal Year 2021- 22 was approximately 131 MW. Retail load for F iscal Year 2022-23 is forecasted to be 908,511 MWh with a peak demand of approximately 135 MW.

Power Enterprise Customers
The P
ower Enterprise’s retail service territory provides it with a monopoly franchise similar to those enjoyed by other public utilities, but with atypical geographic boundaries. Except for a few large customers, most of Power Enterprise’s retail customers are directly interconnected to PG&E’s distribution network. See “– Transmission and Distribution – In-City Distribution.” Most Power Enterprise retail customers are entities affiliated with the City or are located on City property . Many City departments currently served by the Power Enterprise have been served by the City and/or the SFPUC (or its predecessor) for decades, in many cases since 1923. The ability of such customers to switch to service provided by another utility in the area is limited and generally would not result in cost savings or service improvements for such customers. Specifically, PG&E’s ability to serve customers in San Francisco is constrained by its non- exclusive franchise agreement with the City and the Power Enterprise’s competitive cost-of-service, which is currently below PG&E’s cost-of-service.

The following table shows the total number of electr ic service accounts maintained by the Power Enterprise from Fiscal Years 2018-19 to 2022-23 by customer category.

64 TABLE 9

POWER ENTERPRISE ELECTRIC SERVICE ACCOUNTS

BY CUSTOMER CATEGORY
FISCAL YEARS 2018-19 TO 2022-23
2018-19 2019-20 2020-21 2021-22 2022-23
Retail and Other(1)(2) 2,209 2,526 3,858 3,551 4,688
City Agencies 1,499 1,512 1,489 1,522 1,528
Moccasin/Riverbank LRA 37 37 36 35 38
Modesto/Turlock Irrigation Districts 2 2 2 2 2
Total Accounts 3,747 4,077 5,385 5,110 6,256
_______________
(1) Other customers include commercial and residential retail, and quasi -municipal customers such as Moscone tenants, Exploratorium, Yerba Buena Gardens and SFUSD.
(2) Decrease in accounts from Fiscal Year 2020 -21 to 2021-22 due primarily to corrections to the customer type made during a transition to the Power Enterprise’s new billing system. Increase in accounts from Fiscal Year 2021 -22 to 2022-23 due primarily to new accounts from affordable housing units.

Source: SFPUC
The following table presents the Power Enterprise’s major customers by average total amount of electricity purchased during Fiscal Years 2018-19 to 2022-23.

(Remainder of Page Intentionally Left Blank)

65 TABLE 10

ANNUAL ELECTRICITY SALES TO MAJOR CUSTOMERS
FISCAL YEARS 2018-19 TO 2022-23
Annual Electricity Sales (MWh)
2018-19 2019-20 2020-21 2021-22 2022-23
Municipal Customers(1)
San Francisco International Airport
(incl. tenants)
311,460 300,299 267,514 278,622 279,175
Municipal Transportation Agency 105,990 93,852 68,289 92,728 95,819 SFPUC - Wastewater Enterprise 65,699 61,390 59,120 56,417 76,710 Administrative Services Agency 89,408 84,438 74,966 67,962 68,742 Department of Public Health 65,570 66,439 64,491 64,380 65,187 SFPUC - Water Enterprise 54,363 50,737 47,808 49,155 44,419 San Francisco Unified School District 30,608 27,933 21,723 30,955 30,947 Recreation and Parks Department 15,358 14,514 12,535 14,175 14,612 San Francisco Housing Authority 7,496 6,337 5,961 5,890 5,549 City Owned Parking Garages 10,210 7,797 6,479 6,926 7,356 Port of San Francisco(2) 11,898 10,073 7,288 14,199 15,645

Retail
Treasure Island(3) 12,416 9,786 9,713 10,381 11,958
Hunters Point Shipyard Redevelopment
– Phase 1 Development(4)
3,142 2,909 3,116 3,303 3,389
Salesforce Transit Center(4) 4,257 6,373 6,218 6,400 7,341

Other Municipal and Retail(5) 217,054 203,399 191,835 195,306 211,240

Wholesale
Turlock Irrigation District -- -- -- -- --
Modesto Irrigation District -- -- -- -- --
Riverbank LRA 6,594 5,641 6,065 19,011 21,163
Western Systems Power Pool 14,124 91,872 -- -- --

Total(6) 1,025,646 1,043,792 853,121 915,810 959,252
_______________
(1) Includes some quasi-municipal customers, such as San Francisco Unified School District. (2) Excludes tenants.
(3) Customers are primarily tenants of TIDA and federal agencies, but this category also includes a small but growing number of Hetch Hetchy redevelopment loads.
(4) Includes construction and post-construction/occupancy. (5) Includes other City departments, Port tenants, Moccasin and miscellaneous residential and commercial accounts. (6) Totals may not add due to rounding.

Source: SFPUC
Significant load decreases across many customers began in April 2020 following the issuance of stay- at- home orders relating to COVID -19. Loads were significantly depressed in Fiscal Year 2020- 21, although some loads showed signs of recovery. Impacts ranged from mild/none (e.g., Department of Public Health), to moderate (e.g., SFO), to severe (e.g., SFMTA, convention centers (convention center electricity sales included within Administrative Services Agency and Other Municipal and Retail)). Load recovery in Fiscal Years 2021- 22 and 2022-23 has been uneven as well, with certain customers showing a rapid rate of recovery, for example, the Port’s shoreside power for cruise ships and SFUSD, and others such as SFO still significantly lower compared to the pre- COVID-19 period.

66 Municipal Customers
• San Fr ancisco Public Utilities Commission: The Power Enterprise supplies electricity to the SFPUC Water Enterprise and Wastewater Enterprise. See “THE PUBLIC UTILITIES COMMISSION – Organization, Purposes and Powers.”
• San Fran cisco International Airport: SFO is the principal commercial service airport for the San Francisco Bay Area. According to data for calendar year 2019 from Airports Council International (“ACI ”), SFO ranked seventh in the United States in terms of passengers and 16th in the United States in terms of air cargo tonnage. In 2021, SFO ranked 17th in the United States in terms of both passengers and air cargo tonnage, according to ACI. According t o United States Department of Transportation statistics, SFO is also a major origin and destination point (14 th in the United States in fiscal year 2021- 22). Passenger enplanements and deplanements at SFO grew from approximately 39.7 million in fiscal yea r 2010- 11 to approximately 57.4 million in fiscal year 2018-19, before dropping to 40.5 million in fiscal year 2019 -20 and 13.7 million in fiscal year 2020 -21 and recovering to 34.8 million in fiscal year 2021-22.
• San Fran cisco Municipal Transportation Age ncy: The SFMTA is an enterprise department of the City responsible for the management of all ground transportation in San Francisco. The SFMTA has oversight over the Municipal Railway (“Muni”) public transit, as well as bicycling, paratransit, parking, traffic, walking, and taxis.

Muni is one of America’s oldest public transit agencies, the largest in the Bay Area, and eighth largest system in the United States. During the five -year period from fiscal year 2018 through fiscal year 2022, annual Muni ridership varied between approximately 62 million and 225 million boardings. • San Fran
cisco Unified School District: The San Francisco Unified School District is the sixth largest school district in California . SFUSD operates 66 elementary schools serving transitional kindergarten through grade five, six alternative configured schools serving transitional kindergarten through grade eight, 13 middle schools serving grades six through eight, 14 high schools serving grades nine through twelve, 13 early education schools, three continuation/alternative schools and six county schools. For fiscal year 2022-23, SFUSD had enrollment of approximately 50,013 students (not including county schools). • Other City Departments: In addition to the departments described above, the Pow er E nterprise serves other City departments, including but not limited to City Hall, the Port, the San Francisco Public Library, the San Francisco Police Department, the San Francisco Fire Department, and serves the San Francisco Housing Authority and the Community College District of San Francisco. See “THE CITY AND COUNTY OF SAN FRANCISCO.”
• City Tenants: The Power Enterprise serves customers who are tenants on City property, including at SFO and the Port.

Wholesale Customers
• The Districts: TID and MID, both established in 1887, are publicly owned irrigation districts in California that also provide retail electricity directly to homes, farms and businesses . The Districts were both organized under the Wright Act, operate under the provisions of the California Water Code as special districts . TID provides electric service within its 662 square mile service area to over 102,900 residential, commercial, industrial and other customers, and supplies water for irrigation use within its boundaries . MID provides electric service within its 160 square mile service area to over 131,600 residential, commercial, industrial and other customers, supplies water for irrigation use in a portion of Stanislaus County and owns and operates a wate r treatment plant which supplies treated domestic water on a wholesale basis to the City of Modesto. Although the Power Enterprise has long- term power sales agreements with the Districts that expired in 2017, the agreements have not been terminated. See “– Wholesale Electricity Sales.”
• Riverbank Local Red evelopment Authority: The Riverbank LRA has converted the former RAAP to civilian and commercial uses. The former RAAP, now referred to as the RIC, is located at the southeastern edge of the City of Riv erbank, five miles north of the City of Modesto and consists of approximately 673,00 square feet

67 of buildings located on 173 acres. The SFPUC provides electric service to the Riverbank LRA for the RIC , and the Riverbank LRA and the SFPUC are developing agreements to continue SFPUC service as RIC’s electric load is expanding, exceeding 50 MW in the next few years. See “– Wholesale Electricity Sales.” • Western Systems Power Pool : T he Western Systems Power Pool (“ WSPP”) is a group of energy buyers and sellers who maintain an agreement that provides standard terms and conditions for power transactions to facilitate trading opportunities and manage power delivery and price risk. The current WSPP Agreement, effective June 28, 2020, is the most commonly used standardized power sales contract in the electric industry. It is regularly modified and approved by FERC and used by jurisdictional and non- jurisdictional entities. WSPP parties regularly enter agreements using some or all of the WSPP standard terms and adding additional terms as required for particular transactions. Many public entities are members of the WSPP, which allows the Power Enterprise to efficiently sell excess Hetch Hetchy Project electricity to Raker Act- eligible entities, such as the Districts and the California CCAs.

The Power Enterprise may purchase or sell energy with different market entities through the WSPP and d
irectly with the CAISO . During periods in which the Hetch Hetchy Project generates el ectricity in excess of the amount necessary to satisfy the Power Enterprise’s retail and wholesale obligations, the Power Enterprise may sell such excess to counterparties eligible under the provisions of the Raker Act. The SFPUC performs verification processes regularly to update the qualified counterparties in order to comply with Raker Act. During Fiscal Years 2020-21 and 2021- 22, the Power Enterprise purchased $4.1 million and $_._ million of power, respectively, and sales of excess electricity, after meeting the Power Enterprise’s other obligations, were approximately 190,000 MWh, or approximately $826,000 and ____ MWh, or approximately $_____, respectively.

Commercial Customers
• Hunters Point Shipyard Phase 1:

A redevelopment project currently under construction, the Hunters Point Shipyard Phase 1 is entitled for 1,400 residential units. SFPUC has constructed facilities to serve this development, and will own, operate and maintain the distribution system as public utility infrastructure is installed and dedicated to the City.
• Treasure Island : U nde
r Navy control since 1941, the former Naval Station Treasure Island was decommissioned in the 1990s. The property includes both Treasure Island and Yerba Buena Island, totaling approximately 575 acres with access from Highway 80 off the Bay Bridge. In 1997, the City created a non- profit public benefit corporation, TIDA, to act as a single entity focused on reuse and conversion of former Naval Station Treasure Island. Since that time, under agreements with the Navy, TIDA has assumed maintenance and operation of the property, excluding portions that were transferred to the United States Coast Guard, the United States Department of Labor, or retained by the Navy. TIDA has established both residential and comm ercial tenancies in existing facilities, with a current resident population over 2,500. TIDA has entered into a memorandum of agreement with the Navy providing for transfer of the property, on a phased basis, subject to Navy remediation of hazardous materials. The SFPUC operates and maintains the existing water, wastewater, gas, and power distribution systems on Treasure Island pursuant to agreement with TIDA, subject to receiving full compensation from TIDA for those services. TIDA sets rates, fees and charges for its tenants and the federal agencies under agreement with the Navy. TIDA and the City have also entered into agreements with the Treasure Island Community Developers, a for - profit development company, to redevelop the property, with entitlements for 8,000 residential units, and commercial development. As of 2023, __ new residential units have been constructed and are receiving power from the Power Enterprise. Unlike the legacy TIDA facilities which the SFPUC serves under agreement with TIDA, new redevelopment customers are served by SFPUC-owned assets and charged SFPUC standard retail rates. • Salesforce Transit Center : Th
e Transbay Joint Powers Authority (“ TJPA”) is constructing a new multi-modal regional transportation center, a downtown rail extension, bus ramps, bus storage facility, and related facilities (collectively referred to as the “ Salesforce Transit Center”) . Phase 1, which included the creation of a new, 1,000,000-square-foot transit center, was completed in 2018. TJPA is c urrently starting its design for Phase 2 of the Salesforce Transit Center program, which includes construction of the Downtown Rail Extension, including a new Fourth and Townsend Street Caltrain station; completion of the Salesforce Transit Center’s train station, including a pedestrian connection to BART and Muni; and a new intercity bus facility. The TJPA and the SFPUC

68 entered into an electric service agreement for the Power Enterprise to be the primary provider of electric service to the Salesforce Transit Center, beginning January 2014 with no defined expiration date. The SFPUC anticipates that future train service into the Salesforce Transit Center will be electrified, which may result in increased load. See “FUTURE POWER SUPPLY AND DEMAND” and “CERTAIN RISK FACTORS – Uncertainties of Forecasting Future Load Growth.”
Under the City’s Administrative Code, all City projects, including projects managed by the successor to the San Francisco Redevelopment Agency, the Office of Community Investment and Infrastructure, must work with SFPUC to study the feasibility of the SFPUC providing power to the project. For example, in 2007 the Power Enterprise, working with the San Francisco Redevelopment Agency, performed a financial analysis to assess the feasibility of the Power Enterprise being the electricity provider to the new Hunters Point redevelopment project.

The results of the analysis guided the City’s decision that the Power Enterprise would be the power provider for Phase 1 of the development. The Power Enterprise expects to be the power provider for other phases of the Hunters Point development and is working with developers and other City agencies as later phases are developed. Similar processes resulted in the Power Enterprise providing power to the Pier 70 Development and the Mission Rock Development.

Recent Factors Impacting Power Revenues
Because most Power Enterprise customers are municipal departments, the Power Enterprise’s revenues are somewhat insulated from recent economic trends which have reduced the residential and commercial population in San Francisco. For commercial and residential retail customers, as well as municipal functions which are exposed to such economic trends (such as the SFMTA and Moscone Convention Center), several factors have contributed to a decline in their electricity demand in recent years, including, but not limited to, certain developments in the local San Francisco economy. For example, there has been a general decline in San Francisco’s population in recent years due to, among other factors, business closures, worker migration out of San Francisco because of permissive remote work policies, a general decline in tourism, and unemployment concentrated r ecently in the tech -heavy information and professional and business services sectors, which can be attributable in some part to the COVID -19 pandemic. However, other customers, including the San Francisco Unified School District and the Port, have recovered to or exceeded their pre-COVID-19 usage levels as of 2022.

See also “THE CITY AND COUNTY OF SAN FRANCISCO – City Financial Challenges,” “ – Power Enterprise Customers,” “FUTURE POWER SUPPLY AND DEMAND – Projected Power Demand and Adequacy of Power Supply” and “CERTAIN RISK FACTORS – Customer Concentration.” Security and Reliability
The security and reliability of the nation’s electrical grid is regulated by FERC through agreement with the NERC. The SFPUC is a NERC- registered Generator Owner, Generator Op erator, Transmission Owner, Transmission Operator, Purchasing Selling Entity and Transmission Planner, and as such is subject to NERC’s mandatory and enforceable reliability standards (“ NERC Reliability Standards”). The SFPUC ensures the secure and reliable operation of its electric system, and compliance with NERC Reliability Standards, by having systems, processes, and trained staff in place to avoid, and if necessary, mitigate operating emergencies. These systems include a SCADA system providing 24/7 monitoring and control functions to NERC -certified system operators, and data sharing functions with interconnected transmission systems to enhance situational awareness and interconnection-wide preparedness. The secure and reliable operation of the Hetch Hetchy Project system is maintained by following a well -defined set of mandatory rules established by the NERC Reliability Standards, which the SFPUC implements through its own operating procedures, in coordination with other interconnected systems. The SFPUC’s procedures provide its trained personnel with pre -planned processes for event reporting, back-up control center operations, system restoral, emergency operations, and contingency analysis and planning that can be executed in coordination with other entities. The security and reliability of the Hetch Hetchy Project, and compliance with NERC Reliability Standards, is achieved through this application of tools, processes, and trained staff.

69 FUTURE POWER SUPPLY AND DEMAND
Projected Power Demand and Adequacy of Power Supply
The Power Enterprise develops five -year forecasts of growth in electricity sales to its customers based on a combination of known new construction projects, expansion of existing service and general projected load growth .

Included in these forecasts are the Power Enterprise’s adopted budget for Fiscal Years 2023- 24, the 2024 Financial Plan and current budget and planning assumptions for the remaining forecast period . The Power Enterprise anticipates electricity sales to current and new customers will increase over the next five years.

TABLE 11

POWER ENTERPRISE

PROJECTED LOAD GROWTH AND POWER SUPPLIES (MWH)
FISCAL YEARS 2023-24 TO 2027-28
2023-24 2024-25 2025-26 2026-27 2027-28
Projected Power Load Sales(1)
Current Customers 923,203 947,100 968,469 985,646 999,894 Redevelopment – New Customers(2) 18,963 53,402 80,067 121,641 139,531 Other – New Customers(3) 8,346 22,688 41,075 43,012 43,154 Total Projected Retail Power Sales 950,512 1,023,190 1,089,611 1,150,300 1,182,579

Riverbank LRA 22,261 22,200 22,200 22,200 22,200
Contract/Market Sales(4) 454,201 434,863 412,737 364,162 352,917 Total Projected Wholesale Power Sales 476,462 457,063 434,937 386,362 375,117

Projected Power Supply
Hetch Hetchy Generation 1,224,103 1,234,616 1,234,616 1,245,987 1,269,995 Sunset Solar 6,607 6,603 6,600 6,597 6,593
Energy Purchases(5) 280,194 300,425 348,709 353,096 352,063 Total Projected Power Supply 1,510,904 1,541,644 1,589,925 1,605,680 1,628,651 _______________
(1) Fiscal Year 2023-24 projections based on adopted budget for Fiscal Year 2023-24. Fiscal Years 2024 -25 through 2027-28 projections based on budget and planning assumptions in 2024 Financial Plan. (2) “ Redevelopment – New customers” includes Hunter’s Point, Salesforce Transit Center, Alice Griffith, Pier 70 Historic Core, Pier 70 Forest City, Mission Rock, Potrero-Hope SF, Sunnydale -Hope SF, UCSF Block 34, and new Treasure/Yerba Buena Island load.
(3) “Other – New Customers” includes City departments and other retail or housing customers that are outside of the redevelopment areas.
(4) Contract/Market Sales are all sales of excess Hetch Hetchy Project generation after meeting retail load requirements. The availability of Hetch Hetchy Project generation depends on hydrological conditions. Contract/Market Sales forecasts are based on Average Annual Hydrological Conditions. See “THE HETCH HETCHY PROJECT – Variability of Hydroelectric Generation.”
(5) Energy Purchases are needed to shape the supply to the demand, resulting in Total Projected Power Supply exceeding Total Projected Retail Power Sales.

Source: SFPUC
The Power Enterprise meets its electricity delivery obligations through a portfolio of demand management and supply-side resources consistent with City policies and best utility practices. The Power Enterprise anticipates addressing any increases in retail electricity sales through a combination of energy efficiency measures, Hetch Hetchy Project generation as available, and supplemental market purchases, each as reflected in the Power Enterprise’s current five-year forecast. See “CERTAIN RISK FACTORS – Forecasting Future Load Growth.”

70 POWER ENTERPRISE CAPITAL PROGRAM
Capital and Financial Planning Process
The SFPUC’s long -term capital and financial planning is performed on an annual rolling 10- year forward looking basis. The SFPUC prepares a 10 -year capital plan for each of its enterprises, as required by the Charter .

The 10- year capital plan serves as the basis for the development of the annual 10 -year financial plan . Proposed long-term capital programs, projects and investments, and related costs are included in the 10- year financial plan .

Consistent with the Charter, updates to the 10 -year capital plan and 10 -year financial plan are generally reviewed at least annually and adopted by the Commission each February. The 10 -year financial plan provides estimated rate impacts of projected capital and operating spending and assures compliance with the SFPUC’s adopted financial policies, including its debt service coverage and fund balance reserve policy requirements.

The 10- year capital plan is not a budget and is not “appropriated” like a budget . The annual capital programs can be revised during the development of the budget and final projects, costs and totals for specific capital improvements to be financed can change . Consequently, even though the annual budgets passed are based on the 10-year capital plan, they may occasionally differ from it.

Financing of Capital Program
On February 14, 2023, the Commission adopted the 10- year capital plan for Fiscal Years 2023 -24 through 2032-33 (the “ 2024 Capital Plan ”), totaling approximately $8.788 billion. Pursuant to the 10- year financial plan for Fiscal Years 2023 -24 through 2032 -33 (the “ 2024 Financial Plan ”), which is based on the 2024 Capital Plan and which was also adopted on February 14, 2023, approximately $1.572 billion has been allocated to Hetch Hetchy Water and Power, with approximately $441.21 million allocated to Hetch Hetchy Water and $1.13 billion allocated to the Power Enterprise over the 10-year period.

The 2024 Capital Plan further projects that revenue funding over such period will account for $196.74 million of project funding and total debt funding will account for $1.38 billion of project funding. Of such debt funding amount, $934.48 million is projected to be allocated to Power Enterprise debt and $441.21 million is projected to be allocated to Water Enterprise debt. See “FORWARD-LOOKING STATEMENTS.” The following table sets forth the projected sources of funds for the first five years of the Power Enterprise’s capital improvement program as set forth in the 2024 Capital Plan. The following table does not include the projected sources of funds allocable to the Water Enterprise.

TABLE 12

POWER ENTERPRISE CAPITAL IMPROVEMENT PROGRAM

FUNDING SOURCES
(1)
FOR FISCAL YEARS ENDED JUNE 30
(IN THOUSANDS)
Appropriations 2024 2025 2026 2027 2028 Total
Power Enterprise Debt(2) $34,877 $137,270 $158,624 $155,084 $116,458 $602,312 Power Enterprise Revenue(3) 7,015 7,811 13,029 20,665 20,665 69,185 Total Sources $41,892 $145,081 $171,653 $175,749 $137,123 $671,497

(1) Amounts are based on anticipated appropriations and are projections from the Power Enterprise 2024 Capital Plan. Actual results may differ materially from these projections. See “FORWARD-LOOKING STATEMENTS.” (2) Consists of Power Enterprise revenue bonds and Commercial Paper Notes. (3) Includes non-operating revenues, such as revenues from the licensing of street poles for installation of distributed antenna system equipment, cap-and-trade auctions, and the sale of low carbon fuel standard credits allocable to the Power Enterprise.

Source: SFPUC

71 2024 Capital Plan Projects
The 2024 Capital Plan consists of projects that are Power Enterprise Projects, Hetch Hetchy Water Infrastructure Projects, Hetch Hetchy Power Infrastructure Projects, and Hetch Hetchy Joint Water and Power Infrastructure Projects, which are further described below. The following descriptions include projected capital spending for these project categories pursuant to the 2024 Capital Plan; however, actual spending may differ from the amounts shown as the SFPUC retains broad authority to prioritize and substitute projects to meet its needs at any time.

Power Enterprise Projects
Streetlights. The 2024 Capital Plan includes approximately $37.2 million for streetlights located in San Francisco. Specifically, funds will be spent for various street lighting improvements, replacement and repairs, including engineering and construction costs.

Renewable Generation. The 2024 Capital Plan includes approximately $10.0 million for renewable generation projects, including the planning, development and implementation of new electricity generation resources to provide clean, local generation.

Transmission/Distribution/Alternative Transmission. The 2024 Capital Plan includes approximately $538.4 million for transmission/distribution projects, including (i) approximately $141.6 million on distribution interface-redevelopment projects, (ii) approximately $146.6 million on the SFO substation improvements, which include upgrading existing substations to meet the airport’s demand growth, and (iii) approximately $105.5 million on the Intervening Facilities project, which includes electrical distribution equipment to connect SFPUC customers to PG&E’s existing distribution system; (iv) $42.7 million for the in-city power asset acquisition analysis.

Energy Efficiency. The 2024 Capital Plan includes approximately $10.0 million for energy efficiency projects, that will be spent on investments to reduce facility operating costs for General Fund and other Power Enterprise customers, improve system functionality and reduce the environmental impact of energy use.

Hetch Hetchy Water Infrastructure Projects
During the 10- year period of the 2024 Capital Plan, the Water Enterprise will invest $185.6 million for improvements on the Hetch Hetchy Project. Funds will be spent on upcountry water projects such as Mountain Tunnel, which has been reclassified as a Water Enterprise- funded project, except for the Flow Control Facility, which is joint- funded (See “– Hetch Hetchy Joint Power/Water Projects” below), San Joaquin Pipeline Valve and Safe Entry project, and continued rehabilitation to the San Joaquin Pipeline to extend the life of the asset. These costs are 100% funded by the Water Enterprise.

Hetch Hetchy Power Infrastructure Projects
The 2024 Capital Plan includes approximately $223.3 million for rehabilitation and upgrades to Hetch Hetchy Project powerhouses, including Moccasin Powerhouse rehabilitation project and upgrades to the bypass systems at Kirkwood and Moccasin powerhouses. This category includes rehabilitation of transmission lines/distribution systems and switchyards/substations.

Hetch Hetchy Joint Power/Water Projects
During the 10-year period of the 2024 Capital Plan, approximately $568.1 million will be related to capital spending for upcountry joint assets, allocable 55% to the Power Enterprise and 45% to the Water Enterprise pursuant to the Water Supply Agreement. See “THE HETCH HETCHY PROJECT – Hetch Hetchy Project Operations – General.” The Power Enterprise’s 55% allocable share of this capital spending totals $312.4 million.

Projects identified include replacements to support the infrastructure required for the operation and maintenance for the Hetch Hetchy Project’s water- and power -related systems, including improvements to dam infrastructure, buildings and facilities improvements and new construction, road improvements, facility security and

72 communication projects. The largest of the joint power/water projects during the 2024 Capital Plan period is spending on dam rehabilitation and improvement projects, totaling $274.9 million.

Environmental Considerations
Projects undertaken by the SFPUC are generally subject to CEQA and certain projects involving the participation of federal agencies, including projects on federal land, are also subject to the NEPA . The San Francisco Planning Department, acting as lead agency under Chapter 31 of the City’s Administrative Code, generally coordinates environmental review of SFPUC projects.

Under CEQA, a project that may have a significant effect on the environment and is to be carried out or approved by a public agency must comply with a comprehensive environmental review process, including the preparation of an Environmental Impact Report (“ EIR”). The EIR reflects not onl y an independent technical analysis of the project’s potential impacts, but also the comments of other agencies with some form of jurisdiction over the project and the comments of interested members of the public. Contents of the EIR include a detailed statement of the project’s significant environmental effects; any such effects that cannot be avoided if the project is implemented; mitigation measures proposed to minimize such effects; alternatives to the proposed project; the relationship between local an d short -term uses and long- term productivity; any significant irreversible environmental changes that would result from the project; the project’s growth- inducing impacts; and a brief statement setting forth the agency’s reasons for determining that certai n effects are not significant and hence do not require discussion in the EIR. Before approving a project, the SFPUC must make findings on whether or how it can mitigate the significant environmental effects of the project. If the project requires mitigation, the SFPUC must adopt a mitigation monitoring plan to determine whether the mitigation is carried out during project implementation.

If the SFPUC determines that the project itself will not have a significant effect on the environment, it may adopt a written statement (called a negative declaration) to that effect and need not prepare an EIR . After deciding to approve or carry out a project, either following the EIR process or after adopting a negative declaration, the SFPUC must file notice of such determination.

Prior to the sale of bonds, the San Francisco Planning Department Environmental Review Officer will issue a “Planning Certificate” required under Proposition E. The Planning Certificate will identify the status of environmental review for eac h capital project to be funded under the proposed bond sale and the type of CEQA document either completed or to be completed for each project . CEQA compliance must be completed for each project prior to project approval or approval to award a construction contract to implement any project to be funded by the proposed bond sale.

Any action or proceeding challenging the SFPUC’s determination must be brought within 30 days following the filing of such notice . Actions have been, and in the future may be, filed against the SFPUC challenging a project’s compliance with CEQA, including the adequacy of the EIR and other environmental documents, for particular projects . If an action challenging the SFPUC’s compliance with CEQA is successful, the particular project could be delayed, revised, suspended or canceled . CEQA also contains a number of exemptions, which the SFPUC uses for its projects when appropriate.

As part of its regular planning and budgetary process, the San Francisco Planning Department gives careful attention to environmental considerations . All projects are evaluated under the SFPUC’s environmental evaluation procedures, developed in compliance with federal and State laws and regulations, and City ordinances and Administrative Code procedures.

Climate Action Plan
In September 2021, the City adopted a set of emissions reduction targets : achieve net-zero greenhouse gas emissions generated by the City by 2040 and reduce emissions associated with consumption of all goods and services in the City ( regardless of where emissions originate) 80% by 2050. In December 2021, Mayor Breed released the City’s Climate Action Plan (the “ Climate Action Plan”) detailing the actions needed to accomplish these targets, developed through a multi -agency and stakeholder process led by the San Francisco Department of Environment (the “Department of Environment”). The Climate Action Plan is a roadmap of goals, strategies and actions to achieve emission reductions across six sectors : energy supply, building operations, transportation and

73 land use, housing, responsible production and consumption, and healthy ecosystems . Key strategies include, but are not limited to, provision of 100% carbon- free energy, decarbonization of buildings, and increases in the public transit, active transportation, and vehicle electrification networks. In addition to reducing emissions to zero over the next 20 years, the Climate Action Plan strives to ensure all San Franciscans have the skills, knowledge, and resources to meet interconnected challenges that lie ahead, including climate change. To do so, the proposed strategies leverage community strengths, advance racial and social equity, and provide critical benefits to the entire community. The Climate Action Plan includes sections on funding and investment, monitoring and reporting. The City also maintains a public -facing reporting mechanism to keep stakeholders and residents informed on progress made against performance metrics laid out in the Climate Action Plan . The Department of Enviro nment contracted with the University of California, Berkeley, Center for Law, Energy & the Environment (the “ CLEE”) to assess options for funding the equitable implementation of the Climate Action Plan. CLEE released its report entitled “Funding San Francisco Climate Action” in November 2022 (the “CLEE Report”).

Pursuant to the Climate Action Plan, energy supply sector goals include achieving 100% renewable electricity by 2025 and 100% renewable energy by 2040, which requires eliminating fossil fuels as a source of power generation. Strategies for achieving such goals include (i ) supplying 100% greenhouse gas -free electricity to residents and businesses; (ii ) investing in local renewable energy and energy resilience projects; (iii ) designing and developing the reliable and flexible grid of the future; (iv) developing workforce capacity to deliver clean energy resources; and (v) planning for the equitable decommissioning of San Francisco’s natural gas system. Actions taken by the Power Enterprise to implement such strategies include the continuation and expansion of programs and rates that provide low -income customers with renewable electricity ; ensuring community and stakeholder engagement in program development and rate -setting; developing onsite solar on City -owned buildings and reservoirs based on emerging opportunities and SFPUC feasibility analysis; encouraging private sector investment in local renewable energy solutions by engaging in public advocacy, educating consumers about their options, and serving as a strategic partner; and championing clean energy installers participating in City -funded incentive programs that engage in workforce development.

FINANCIAL OPERATIONS
General
The SFPUC is a department of the City and, as such, the financial operations of the SFPUC’s three enterprises are included in the Annual Comprehensive Financial Report of the City and shown as enterprise funds .

The City’s Annual Comprehensive Financial Report is not incorporated by reference herein .

The following information is provided with respect to the Power Enterprise only and does not purport to reflect the financial position of the SFPUC or the City as a whole.

Basis of Accounting. The accounts of Hetch Het chy Water and Power are organized based on proprietary fund types and are included as enterprise funds of the City. The activities of the Power Enterprise are accounted for with a separate set of self -balancing accounts that comprise assets, deferred outf lows, liabilities, deferred inflows, net position, revenues and expenses. The Power Enterprise fund accounts 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 (i i) that are required by laws or regulations that the activity’s costs of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

The financial activities of the Power Enterprise are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with generally accepted accounting principles in the United States. 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. Operating revenues are defined as charges to customers and rental income.

The Power Enterprise applies all GASB pronouncements, as well as statements and interpretations of the Financial Accounting Standards Board, Accounting Principles Board Opinions, and Accounting Research Bulletins

74 of the Committee on Accounting Procedures issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements.

City Budget Process. The SFPUC’s operating and capital budget preparation and approval is a part of a City-wide process . The SFPUC is one of several departments that prepare biannual budgets . The Commission reviews and approves the SFPUC’s two-year budget, which is then submitted to the Mayor’s Office for review . The Mayor then incorporates the proposed budget, with amendments, into the City -wide budget that is submitted to the Board of Supervisors for approval . Under the Charter, the Board of Supervisors may increase or decrease any proposed expenditure in the Mayor’s budget so long as the aggregate changes do not cause the expenditures to exceed the total amount of expenditures proposed by the Mayor. The Charter further provides that the Mayor may reduce or reject any expenditure authorized by the Board of Supervisors except appropriations for bond interest, redemption or other fixed charges, subject to reinstatement of any such expenditure by a two thirds vote of the Board of Supervisors.

City Services Auditor . On November 4, 2003, voters in the City adopted Proposition C, an ordinance that established the City Services Auditor (“ CSA”), an audit function within the Office of the City Controller . Pursuant to the provisions of this ordinance, which have been incorporated into the Charter, the CSA has broad oversight authority and responsibilities including, but not limited to, (i ) reporting upon level of effectiveness for City public services, (ii) auditing financial and management performance of City departments and functions, (iii ) ensuring the financial integrity and improving the overall performance and efficiency of City government, and (iv ) maintaining a whistleblower hotline to investigate upon reports of fraud, waste and abuse.

CSA has engaged HKA Global, Inc. and Yano Accountancy Corporation to conduct a three -phase performance audit of select revenue bonds issued by the SFPUC to determine whether revenue bond funds were spent in accordance with the stated purposes and permissible use of such bonds. The first phase included the audit of six series of revenue bonds issued by the SFPUC’s Water Enterprise and Wastewater Enterprise. In February 2022, CSA issued the audit report for the first phase, which concluded that the revenue bond expenditures for such bonds were spent appropriately, and made two recommendations that (i) the SFPUC coordinate with RBOC to determine the most effective method to comprehensively report project expenditures by funding source and uses of revenue bond proceeds, and (ii) the SFPUC comply with its policies regarding quality assurance audits. The SFPUC has since implemented both recommendations from the first phase audit report. The second phase is currently ongoing and includes the aud it of six of revenue bonds issued by the SFPUC’s Water Enterprise, Wastewater Enterprise and Power Enterprise. The SFPUC anticipates that the audit report for the second phase will be issued in September 2023, and that the third phase will commence following the completion of the second phase audit report .

Financial Management Policies . To support sound financial management practices during periods of instability and to ensure organizational accountability and disciplined decision making, and to maintain the highest practical credit ratings, the SFPUC conducted an extensive peer review study to compare the financial policies of other United States municipal utilities, analyze rating agency evaluations of financial policies and recommend changes to the SFPU C’s existing financial policies . Based on this study, the Commission adopted in February and March 2017 a Debt Service Coverage Policy, a Capital Financing Policy and a Fund Balance Reserve Policy . The SFPUC subsequently revised its Debt Management Polic ies and Procedures, which the Commission adopted in November 2019. See “– Financial Management Policies.” In addition, the Commission adopted a Ratepayer Assurance Policy to address the prudent use of ratepayer funds and the establishment of rates and charges and to ensure process transparency.

Rate-Setting Process; Rates
General
The California Constitution permits the City, like other municipalities within California, to serve electric customers both within and outside of its geographic borders, except within the service territory of another municipality that objects to such service. Section 8B.121 of the Charter gives the SFPUC exclusive control of energy supplies and utilities for the City. The Commission sets the rates, fees and other charges impos ed in connection with provision of utility services under its jurisdiction pursuant to Section 8B.125 of the Charter, including rates contained in the SFPUC’s agreements with various parties (for example, the Districts) for the sale of

75 electricity. Commission action on all retail rates, fees and charges for utility services is subject to rejection – within 30 days of submission – by resolution of the Board of Supervisors. If the Board of Supervisors fails to act within 30 days, the rates shall become effective without further action by the Board of Supervisors . Prior to the Commission taking action on any rate -setting, the proposed rates, fees and charges are reviewed by the Citizens’ Advisory Committee and the Rate Fairness Board (as further described under “ – SFPUC Citizens Advisory Committee and Rate Fairness Board”).

In addition, under Charter Section 8B.125, in setting retail rates, fees and charges, the Commission must:
(a) Provide sufficient revenues to improve or maintain the financial condition and bond ratings of the Power Enterprise at or above levels equivalent to highly- rated utilities, meet requirements and covenants under all bond resolutions and the Indenture, and provide sufficient resources for the continued financial health (including appropriate reserves), operation, maintenance and repair of the Power Enterprise, consistent with good utility practice;
(b) Retain an independent rate consultant to conduct a cost -of-service study for the Power Enterprise at least every five years;
(c) Set retail rates, fees and charges based on the cost-of-service; (d) Study and develop, in accordance with applicable state and federal laws, rate- based conservation incentives or lifeline rates and similar rate structures to provide assistance to low-income customers; (e) Adopt annually a rolling five-year forecast of rates, fees and other charges; and (f) Establish an independent Rate Fairness Board.

None of the rates set by the Commission are subject to administrative or regulatory review by any State or federal regulatory body, including the CPUC and FERC. However, such rates are subject to review by the Board of Supervisors and must comply with certain ratemaking and other requirements of federal and State law, together with the Charter and municipal code o f the City. It is possible that future legislative or regulatory changes could subject the rates or service area of the SFPUC to the jurisdiction of a regulatory body such as the CPUC , or to other limitations or requirements of law.

SFPUC Citizens Advisory Committee and Rate Fairness Board The Citizens’ Advisory Committee (“ CAC”), established by a Charter amendment in 2002, provides recommendations to the SFPUC’s General Manager and the Board of Supervisors regarding the SFPUC’s long- term strategic, financial and capital improvement plans for all of its enterprises. The CAC is comprised of 17 appointees .

Each member of the Board of Supervisors may appoint one member who must be a resident of their supervisory district. Candidates must demonstrate one or more of the following qualifications : represent a community, business, environmental or environmental justice organization, or have demonstrated knowledge, skill or experience in a field related to public utilities, environmental justice or environmental science. Two additional members of the CAC are appointed by the President of the Board of Supervisors, one of whom represents a small business and the other of whom represents an environmental justice organization. The final four members are appointed by the Mayor and must include one member who represents regional water customers of the SFPUC, one who represents a large San Francisco water user, one San Francisco resident who has knowledge of engineering or financial management and one who represents a regional or statewide environmental organization.

Proposition E, approved by City voters on November 5, 2002 (“Proposition E”), directed the establishment of a Rate Fairness Board to advise the SFPUC on water, sewer, and power rate matters. The Rate Fairness Board consists of seven members : the City Administrator or their designee; the Controller or their designee; the Director of the Mayor’s Office of Public Finance or their designee; two residential San Francisco retail customers, consisting of one appointed by the Mayor and one by the Board of Supervisors; and two San Francisco retail business customers, consisting of a large business customer appointed by the Mayor and a small business customer appointed

76 by the Board of Supervisors. Specific powers for the Rate Fairness Board include the authority to: (1 ) review the five-year rate forecasts produced by the SFPUC enterprises, including the Power Enterprise; (2 ) hold one or more public hearings on annual rate recommendations before the SFPUC adopts rates; (3) provide a report and recommendations to the SFPUC on any rate proposal; and (4) in connection with periodic rate studies, submit to the SFPUC rate policy recommendations for the Commission’s consideration, including recommendations to reallocate costs among various retail utility customer classifications, subject to any outstanding bond requirements. The Rate Fairness Board is not authorized, however, to reject proposed rates approved by the Commission.

Cost of Service Studies
Proposition E also added a requirement in the Charter that the SFPUC conduct an independent utility cost - of-service study at least every five years . The most recent study was completed in May 2022 (the “ 2022 Power Rates Study”) to evaluate the cost of service of the Power Enterprise and to recommend appropriate rate structures .

For more information regarding the 2022 Power Rates Study, see “– Rate-Setting Actions” below.

Rate-Setting Actions
From July 2012 through June 2022, the Power Enterprise provided service to three “rate classes:” (i) General Use Municipal, (ii ) Enterprise Municipal (including, but not limited to SFO, the SFPUC’s Water and Wastewater Enterprises, and the Port of San Francisco), and (iii) Retail (Non -Municipal). For the General Use Municipal rate class, there was one flat $ per kWh charge that did not vary based on the season or customer class, or have demand or fixed service charges . General Use Municipal rates were lower than the Enterprise Municipal rates and the cost of service identified in the 2022 Power Rates Study. For the Enterprise Municipal rate class, electric rates and charges were established to cover Power Enterprise expenses for operations, maintenance, and capital investment. For certain priv ate entities and some municipal and public agencies, electric rates were based on rate schedules adopted by PG&E, as authorized in a rate -setting process regulated by the CPUC . Finally, for the Retail rate class, due to limited cost data for these new cus tomers, as well as a policy goal to remain competitive with PG&E, the Power Enterprise’s retail power rates were set to 10% below the equivalent PG&E tariff schedules, with automatic annual adjustments.

The 2022 Power Rates Study transitioned away from the legacy groupings described above, and instead charge all customer rates based on their customer class (i.e., residential, small commercial, medium commercial, large commercial, industrial, etc.), and to move all rates to their cost of service. The transi tion was designed to support the fiscal health of the Power Enterprise, improve the fairness of the Power Enterprise’s rates, vastly simplify billing administration, and set up the program to implement modern rate structures to support its policy goals.

Key rate design changes proposed as part of the 2022 Power Rates Study included the following:
• Assigning all General Use customers to the appropriate customer class. o Creating a “Municipal General” rate for each class with the same structure as the retail r ate within that class (i.e., the same seasonal periods, energy and demand line items, customer charge, etc.). o Calculating the Municipal General rate as a discount from the equivalent retail rate schedule in the year, solving for an all -in average $ per kWh effective rate that increases by $0.03/kWh annually from the prior General Use rate of $0.0988/kWh.
o If the Municipal General rate for a fiscal year met or exceeded the cost of service for the customer class, eliminating the rate schedule, and charging these customers the normal retail rate for that customer class.
• For Enterprise and Retail customers, maintaining the cur rent rate structures and options available, but transitioning to cost of service, with some adjustments.

77 o Phasing-in rate changes – increasing or decreasing – to the cost -of-service rate over two fiscal years.
o If phasing-in would require an increase of more than 10% annually in the all -in average $ per kWh paid by customers on a particular rate schedule, limiting the increase to no more than approximately 10% as a customer class.
• Distributing the under-collection amount to all retail and Enterprise non-residential rate classes.

In addition to the steps described above, the proposed rates were generally designed to minimize significant changes to rate structures, because the proposed changes to rate levels as part of the transition to cost of service rates are significant.

On May 24, 2022, the Commission adopted Resolution 22 -0095, establishing rates for Fiscal Years 2022- 23 and 2023-24 based on staff recommendations from the 2022 Power Rates Study.

The following tables set forth adopted electric service rates for Fiscal Year 2023 -24 for major customer classes. For Fiscal Year 2023 -24, the “Residential” customer class is projected to make up approximately 3.7% of revenues; the “small commercial” customer class is projected to make up approximately 8.4% of revenues; the “medium commercial” customer class is projected to make up approximately 14.3% of revenues; the “large commercial” customer class is projected to make up approximately 10.6% of revenues; and the “industrial” customer class is projected to make up approximately 63% of revenues.

(Remainder of Page Intentionally Left Blank)

78 TABLE 13

ADOPTED RETAIL, ENTERPRISE MUNICIPAL AND GENERAL USE

ELECTRIC SERVICE RATES FOR MAJOR CUSTOMER CLASSES
FOR FISCAL YEAR 2023-24
Residential, Gas Heating
Retail and Enterprise
Municipal(1) General Use(2)
Customer Charge ($ per month) $7.23 --
Summer Energy Charge ($ per kWh)
Tier 1 (0 kWh – 227 kWh) $0.22770 --
Tier 2 (227 kWh – 524 kWh) $0.27324 --
Tier 3 (Over 524 kWh) $0.40986 --
Winter Energy Charge ($ per kWh)
Tier 1 (0 kWh – 252 kWh) $0.22770 --
Tier 2 (252 kWh – 579 kWh) $0.27324 --
Tier 3 (Over 579 kWh) $0.40986 --

Small Commercial (Demand <75 kW)
Retail and Enterprise
Municipal(1) General Use(2)
Customer Charge ($ per month)
Single Phase Service $14.31 $8.52
Poly Phase Service $35.80 $21.32
Summer Energy Charge ($ per kWh) $0.29680 $0.17332
Winter Energy Charge ($ per kWh) $0.23852 $0.13862

Medium Commercial (Demand 75-500 kW)
Retail and Enterprise
Municipal(1) General Use(2)
Secondary(4) Primary(5) Secondary(4) Primary(5)
Customer Charge ($ per month) $255.11 $238.51 $181.77 $192.84 Summer Energy Charge ($ per kWh) $0.18865 $0.17023 $0.12729 $0.12955 Winter Energy Charge ($ per kWh) $0.15362 $0.13881 $0.10233 $0.10414 Demand Charge ($ per kW) $20.70 $17.12 $14.75 $13.84

Large Commercial (Demand 500-1000 kW
)
Retail and Enterprise
Municipal(1) General Use(2)
Secondary(3) Primary(4) Secondary(3) Primary(4)
Customer Charge ($ per month) $1,659.31 $1,553.60 $1,350.68 $1,529.83 Summer Energy Charge ($ per kWh)
On-Peak $0.12123 $0.09424 $0.08598 $0.07744
Part-Peak $0.12123 $0.09424 $0.08598 $0.07744
Off-Peak $0.09969 $0.07821 $0.06845 $0.06165
Winter Energy Charge ($ per kWh)
Part-Peak $0.10727 $0.08385 $0.06114 $0.06721
Off-Peak $0.09962 $0.07815 $0.05604 $0.06159
Summer Demand Charge ($ per kW)
On-Peak $15.44 $12.89 $12.57 $12.69
Part-Peak $12.59 $10.78 $10.25 $10.62
Off-Peak $28.24 $22.93 $22.98 $22.58
Winter Demand Charge ($ per kW)
Maximum $28.24 $22.93 $22.98 $22.58

(Table and footnotes continued on the following page.)

79 Industrial (Demand >1000 kW)
Retail and Enterprise
Municipal(1) General Use(2)
Secondary(3) Primary(4) Secondary(3) Primary(4)
Customer Charge ($ per month) $1,660.42 $1,594.48 $1,522.94 $1,518.50 Summer Energy Charge ($ per kWh)
On-Peak $0.10890 $0.10605 $0.07833 $0.07816
Part-Peak $0.10890 $0.10605 $0.07833 $0.07816
Off-Peak $0.09030 $0.08818 $0.06127 $0.06114
Winter Energy Charge ($ per kWh)
Part-Peak $0.09679 $0.09441 $0.06722 $0.06707
Off-Peak $0.08996 $0.08785 $0.06096 $0.06083
Summer Demand Charge ($ per kW)
On-Peak $16.39 $16.63 $15.04 $15.84
Part-Peak $12.91 $13.74 $11.84 $13.09
Maximum $29.18 $27.00 $26.77 $25.72
Winter Demand Charge ($ per kW)
Maximum $29.18 $27.00 $26.77 $25.72
_______________
(1) Rates applicable to most retail non -municipal Power Enterprise customers (i.e., “Retail”), and certain municipal, governmental, and commercial customers, referred to as “Enterprise” customers. (2) Rates applicable to certain municipal, governmental, and commercial customers, referred to as “General Use” customers. (3) Secondary voltage class if the service voltage is less than 2,400 volts. (4) Primary voltage class if the customer is served from a single customer substation or without transformation at a standard primary voltage.

Source: SFPUC; Rate Schedules & Fees for Hetch Hetchy Power and CleanPowerSF (Fiscal Year 2023-24), adopted by the Commission on May 24, 2022.

The following table sets forth the average electric service rates for each major customer class for Fiscal Year 2023-24.

TABLE 14
AVERAGE ELECTRIC SERVICE RATES(1)
FOR FISCAL YEAR 2023-24
Customer Classes
Retail and
Enterprise
Municipal(2)
General Use
Municipal(3)
Residential $0.21278/kWh --
Small Commercial (Demand <75 kW) $0.27771/kWh $0.15877/kWh Medium Commercial (Demand 75-500kw) $0.23357/kWh $0.15877/kWh Large Commercial (Demand 500-1000 kW) $0.20045/kWh $0.15877/kWh Industrial (Demand >1000kW) $0.17008/kWh $0.15877/kWh

_______________
(1) Average rates are calculated by dividing total revenue projections ($ ) by total energy usage projections (kWh) for each applicable customer class.
(2) Rates applicable to most retail non -municipal Power Enterprise customers (i.e., “Retail”), and certain municipal, governmental, and commercial customers, referred to as “Enterprise” customers. (3) Rates applicable to certain municipal, governmental, and commercial customers, referred to as “General Use” customers.

Source: SFPUC.

The SFPUC anticipates that rates for Fiscal Years 2024 -25 and 2025- 26 will be adopted in Fiscal Year 2023-24, informed by the 2022 Power Rates Study and then-current market conditions.

80 Contractual Rate-Setting Actions
While the SFPUC is obligated to provide power at cost to MID and TID, the Districts have not elected to take such power since Fiscal Year 2017 -18. The contracts governing these rates are currently expired, and discussions regarding a renegotiation are ongoing. See “THE POWER ENTERPRISE – Wholesale Electricity Sales.”
PG&E Retail Rates
The rates PG&E may charge its retail customers for various categories of electricity delivery within the City (“PG&E Rates”) are established by the CPUC. PG&E Rates are adjusted by the CPUC from time to time.

While previously the electric rates charged by the SFPUC to its customers are sometimes limited by or established with reference to PG&E rates, this is no longer true beginning in Fiscal Year 2022 -23. See “– Rate-Setting Actions.” As a result, the establishment of higher or lower PG&E Rates by the CPUC no longer has an impact on the electric rates charged by the SFPUC to affected customers or Revenues. See “THE POWER ENTERPRISE – Power Service in San Francisco – Pacific Gas & Electric Company ” and “CERTAIN RISK FACTORS – Increased Operation and Maintenance Expenses.”
Billing and Collection Procedures
The SFPUC directly bills Power Enterprise customers for electric service on a monthly basis. Billing is generally based on actual meter reads, although in certain cases estimates are used (with a later adjustment) or are made pursuant to an average billing agreement. The SFPUC m ay impose a late charge or, for customers other than municipal customers, disconnect service for nonpayment.

Discount Programs
In 2020, the SFPUC established a temporary emergency customer assistance program for customers whose income had been impacted by COVID-19 or the City’s stay- at-home orders . The temporary program provided residential Power Enterprise customers a 30% electricity bill discount. The temporary program ended March 31, 2022 and was replaced by an income-limited permanent discount program for eligible Power Enterprise customers.

Power Sales Revenues; Other Revenues
As of Fiscal Year 2022 -23, approximately __% of all Power Enterprise revenues are from charges for services and approximately __% are from other revenues, including rents, interest income and other revenues. On average, approximately 85% of charges for service are from municipal sales.

Following the outbreak of COVID -19, in Fiscal Year 2020- 21 approximately 70% of charges for service were from municipal sales. Retail sales have grown in recent years due to customer growth in redevelopment areas and customers transferring to Power Enterprise service from other providers. Wholesale sales are possible when there is excess Hetch Hetchy Project generation available for sale, and are driven by supply variability.

As shown in the following table, power sales are still below Fiscal Year 2018- 19 pre-pandemic levels, with aggregate power sales for Fiscal Years 2021 -22 and 2022- 23 approximately __% and __% lower than Fiscal Year 2018-19 pr e-pandemic levels, respectively . The SFPUC anticipates that most power sales will return to pre - pandemic levels in Fiscal Year 2025 -26. Some reductions may be permanent as the local economy shifts to a post - pandemic “new normal” with more remote work and shifts in the demand for City services . Pursuant to the 2024 Financial Plan, the SFPUC projects that sales to existing power customers will stabilize at approximately 93% of their pre-pandemic usage.

81 TABLE 15

HISTORICAL REVENUES
FOR FISCAL YEARS 2018-19 TO 2022-23
(IN THOUSANDS)
Revenues: 2018-19 2019-20 2020-21 2021-22 2022-23
Charges for Services
Municipal Sales $ 122,637 $ 104,452 $ 96,730 111,456
Other Retail Sales(1) 4,960 22,352 24,411 31,470
Wholesale Sales 15,812 13,876 15,106 30,179
Subtotal $ 143,409 $ 140,680 $ 136,247 $ 173,105

Rent & concessions $ 152 $ 191 $ 136 $ 137
Interest & investment income 6,883 5,746 24 (4,001)
Trans Bay Cable License(2) 2,522 2,574 - -
Cap & Trade Allowances(2) 2,843 3,184 2,045 4,933
All Others 5,542 19,248 17,228 10,830
Subtotal $ 17,942 $ 30,943 $ 19,433 $ 11,899
Totals $ 161,351 $ 171,623 $ 155,680 $ 185,004
_______________
(1) Includes revenues recovered from services to Treasure Island . Such amounts are excluded from Revenues under the Indenture.
(2) Trans Bay Cable LLC licenses and cap and trade allowances are excluded from Revenues under the Indenture.

Source: SFPUC.

The SFPUC receives payments from other agencies of the City for their share of the proportionate cost of the service provided to them. For Fiscal Years 2020- 21, 2021-22, and 2022- 23, these service deliveries generated approximately $82 million, $116 million and $__._ million (unaudited) in revenues, respectively. Over the past five Fiscal Years, including Fiscal Year 2020 -21, revenues from service deliveries have averaged approximately __% of Power Enterprise revenues. For Fiscal Year 2023- 24, the SFPUC has budgeted $161.9 million in revenues from service deliveries.

Operation and Maintenance Expenses
“Operation and Maintenance Expenses” covers the general operational expenses of the Power Enterprise.

These expenses include labor and employment benefits, contractual services, materials and supplies, depreciation, general and administrat ive, services from other departments and other miscellaneous costs. Services from other departments include payment for services from other City departments, such as City Attorney’s Office and the General Services Agency. Purchased power costs also constitute Operation and Maintenance Expenses. See “HISTORICAL OPERATING RESULTS” and “THE PUBLIC UTILITIES COMMISSION – Employee Relations.”
Allocation of Costs
Various common costs incurred by the SFPUC are allocated among the Power Enterprise, the Water Enterprise and the Wastewater Enterprise. Allocations are based on the SFPUC management’s best estimate and may change from year to year depending on activities undertaken by each enterprise and information available.

For Fiscal Years 2020 -21, 2021 -22, and 2022 -23 the SFPUC allocated $13 million, $9 million and $__ million (unaudited), respectively, in administrative costs to Hetch Hetchy Water and Power . For Fiscal Year 2023-24, the SFPUC has budgeted $11.0 million in administrative costs to the Power Enter prise. Administrative costs are included in the financial statements under various expense categories. These costs are then allocated to Hetch Hetchy Water and the Power Enterprise in the Hetch Hetchy Water and Power financial statements, using the periodically reviewed department overhead allocation model.

82 Payments to/from the City
A variety of City departments provide direct services such as engineering, purchasing, legal, data processing, telecommunications and human resources to the Power Enterprise and charge amounts designed to recover those costs. For Fiscal Years 2020 -21, 2021 -22, and 2022- 23, these charges totaled approximately $6 million, $6 million and $__._ million (unaudited), respectively. For Fiscal Year 2023 -24, the SFPUC has budgeted $6 million for such charges.

The SFPUC has a 75 -year lease agreement with the San Francisco Recreation and Parks Department for parking spaces at the Civic Center garage for use by the SFPUC’s fleet of vehicles. The lease commenced on February 1, 2011. Payments to be made under this agreement total $6.274 million, all of which has been paid . The expenses and prepayments are allocated among the Power Enterprise , the Water Enterprise and the Wastewater Enterprise based on employee occupancy at 525 Golden Gate. For Fiscal Years Fiscal Years 2020 -21, 2021-22, and 2022-23, the Power Enterprise’s allocable shares of expenses and prepayments were $17 ,000 and $922,000, $18,000 and $904,000, and $17,000 and $887,000, respectively.

The SFPUC makes payments to the City relating to the financing of the SFPUC’s headquarters at 525 Golden Gate Avenue, San Francisco, California. See “OBLIGATIONS PAYABLE FROM REVENUES – Other Obligations Payable from Revenues.”
The municipal customers also pay the Power Enterpri se directly for power service. See “– Power Sales Revenues; Other Revenues.”
Financial Management Policies
The SFPUC makes no representation that the following policies will not be revised or amended and, except to the extent required for compliance with the terms of the Indenture, makes no representation that these policies will be followed by the SFPUC.

Debt Management Policies and Procedures . The SFPUC has established “Debt Management Policies and Procedures” (the “Debt Policies ”) for debt financing under its jurisdiction . The SFPUC has also established separate “SFPUC Municipal Securities Disclosure Policies and Procedures” (the “Disclosure Policies ”) which are appended to the Debt Policies . The Debt Policies, including the appended Disclosure Policie s, apply to all SFPUC enterprises, including the Power Enterprise, and are intended to enable the SFPUC to effectively manage its debt issuance and administration practices and comply with all debt issuance and administration rules and regulations .

The Debt Policies are reviewed bi-annually and revised, as necessary, with Commission approval.

The Commission adopted revisions to the Debt Policies in 2019. Such revisions included adding two amendments that were made to Rule 15c2-12, effective February 27, 2019 (the “ Rule 15c2-12 Amendments ”) to the Disclosure Policies . See the Listed Events 15 and 16 in “APPENDIX E – FORM OF CONTINUING DISCLOSURE CERTIFICATE .” In addition, pursuant to the Disclosure Policies, the SFPUC developed a Disclosure Practices Working Group (the “ DPWG”). The DPWG meets at least semiannually to better and more effectively administer the SFPUC’s continuing disclosure requirements, particularly to monitor the SFPUC’s financial obligations and financial difficulties, if a ny, in light of the Rule 15c2-12 Amendments . The DPWG is comprised of the Chief Financial Officer and Assistant General Manager, Business Services, two Deputy Chief Financial Officers and the Debt Manager of the SFPUC, with legal consultation from the Cit y Attorney’s Office and the SFPUC’s outside disclosure counsel.

Debt Service Coverage Policy. The Commission adopted a debt service coverage policy (the “ Debt Service Coverage Policy ”) on March 28, 2017, which applies to all SFPUC enterprises, including t he Power Enterprise. Pursuant to the Debt Service Coverage Policy, to ensure that the SFPUC maintains access to low -cost capital and retains financial flexibility for contingencies, the SFPUC will aim to adopt budgets, rates and financial plans that gener ate revenues such that debt service coverage on an Indenture basis (including certain available fund balances) will be at least 1.35 times and debt service coverage on a current basis will be at least 1.10 times.

83 The Indenture includes a rate covenant of 1.25 times coverage (including certain available fund balances).

See “SECURITY FOR THE BONDS – Rate Covenant; Rates and Charges.” Capital Financing Policy . The Commission adopted a capital financing policy (the “Capital Financing Policy”) on March 28, 2017, which applies to all SFPUC enterprises, including the Power Enterprise . The SFPUC relies mainly on current revenue and debt financing to pay for capital assets or improvements . According to the Capital Financing Policy, the appropriate mix of current revenues versus debt financing depends, in part, on the capital investment lifecycle of the Power Enterprise . Accordingly, the SFPUC has determined that over the 10 -year financial planning horizon, the SFPUC will aim to pay for a minimum ranging between 15% and 30% of the Power Enterprise’s capital budget from current revenues.

Fund Balance Reserve Policy. The Commission adopted a fund balance reserve policy (the “ Fund Balance Reserve Policy ”) on February 28, 2017, which applies to all SFPUC enterprises, including the Power Enterprise. Pursuant to the Fund Balance Reserve Policy, for the time period covered in the 10- year financial plan, the SFPUC will aim to propose operating and capital budgets and rates for adoption such that the Fund Balance Reserve t otals a minimum of 90 days or 25% of operations and maintenance expenses (including programmatic projects and excluding debt service and revenue -funded capital) throughout the forecast period. Amounts in excess of such minimum will be considered for contingencies and rate stabilization.

Investment of SFPUC Funds
The SFPUC’s pooled deposits and investments are invested pursuant to State law and the investment policy established from time to time by the City Treasurer and overseen by the Treasury Oversight Committee. The current policy seeks the preservation of capital, liquidity and yield, in that order of priority. Under the City Treasurer’s current investment procedures, the SFPUC’s pooled deposits and investments are invested in the City’s la rger pooled investment fund (the “ City Pool”). Among other purposes, the City Pool serves in effect as a disbursement account for expenditures from the City’s various segregated and pooled funds. Investments are generally made so that securities can be held to maturity. The City Treasurer calculated the weighted average maturity of these investments as of June 30, 2023, to be 442 days (most recent data available).

The following table sets forth the approximate book values of the investments held in the C ity Pool reported by the City Treasurer as of June 30, 2023. The Power Enterprise’s pooled deposits and investments accounted for approximately $247.4 million, or approximately 1.5%, of such amounts . The Water Enterprise and the Wastewater Enterprise each have their own pooled deposits and investments that are separate from the Power Enterprise.

TABLE 16

CITY POOLED INVESTMENT FUND
(AS OF JUNE 30, 2023)
Investments
Book Value
(millions)
U.S. Treasuries $3,626.3
Federal Agencies 7,353.5
Public Time Deposits 30.0
Negotiable CDs 1,920.0
Commercial Paper 389.5
Money Market Funds 2,573.9
Supranationals 643.2
Total $16,536.4
____________________
Source: Office of the Treasurer and Tax Collector of the City and County of San Francisco.

84 The SFPUC’s non -pooled deposits and investments consist primarily of funds related to the SFPUC’s outstanding bonds, which are invested pursuant to policy established by the SFPUC, subject to the restrictions contained in the applicable bond documentation.

Risk Management and Insurance
The SFPUC’s risk management program encompasses both self -insured and insured coverage. Risk assessments and coverage are coordinated by the SFPUC Enterprise Risk Manager through the City Office of Risk Management. With certain exceptions, the City and SFPUC’s general approach is to first evaluate self- insurance for the risk of loss to which it is exposed. Based on this analysis, the SFPUC has determined that mitigating risk through a “self -retention” mechanism is more economical as it manages risks internally and administers, adjusts, settles, defends and pays claims from budgeted resources (i.e., pay -as-you-go). When economically more viable or when required by debt financing covenants, the SFPUC obtains commercial insurance.

At least annually, the City reviews and actuarially determines general liability and workers’ compensation liabilities, which are recorded as “Damages and Claims” and “Accrued Worker’s Compensation” in the financial statements.

The SFPUC does not maintain commercial earthquake coverage, with certain minor exceptions, such as a sub-limit for fire-sprinkler leakage due to earthquake under the Property Insurance program.

The following is a summary of the SFPUC’s coverage approach to risk:

Primary Risks Typical Coverage Approach
General Liability Self-Insured
Property Purchased Insurance & Self-Insured
Electronic Data Processing Purchased Insurance & Self-Insured Workers’ Compensation Self-Insured through City-Wide Pool Other Risks Typical Coverage Approach
Surety Bonds Purchased and Contractually Transferred
Professional Liability Combination of Self-Insured, Purchased Insurance and Contractual Risk Transfer Errors & Omissions Combination of Self-Insured, Purchased Insurance and Contractual Risk Transfer Builders Risk Purchased Insurance & Contractual Risk Transfer Public Officials Liability Purchased Insurance
Employment Practices Liability Purchased Insurance
Crime Purchased Insurance
Cyber Liability Purchased Insurance

The SFPUC’s property risk management approach varies depending on whether the facility is currently under construction, or if the property is part of revenue -generating operations. The majority of purchased insurance is for revenue -generating facilities, debt-financed facilities and mandated coverage to meet statutory or contractual requirements.

Additionally, the SFPUC acknowledges the importance of aligning strategic planning to the risk management process and has implemented an Enterprise Risk Managemen t (“ERM”) program to meet this need.

The framework provides a strategic approach to managing operational risks. The ERM program has been implemented thus far for Information Technology Services, the Power Enterprise and CleanPowerSF and plans are in place to continue implementation across the remainder of the SFPUC as needed.

Capital Project Risk Management . For capital construction projects, the SFPUC has utilized traditional contractual risk transfer, contractor -controlled insurance programs or other a lternative insurance programs. Under the latter two approaches, the insurance program usually provides coverage for the entire construction project, along with multiple risk coverages, such as general liability and workers compensation. When a contractua l risk transfer is used for capital construction risks, the SFPUC requires each contractor to provide its own insurance, while ensuring

85 that the full scope of work be covered with satisfactory levels to limit the SFPUC’s risk exposure balanced by that which is commercially available.

Performance bonds are required, and Builder’s Risk insurance must be purchased, in most phases of the 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.

Professional liability policies are either directly purchased insurance on behalf of the SFPUC, transferred through contract to the contracted professional, or retained through self -insurance on a case-by-case basis depending on the size, complexity or scope of construction or professional service contracts. Professional liability policies are typically purchased for services provided by engineers, architects, design professionals and other licensed or certified professional service providers.

Builder’s Risk policies of insurance are required to be provided either through an owner -controlled insurance program or the contractor on all construction projects for the full value of the construction.

HISTORICAL OPERATING RESULTS
The historical results of operations reflected in the following table are based on the tables contained in the SFPUC’s audited financial statements entitled “Statements of Revenues, Expenses and Changes in Net Position” and “Statements of Cash Flows” for the Fiscal Years listed. See “APPENDIX B – SFPUC POWER ENTERPRISE FINANCIAL STATEMENTS.”

(Remainder of Page Intentionally Left Blank)

86 TABLE 17

POWER ENTERPRISE

HISTORICAL REVENUES AND OPERATION AND MAINTENANCE EXPENSES FOR FISCAL YEARS ENDED JUNE 30
(IN THOUSANDS)(1)
2018 2019 2020 2021 2022

OPERATING & INVESTMENT
REVENUE(2)

Charges for Services(3) $118,672 $143,409 $140,680 $136,247 $173,105 Rent & Concessions 163 152 191 136 137
Interest & Investment Income(4) 2,537 6,883 5,746 24 (4,001) Other Non-Operating Revenues(5) 10,073 10,907 25,006 19,273 15,763 Total Revenues $131,445 $161,351 $171,623 $155,680 $185,004

OPERATING & MAINTENANCE

EXPENSE
Salary & Fringe Benefits(6) $34,950 $37,583 $40,712 $40,756 $34,646 Contractual Services 5,526 6,086 7,742 8,726 9,604
Purchased Power & Related Costs(7) 34,435 47,437 48,831 42,693 58,252 Materials & Supplies 1,541 672 2,260 1,990 2,270
Depreciation & Amortization(8) 14,049 14,484 15,723 15,627 17,628 Services of Other Departments 5,848 6,833 6,426 6,137 6,253 General & Administrative(9) 4,238 3,660 4,370 6,074 4,654 Other 18,808 5,933 22,063 23,635 23,040
Total Operating Expenses $119,395 $122,688 $148,127 $145,638 $156,347

OPERATING AND INVESTMENT
INCOME $12,050 $38,663 $23,496 $10,042 $28,657

COVERAGE CALCULATION
Operating & Investment Income $12,050 $38,663 $23,496 $10,042 $28,657 -Revenue and Expenses Excluded
from Coverage Calculation(1) (9,194) (8,478) (12,868) (5,731) 6,707 +Adjustment to Investing Activities 419 (2,606) 101 1,902 3,297 +Depreciation & Non-Cash Expenses 14,131 14,604 27,470 23,037 18,351 +Changes in Working Capital 13,281 (2,386) 3,243 (18,641) (2,702) =“Net Revenues”(10) $30,687 $39,798 $41,442 $10,609 $54,310 +Other Available Funds(2) 36,525 31,215 39,119 23,569 44,315 Funds Available for Debt Service $67,212 $71,013 $80,561 $34,178 $98,625 Revenue Bond Debt Service $2,570 $2,569 $2,568 $2,567 $2,565

DEBT SERVICE COVERAGE(12)
Indenture Basis (Including “Other
Available Funds”)(1)(11)(13) 26.15x 27.64x 31.37x 13.31x 38.45x Current Basis(1)(14) 11.94x 15.49x 13.44x 3.67x 20.71x

(1) Operating and Investment Income presented in this table differs from the Change in Net Position presented in the Statement of Revenues, Expenses and Changes in Net Position in the audited financial statements . This table may exclude certain elements of non -operating revenue and expenses included in the Statements of Revenues, Expenses and Changes in Net Position. Revenues and expenses associated with Treasure Island Development, Transbay Cable Proceeds, cap and trade allowances, power system impact mitigation, federal subsidies, and other revenues deemed unavailable to pay debt service have been excluded. L ow carbon fuel standard (“ LCFS”) revenue is excluded in Current Basis coverage but included for Indenture Basis coverage calculation.

(Footnotes continued on the following page.)

87 (2) Excludes operating results for CleanPowerSF.
(3) Increase in Fiscal Year 20221 -22 mainly due to higher wholesale electricity sales mostly from CAISO credits, increase in sales to City departments, and sales to retail customers due to higher consumption. (4) Decrease in Fiscal Year 2021 -22 mainly due to unrealized loss attributed to decrease in market value of cash and investments held in the City Treasury.
(5) Decrease in Fiscal Year 2021 -22 due to lower power system impact mitigation payments and c ap and t rade revenue received.
(6) Decrease in Fiscal Year 2021-22 mainly due to lower pension obligations based on actuarial reports. (7) Increase in Fiscal Year 2021-22 mainly due to increased wholesale distribution rates. (8) Increase in Fiscal Year 2021-22 mainly due to additional buildings, structures, and equipment placed in service. (9) Decrease in Fiscal Year 2021-22 mainly due to lower litigation expenses. (10) “Net Revenue” is presented on a cash basis.
(11) Per Indenture, in addition to current year cash flow, coverage calculation includes certain “Other Available Funds,” which are not budgeted to be spent in such twelve months and legally available to pay debt service. (12) Coverage does not include debt service on the Subordinate Obligations, the Power Enterprise’s share of lease payments associated with the 2009 Golden Gate COPs and debt service on Commercial Paper Notes. (13) Unaudited. Calculated as ratio between Net Revenues plus “Other Available Funds” over debt service on all senior lien obligations.
(14) Unaudited. Calculated as ratio between Net Revenues over debt service on all senior lien obligations; excludes “Other Available Funds.” LCFS revenue is excluded in Current Basis coverage; in Fiscal Years 2019-20, 2020 -21 and 2021 -22, LCFS revenue was $6.9 million, $1.2 million, and $1.2 million, respectively.

Source: SFPUC, Hetch Hetchy Water and Power and CleanPowerSF Audited Financial Statements

CERTAIN RISK FACTORS
The following section discusses certain risk factors that should be considered by potential investors, along with all other information presented in this Official Statement, in evaluating the risks inherent in the purchase of the 2023A Bonds. The following discussion is not meant to be a comprehensive or definitive list of the risks associated with an investment in the 2023A Bonds. Any one or more of the risk factors discussed below, among others, could adversely affect the ability of the S FPUC to pay principal of or interest on the 2023A Bonds or lead to a decrease in the market value and/or in the liquidity of the 2023A Bonds. The order in which this information is presented does not necessarily reflect the relative importance of the vari ous issues. There can be no assurance that other risk factors not discussed herein will not become material in the future, and the SFPUC has not undertaken to update investors about the emergence of other risk factors in the future.

General
The ability of the SFPUC to comply with its covenants under the Indenture and to generate Revenues sufficient to pay the Operation and Maintenance Expenses of the Power Enterprise and principal of and interest on the Bonds may be adversely affected by actions and events outside of the control of the SFPUC and may be adversely affected by actions taken (or not taken) by regulatory agencies, voters, Power Enterprise customers or PG&E. Among other matters, general and local economic conditions, weather or climatic conditions or natural or other disasters or the availability of insurance relating to any such events , and changes in law and government regulations could adversely affect the amount of Revenues realized by the SFPUC or significantly raise the cost of operating the Power Facilities. See “THE POWER ENTERPRISE – Recent Factors Impacting Power Revenues.” In addition, the realization of future Revenues is subject to, among other things, the capabilities of management of the SFPUC, the ability of the SFPUC to provide s ervice to its customers, the ability of the SFPUC to establish, maintain and collect charges from its customers and the ability of the SFPUC to establish, maintain and collect rates and charges sufficient to pay for Operation and Maintenance Expenses of the Power Enterprise, the Bonds and other obligations payable from Revenues. See “FINANCIAL OPERATIONS” and “OBLIGATIONS PAYABLE FROM REVENUES.”
Limited Obligations
If the SFPUC defaults on its obligations to make debt service payments on the Bonds, the Trustee has the right under the Indenture to accelerate the total unpaid principal amount of the Bonds. However, in the event of a

88 default and such acceleration, there can be no assurance that the SFPUC, and correspondingly the Trustee, will have sufficient moneys available for payment of the Bonds.

The SFPUC is not obligated to pay the principal of, premium, if any, or interest on the 2023A Bonds from any source of funds other than the Revenues of the Power Enterprise, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits. The General Fund of the City is not liable for the payment of the principal of, premium, if any, or interest on the 2023A Bonds, and neither the credit nor the taxing power of the City is pledged to the payment of the principal of, premium, if any, or interest on the 2023A Bonds. The SFPUC has no taxing power. The 2023A Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or of the SF PUC or any of its income or receipts, except Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits.

Risks Related to Power Enterprise Operations and Facilities The operation of the Power Facilities, including the Hetch Hetchy Project, is subject to a number of risks which could adversely affect the ability of the Power Enterprise to generate electricity or deliver electricity to its customers. Such interruptions in generation or transmission could adversely impact Revenues or require the SFPUC to increase expenditures for repairs and replacement power. Such Revenue losses or increased operating expenses, if significant, could adversely impact the SFPUC’s ability to pay debt service on the Bonds.

Lack of Supply Diversity. Although the SFPUC has been developing alternative sources of generation, the Power Enterprise’s electric supply resources remain highly concentrated. Developments with respect to hydroelectric generation in general, or the Hetch Hetchy Project in particular, could have an amplified effect on the availability and cost of electricity required to meet the needs of the Power Enterprise’s customers . See “THE HETCH HETCHY PROJECT.”
Aging Facilities; Failure of Key Facilities . The Power Facil ities vary in age, condition and estimated service life remaining. The average useful life of generating assets is about 30 years while the average useful life of transmission assets is approximately 80 years. Certain portions of the Power Facilities are near the end of their useful life. Long -lived assets result in decreased reliability due to unplanned outages and place a greater maintenance burden on Power Enterprise operations. Aging generating and transmission assets, if left unaddressed, could result in increased system failures, including losses of Hetch Hetchy Project electric generation delivered to San Francisco, increasing the Power Enterprise’s reliance on purchased power. See “THE HETCH HETCHY PROJECT – Physical Condition of Facilities.”
Limited Redundancy . Certain Power Facilities have limited redundancy, which reduces the SFPUC’s ability to take components of the system out of service for maintenance and repairs, and to provide backup facilities in cases of failure. Any failure of the Power Facilities could result in an increase in the Power Enterprise’s purchased power or transmission costs.

Rainfall Variability and Drought . Hydroelectric generation by the Hetch Hetchy Project is subject to seasonal and annual variations in rainfall. See “THE HETCH HETCHY PROJECT – Variability of Hydroelectric Generation.”
Water System Operation Requirements . The SFPUC’s “water first” policy requires the Power Enterprise to coordinate electricity generation with water releases from Hetch Hetchy Reservoir required to serve the needs of Water Enterprise customers, which has an impact on the Power Enterprise’s ability to schedule generation in a manner that would maximize Revenues and minimize Operation and Maintenance Expenses. The price of electricity is subject to market conditions and seasonal market variations which frequently result in lower costs per MWh during the early part of the calendar year when more water is released to serve the requirements of the Water Enterprise and higher costs per MWh in the latter part of the calendar year when less water is released to serve the requirements of the Water Enterprise. See “THE HETCH HETCHY PROJECT – Hetch Hetchy Project Operations – Water First Policy” and “– Variability of Hydroelectric Generation.”

89 Unavailability of Transmission. The SFPUC’s transmission assets are interconnected to the CAISO’s system. The unavailability of transmission assets due to failure or maintenance outage could require the Power Enterprise to obtain alternative transmission services from other utilities through established interties to deliver energy to the CAISO’s transmission network, which could result in increased transmission costs to the Power Enterprise. See “THE POWER ENTERPRISE – Transmission and Distribution.” Interconnection Delays and Costs . In 2016, the SFPUC began taking distribution service from PG&E under its FERC-approved open access tariff (see “THE POWER ENTERPRISE – Transmission and Distribution”).

Since that time, PG&E has updated and modified its distribution terms, which has had the effect of delaying grid access for certain SFPUC customers or increasing costs of service for the SFPUC. Starting in July 2018, the City required the SFPUC to provide the Board of Supervisors with quarterly reports identifying projects with applications to PG&E for electric service. Such reports identify any concerns with securing temporary and permanent power or other obstacles that could increase costs or delay service to City customers, and provide updates on the status of disputes with PG&E before the FERC or in other forums. Since November 2018, the SFPUC has provided reports on 142 projects that have experienced such delays or other obstacles. At present, the SFPUC has 42 projects with active applications for distribu tion service that have experienced interconnection delays or increased project costs.

Thirty-four City projects have been released to obtain electric service from PG&E.

To mitigate the impacts of such connection delays and increased costs, the City is in vesting in its own distribution systems (see “POWER ENTERPRISE CAPITAL PROGRAM – 2024 Capital Plan Projects – Power Enterprise Projects – Transmission/Distribution/Alternative Transmission”). The City has also indicated an interest in acquiring the PG&E transmission and distribution systems serving San Francisco (see “THE PUBLIC UTILITIES COMMISSION – Proposed Transaction with Pacific Gas & Electric Company).

Casualty Losses. Damage to the Power Facilities from a variety of sources could impair or degrade the Power Enterprise’s ability to deliver electricity to its customers , perhaps for an extended period of time. The SFPUC maintains a risk management program which includes both insured and self -insured coverages; however, the program does not provide, and the SFPUC is not required to obtain, coverage for every type of loss. For example, damage attributable to seismic events and environmental pollution are excluded from such coverages. In situations where the SFPUC has not purchased commercial coverage, the Power Enterprise has a ‘self -retention’ program that it administers and retains budgeted resources internally to provide coverage for loss liabilities. See “FINANCIAL OPERATIONS – Risk Management and Insurance.” There can be no assurance i n the event of a casualty loss that insurance proceeds or the SFPUC’s budgeted resources will be available in amounts sufficient to make necessary capital repairs and mitigate other consequential losses.

Seismic Hazards. Certain facilities and customers o f the Power Enterprise are located in seismically active regions of California. See “– Seismic Considerations.” Other Natural and Man -Made Disasters. Other disasters, including without limitation wildfires, flooding and landslides, or man- made disasters, could interrupt operation of the Hetch Hetchy Project and other Power Facilities. See “THE HETCH HETCHY PROJECT – Wildfire Considerations.” Operational Liability. The SFPUC operates high voltage transmission lines through right of way corridors that extend approximately 134 miles across forested and populated areas between the Sierra Nevada Mountains and the Newark Substation. These high voltage transmission lines can cause fires, electrocution or other casualties if safe clearance zones are not maintained or are accidentally breached, potentially resulting in significant liability losses. The SFPUC performed a condition assessment of its transmission line right of way and has identified potential hazards (clearance detections), including those due to insufficient ground clearance and those caused by encroachments or structures improperly located by other local jurisdictions, utilities or individuals in proximity to the transmission lines. Immediate measures were taken to enhance warning notification and exclude access at detection points. The SFPUC has prioritized these detection points based on risk and developed a capital program to mitigate these clearance issues . The SFPUC anticipates that identified potential hazards are likely to be fully mitigated by 2035. See “POWER ENTERPRISE CAPITAL PROGRAM.” Safety and Security. Military conflicts and terrorist activities could also adversely impact the operations of the Power Enterprise or the finances of the SFPUC. The SFPUC plans and prepares for emergenc y situations and

90 related responses to maintain critical services. However, there can be no assurance that any such safety and security measures will prove adequate in the event of terrorist activities directed against the Power Facilities or that costs of security measures will not be greater than presently anticipated.

Statutory and Regulatory Compliance . The operation of the Power Facilities and a retail electric service program is subject to a variety of federal and State statutory and regulatory requi rements concerning matters such as reliability, reporting and the scheduling of electrical generation and transmission. Non -compliance with applicable laws or regulations could result in fines and penalties being assessed against the SFPUC or claims being made by private parties. Changes in the scope and standards for electricity generation, transmission and distribution systems such as the Power Facilities may also lead to administrative orders issued by federal or State regulators. Future compliance wi th increased regulatory requirements or enforcement orders could impose substantial additional operating expenses on the SFPUC.

Endangered Species. Various aquatic species (including native fishes) present in the Tuolumne River and Bay Area streams (e.g., Alameda, San Mateo and Pilarcitos Creeks) are either listed or candidates for listing under the State or federal endangered species acts. New listings and future enforcement actions under the acts, or conditions placed in permits to undertake construction for certain projects, could potentially directly affect water flow and electrical generation at the Hetch Hetchy Project. See “THE HETCH HETCHY PROJECT – FERC Proceedings Regarding Relicensing of the New Don Pedro Project.” Labor Actions . The Charter p rohibits SFPUC and other City employees from striking. Nonetheless, a work stoppage or other labor action could limit the SFPUC’s ability to operate the Power Facilities and adversely impact Revenues.

Skilled Labor. Operation of a utility requires a skilled workforce. Tight labor markets and work places in high-cost regions, such as the San Francisco Bay Area, or remote mountainous regions, such as where Hetch Hetchy Project operations are located , may increase the difficulty in recruiting and retaining a skilled workforce. The SFPUC is currently experiencing challenges in hiring and retaining certified professional electrical engineers with power systems experience and high voltage lineworkers. Although the Power Enterprise has been able to deliver uninterrupted power to its retail and wholesale customers, challenges in hiring and retaining a skilled workforce could impact the SFPUC’s ability to operate the Power Facilities.

Proposals to Restore Hetch Hetchy Valley. Some environmental organizations advocate for the removal of the Hetch Hetchy Reservoir and the restoration of Hetch Hetchy Valley. For example, an initiative ordinance qualified for the November 2012 City ballot with support from an organization called “Restore Hetch Hetchy” and would have required the City to identify alternative sources of water and, subject to certain additional conditions, end its use of the Hetch Hetchy Reservoir. That reservoir supplies the Kirkwood and Moccasin Powerhouses, which combined generate approx imately 57% of the electricity produced by the Hetch Hetchy Project. This initiative was rejected by the City’s voters.

Previous studies have examined proposals to remove Hetch Hetchy Reservoir. For example, a 2006 report by the California Department of Water Resources and the California Department of Parks and Recreation concluded that it is technically feasible to restore Hetch Hetchy Valley but cautioned financial feasibility . The study estimated that the total cost of such a project would range from $3 billion to $10 billion in 2006 (approximately $4 billion to $13 billion in 2020, adjusted for inflation) . The State agencies also concluded that the initial planning effort would take up to 10 years to complete and cost an additional $65 million. A pr oject to restore the Hetch Hetchy Valley likely would substantially increase the Power Enterprise’s annual cost of power.

In 2015, Restore Hetch Hetchy filed a complaint against the City alleging that the SFPUC’s operation of Hetch Hetchy Reservoir is an u nreasonable method of diversion of water in violation of the California Constitution because of the O’Shaughnessy Dam’s location within a national park. The case has been fully and finally resolved in the City’s favor. In addition, in 2019, Restore Hetch Hetchy commissioned a report that concluded that restoring Hetch Hetchy Valley and opening it to greater public use had an economic use value between $2 billion to $5 billion and an intrinsic passive -use value of over $100 billion over a 50 -year period . No formal federal, State or local policy proposals have been made in response to the report.

91 The SFPUC is unable to predict whether any similar initiatives, or similar federal or State legislation, might be approved by the voters or adopted by legislative bodies in the future, or the potential impact of such efforts on the SFPUC or the Power Enterprise. Any such legislation or litigation, if successful, could impose substantial additional operating and capital expenses on the Power Enterprise.

Inverse Condemnation
Under the doctrine of inverse condemnation (a legal concept that entitles property owners to just compensation if their private property is damaged by a public use), California courts have imposed liability on public agencies in legal actions brought by private property holders for damages caused by such public agencies’ infrastructure. In City of Oroville v. Superior Court of Butte County , 7 Cal. 5th 1091 (2019), however, the California Supreme Court held that damage to private property must be substantially caused by an inherent risk presented by the deliberate design, construction or maintenance of the public improvement . Thus, if the inherent risks associated with the SFPUC’s facilities, including water storage or transportation facilities or electrical distribution and transmission lines, as deliberately designed, constructed or maintained, are determined to be the substantial cause of damage to private property from flooding, fire or otherwise, and the doctrine of inverse condemnation applies, the SFPUC could be liable for direct and indirect property damage to private parties and such liability, in the aggregate, could be substantial. In addition to such claims for property damage, the SFPUC could also be liable for punitive damages and other damages under other theories of liability, including if the SFPUC were found to have been negligent, which liability, in the aggregate, could be substantial . See “THE HETCH HETCHY PROJECT – Wildfire Considerations.”
Seismic Considerations
Certain distribution and transmission facilities of the Power Enterprise and the Power Enterprise’s principal customers are located in seismically active regions of California. The San Andreas Fault lies immediately west of San Francisco, and the Hayward faul t is approximately fifteen miles to the east of San Francisco. A third major fault, the Calaveras Fault, is a branch of the Hayward Fault and lies east of the Hayward Fault.

During the past 150 years, the San Francisco Bay Area has experienced several maj or and numerous minor earthquakes. The largest was the 1906 San Francisco earthquake along the San Andreas Fault with an estimated magnitude of 8.2 on the Richter scale. The 1868 Hayward earthquake along the Hayward Fault had an estimated magnitude of be tween 6.8 and 7.0 on the Richter scale. The 1989 Loma Prieta earthquake along the San Andreas Fault had an estimated magnitude of 6.9 on the Richter scale. The most recent significant earthquake was the 2014 South Napa earthquake on the West Napa Fault, the northern extension of the Calaveras Fault, which had a magnitude of 6.0 on the Richter scale and an epicenter near the city of Napa, approximately 50 miles north of San Francisco. According to United States Geological Survey findings, a significant earthquake along these or other faults is probable during the period the 2023A Bonds will be outstanding. A significant earthquake in San Francisco could adversely affect power deliveries, short -term or long- term demand , or the ability of Power Enterprise customers to pay for electric service.

The Hetch Hetchy Project is located largely in Yosemite National Park, one of the most stable seismic zones in California, and there are no known major faults in the area in which i ts large generation facilities are located. The SFPUC therefore considers the risk of either a major earthquake in that region or an earthquake in the San Francisco Bay Area of a magnitude sufficient to have a significant impact on the Hetch Hetchy Projec t to be low. Many of the Hetch Hetchy Project’s generation and transmission facilities were constructed prior to 1980, however, and have not been retrofitted to meet current seismic standards. As the SFPUC continues to upgrade and replace facilities, design improvements to meet, or exceed, current seismic standards are included.

The SFPUC’s in -city assets, including for example certain distribution systems, renewable energy generating facilities and streetlights, along with facilities in other locations in the larger Bay Area, such as substations located near SFO, are expected to be subject to greater and more frequent seismic activity than the facilities of the Hetch Hetchy Project as sections of the Hayward Fault, San Andreas Fault and Calaveras Fault are near San Francisco.

92 With certain minor exceptions, the SFPUC does not maintain commercial earthquake insurance coverage for the Hetch Hetchy Project or other Hetch Hetchy Water and Power facilities. See “FINANCIAL OPERATIONS – Risk Management and Insurance.”
A major seismic event affecting critical operational facilities of the Power Enterprise could result in electrical generation service interruptions necessitating that the Power Enterprise purchase wholesale electricity, based on availability and market pri ce, to replace any generation capacity taken offline by the seismic event.

Particularly severe seismic events could also significantly impact the wholesale electricity market, available transmission resources and customer demand.

Climate Change
Impact on City of San Francisco. Numerous scientific studies on global climate change show that, among other effects on the global ecosystem, sea levels will rise , extreme temperatures, and extreme weather events will become more frequent as a result of increasing global temperatures attributable to atmospheric pollution.

The Fourth National Climate Assessment, published by the United States Global Change Research Program in November 2018 (“ NCA4”), finds that more frequent and intense extreme weather and climate- related events, as well as changes in average climate conditions, are expected to continue to damage infrastructure, ecosystems and social systems over the next 25 to 100 years. NCA4 states that rising temperatures, sea level rise, and changes in extreme events are expected to increasingly disrupt and damage critical infrastructure and property and regional economies and industries that depend on natural resources and favorable climate conditions . Disruptions could include more frequent and longer- lasting power outages, fuel shortages and service disruptions . NCA4 states that the continued increase in the frequency and extent of high- tide flooding due to sea level rise threatens coastal public infrastructure. NCA4 also states that expected increases in the s everity and frequency of heavy precipitation events will affect inland infrastructure, including access to roads, the viability of bridges and the safety of pipelines.

Sea levels will continue to rise in the future due to the increasing temperature of the oceans causing thermal expansion and growing ocean volume from glaciers and ice caps melting into the ocean. Between 1854 and 2016, sea level rose about nine inches according to the tidal gauge at Fort Point, a location underneath the Golden Gate Bridge. Weather and tidal patterns, including 100-year or more storms and king tides, may exacerbate the effects of climate related sea level rise. Coastal areas like San Francisco and the Bay Area are at risk of substantial flood damage over time, affecting private development and public infrastructure, including roads, utilities, emergency services, schools, and parks . As a result, the City could lose considerable tax revenues and many residents, businesses, and governmental operations along the waterfront could be displaced, and the City could be required to mitigate these effects at a potentially material cost.

Adapting to sea level rise is a key component of the City’s policies . The City and its enterprise departments have been preparing for future sea level rise for many years and have issued a number of public reports .

For example, in March 2016, the City released a report entitled “Sea Level Rise Action Plan,” identifying geographic zones at risk of sea level rise, providing a framework for adaptation strategies to confront these risks, and identifying data gaps and next steps . That study shows an upper range of end- of-century projections for permanent sea level rise, including the effects of temporary flooding due to a 100- year storm, of up to 108 inches above the 2015 average high tide . To implement the Sea Level Rise Action Plan, the Mayor’s Sea Level Rise Coordinating Committee, co- chaired by the Planning Department and the Port of San Francisco, worked together to develop the City’s Guidance for Incorporating Sea Level Rise into Capital Planning, Adopted September 2014, Revised December 2015, and Updated January 2020 and finalized the City’s Sea Level Rise Vulnerability and Risk Assessment, February 2020. The City is now working to fill some of the identified data gaps from the Sea Level Rise Action Plan, including working with Lawrence Berkeley National Laboratory to understand the effect of climate change on future storms for the Bay Area . Among the findings is that storm -total precipitation for the largest types of storms is expected to produce up to 17% more rainfall by 2050 and up to 37% more rainfall by 2100 .

For the smaller storms, the change is expected to be even larger with increases of up to 57% more rain by 2050 and 67% more rainfall by 2100. The final written reports are expected by late spring 2023. The City is transitioning toward efforts that would consolidate and coordinate sea level rise adaptation and overall resilience planning so that City departments can maximize efficiency and the co -benefits of investment dollars . The City has developed and continues to refine the governance structure of the Climate Resilience Program (also known as ClimateSF) to

93 improve how the City manages, finances and implements climate resilience projects and/or programs. Such efforts include the publication of a comprehensive Climate Action Plan in 2021. See “ POWER ENTERPRISE CAPITAL PROGRAM – Climate Action Plan.” For the City, climate resilience refers to a range of coordinated actions th at eliminate greenhouse gas emissions and adapt the built and natural environment, while achieving a more equitable and sustainable city.

In April 2017, the Working Group of the California Ocean Protection Council Science Advisory Team (in collaboration with several state agencies, including the California Natural Resource Agency, the Governor’s Office of Planning and Research, and the California Energy Commission) published a report, that was formally adopted in March 2018, entitled “Rising Seas in Califor nia: An Update on Sea Level Rise Science” (the “Sea Level Rise Report”) to provide a new synthesis of the state of science regarding sea level rise. The Sea Level Rise Report provides the basis for State guidance to state and local agencies for incorporating sea level rise into design, planning, permitting, construction, investment and other decisions . Among many findings, the Sea Level Rise Report indicates that the effects of sea level rise are already being felt in coastal California with more extensive coastal flooding during storms, exacerbated tidal flooding, and increased coastal erosion. In addition, the report notes that the rate of ice sheet loss from Greenland and Antarctic ice sheets, while highly uncertain as to timing, could pose a particular risk of sea level rise for the California coastline.

The City has already incorporated site-specific adaption plans in the conditions of approval for certain large waterfront development projects, such as the Candlestick/Hunters Point Shipyard, Treasure Island, Pier 70 and Mission Rock projects. Also, the City has started the process of planning to fortify the Port’s seawall from sea level rise, including an initial investment of about $8 million during fiscal year 2017 -18 and consideration of financing options. In November 2018, San Francisco voters approved a bond measure providing $425 million toward study and repair of the City’s sea wall against seismic threats and sea level rise. This Phase 1 funding provides early investment in long- term upgrades expected to cost more than $5 billion. In coordination with the Army Corps of Engineers, the City is also developing a Waterfront Resilience Plan to address immediate hazards including seismic and flooding, as well as longer term hazards like sea level ri se. This adaptive effort allows the City to act now to address risks to life safety and emergency response, while planning for mid- and long-term risks. It also allows the City to be responsive to community priorities, changes in science, and funding and partnership opportunities.

Portions of the San Francisco Bay Area, including San Francisco, are built on fill that was placed over saturated silty clay known as “Bay Mud.” This Bay Mud is soft and compressible, and the consolidation of the Bay Mud under the weight of the existing fill is ongoing. A report issued in March 2018 by researchers at the University of California, Berkeley, and the University of Arizona suggests that flooding risk from climate change could be exacerbated in the San Francisco Bay Area due to the sinking or settling of the ground surface, known as subsidence. The study claims that the risk of subsidence is more significant for certain parts of San Francisco built on fill.

Projections of the effects of global climate change o n San Francisco are complex and depend on many factors that are outside the City’s control . The various scientific studies that forecast climate change and its adverse effects, including sea level rise and flooding risk, are based on assumptions contained in such studies, but actual events may vary materially. Also, the scientific understanding of climate change and its effects continues to evolve .

Accordingly, the City is unable to forecast when sea level rise or other adverse effects of climate change (e.g., the occurrence and frequency of 100- year storm events and king tides) will occur . In particular, the City cannot predict the timing or precise magnitude of adverse economic effects, including, without limitation, material adverse effects on the bus iness operations or financial condition of the City and the local economy during the term of the 2023A Bonds. While the effects of climate change may be mitigated by the City’s past and future investment in adaptation strategies, the City can give no assurance about the net effects of those strategies and whether the City will be required to take additional adaptive mitigation measures . If necessary, such additional measures could require significant capital resources.

In September 2017, the City filed a lawsuit against the five largest investor -owned oil companies seeking to have the companies pay into an abatement fund to help fund infrastructure for climate change adaptation. In July 2018, the United States District Court for the Northern District of C alifornia denied the plaintiff’s motion for remand to State court and then dismissed the lawsuit, which the City had joined as a plaintiff . The plaintiffs appealed these decisions to the United States Court of Appeals for the Ninth Circuit, which in May 2020 vacated the

94 District Court’s order that found the case arose under federal law, remanding the case back to the District Court to determine if there were any other grounds for federal jurisdiction. In June 2021, the United States Supreme Court declined to review the Ninth Circuit’s decision . In October 2022, the District Court ordered the case remanded to State court and stayed the remand pending any appeals . The defendants have appealed the District Court’s decision to the Ninth Circuit. While the City believes that the claims in this lawsuit are meritorious, it can give no assurance regarding whether the lawsuit will be successful and obtain the requested relief from the courts, or contributions to the abatement fund from the defendant oil companies.

Impact on SFPUC Power Enterprise . The issue of climate change has become an important factor in hydroelectric generation in California . There is evidence that increasing concentrations of greenhouse gases have caused and will continue to cause a rise in temperatures around the world, which will result in a wide range of changes in climate patterns. Moreover, there is evidence that a warming trend occurred during the latter part of the 20th century and will likely continue through the 21st century. These changes will have a direct effect on hydroelectric generation in California, and numerous studies on climate and water in California have been conducted to determine the potential impacts. Based on these studies, climate change could result in the following types of water resources impacts in California, including impacts on the Regional Water System and associated watersheds which may, in turn, impact hydroelectric generation:
• Reductions in the average annual snowpack versus historical levels due to a rise in the snowline and a shallower snowpack in the low - and medium -elevation zones, such as in the Tuolumne River basin, and a shift in snowmelt runoff to earlier in the year;
• Changes in the timing, intensity and annual variability of precipitation , and an increased amount of precipitation falling as rain instead of as snow;
• Long-term changes in watershed vegetation and increased incidence of wildfires that could degrade water quality;
• Sea level rise, which could cause inundation of Regional Water S ystem assets and/or an increase in saltwater intrusion into groundwater basins;
• Increased water temperatures with accompanying adverse effects on some fisheries and water quality; and
• Changes in urban water demand.

However, other than the general trends li sted above, there is no clear scientific consensus on exactly how climate change will quantitatively affect SFPUC or State water supplies and, therefore, hydroelectric generation.

Regarding sea level rise, the City has developed policies for considering the potential impact of sea level rise on City assets, “Guidance for Incorporating Sea Level Rise into Capital Planning” that requires all assets in the City’s 10-year capital plan be evaluated for inundation under a variety of sea level rise scenarios plus a 1% storm.

The City, through its Sea Level Rise Action Plan, will be evaluating the best approaches and potential adaptive management plans for protecting public and private assets potentially subject to inundation caused by sea level rise and large storms.

Cybersecurity
City Measures. The City, like many other large public and private entities, relies on a large and complex technology environment to conduct its operations, and faces multiple cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks on its computing and other digital networks and systems (collectively, “Systems Technology”). As a recipient and provider of personal, private, or sensitive information, the City has been the subject of cybersecurity incidents that have resulted in or could have resulted in adverse consequences to the City’s Systems Technology and that required a response action to mitigate the consequences.

95 Cybersecurity incidents could result from unintentional events, or from deliber ate attacks by unauthorized entities or individuals attempting to gain access to the City’s Systems Technology for the purposes of misappropriating assets or information or causing operational disruption and damage . To mitigate the risk of business operations impact and/or damage from cybersecurity incidents or cyber -attacks, the City invests in multiple forms of cybersecurity and operational safeguards . In November 2016, the City adopted a City- wide Cyber Security Policy (the “ City Cyber Policy ”) to support, maintain, and secure critical infrastructure and data systems . The objectives of the City Cyber Policy include the protection of critical infrastructure and information, manage risk, improve cyber security event detection and remediation, and facilit ate cyber awareness across all City departments .

The City’s Department of Technology has established a cybersecurity team to work across all City departments, including the SFPUC, to implement the City Cyber Policy. The City Cyber Policy is reviewed periodically.

The City has also appointed a City Chief Information Security Officer (the “ CCISO”), who is directly responsible for understanding the business and related cybersecurity needs of the City’s 54 departments, including the SFPUC . The CCISO is respo nsible for identifying, evaluating, responding, and reporting on information security risks in a manner that meets compliance and regulatory requirements, and aligns with and supports the risk posture of the City. Mayor Breed addressed this issue on June 4, 2021 in Executive Directive 21- 02, Ensuring Strong and Organized City Defense Against Cybersecurity Attacks (“ Executive Directive 21-02”), which sets forth requirements for City departments to strengthen and improve the City’s cyber functions and progra ms.

SFPUC Measures. The SFPUC also relies on a large and complex technology environment to conduct its operations. Although the SFPUC maintains its own business and control networks that are separate from the City’s network, the SFPUC faces similar cybersecurity threats as the City, including hacking, viruses, malware and other attacks on its computing and other digita l networks and systems . To mitigate the risk of and damage from cybersecurity incidences or cyberattacks, the SFPUC abides by the City Cyber Policy and also maintains its own cybersecurity program (the “ SFPUC Cybersecurity Program ”). The SFPUC Cybersecur ity Program is based on National Institute of Standards and Technology cybersecurity guidance and employs industry standard Center for Internet Security critical security controls. In addition, control networks for the Water Enterprise and the Wastewater Enterprise adhere to the American Water Works Association Cyber Security guidance and the control networks for the Power Enterprise adhere to the North American Electric Reliability Corporation critical infrastructure protection controls . The SFPUC Cybers ecurity Program includes industry standard cybersecurity solutions, and the SFPUC’s technologies are continuously tested as part of an internal vulnerability program . The SFPUC’s technical controls are prescriptive for hardening servers, network devices and databases, and for addressing system administrator controls, mobile device management, incident response, security patching, antivirus, email, passwords, remote access, secure asset disposal, end user controls, and timely removal of access to systems and facilities for staff that leave employment at the SFPUC . In addition to the SFPUC’s controls and in alignment with Executive Directive 21-02, the SFPUC has deployed the city- wide-real-time threat monitoring and alerting solution. The SFPUC Cybersecurit y Program is periodically reviewed for effectiveness by independent consultants, most recently in June 2022. In addition, pursuant to the SFPUC’s policies, the City Services Auditor and independent cybersecurity auditors performed extensive penetration and vulnerability testing on the SFPUC’s business and control networks.

The SFPUC has also appointed a Chief Information Security Officer (the “ CISO”). In addition to working with the CCISO on cybersecurity policy development and solution sharing, the CISO is responsible for annual updates to the SFPUC’s policies, is charged with identifying and monitoring threats which are typically addressed by the SFPUC’s information technology services team, educating staff concerning vulnerabilities and constantly improving the SFPUC Cybersecurity Program.

While the SFPUC Cybersecurity Program is periodically reviewed, no assurances can be given by the SFPUC that such measures will ensure against other cybersecurity threats and attacks . Cybersecurity breaches could damage the SFPUC’s information security systems and cause material disruption to the SFPUC’s operations and the provision of SFPUC services. The costs of remedying any such damage or protecting against future attacks could be substantial. Further, cybersecur ity breaches could expose the SFPUC to material litigation and other legal risks, which could cause the SFPUC to incur material costs related to such legal claims or proceedings . The SFPUC currently purchases liability insurance covering cyber -losses and requires its technology vendors to purchase technology errors and omissions insurance coverage.

96 Construction Related Risks
Construction projects for the Power Enterprise are subject to ordinary construction risks and delays applicable to projects of their kind, including but not limited to (i ) inclement weather affecting contractor performance and timeliness of completion, which could affect the costs and availability of, or delivery schedule for, equipment, components, materials, labor or subcontract ors; (ii) contractor claims or nonperformance; (iii ) failure of contractors to execute within contract price; (iv ) work stoppages or slowdowns; (v) failure of contractors to meet schedule terms; (vi ) errors or omissions in contract documents requiring change orders; (vii ) the occurrence of a major seismic event; or (viii) unanticipated project site conditions, including the discovery of hazardous materials on the site or other issues regarding compliance with applicable environmental standards, and other na tural hazards or seismic events encountered during construction. Increased construction costs or delays could impact the Power Enterprise’s financial condition in general and the implementation of its capital programs in particular . Construction bids may also be higher than anticipated for budgeting purposes.

Commercial Paper Note Credit Facilities
Commercial Paper Notes. The bank credit facilities supporting the Commercial Paper Notes are subject to early termination upon the occurrence of certain events, including the failure of the SFPUC to make certain payments, the occurrence of certain bankruptcy or insolvency- related events, the reduction below specified levels or the withdrawal or suspension of ratings on certain obligations of the SFPUC payable f rom Net Revenues or certain other specified events of default. Upon the occurrence of such termination, one or more of the following would likely occur: (a ) the SFPUC would be prohibited from issuing additional notes supported by such credit facilities; (b) any outstanding reimbursement obligation of the SFPUC to the bank providing such facility for draws made for the payment of principal of or interest on Commercial Paper Notes could bear interest at rates higher than the rates borne by the C ommercial Paper Notes; and (c) any such outstanding reimbursement obligation of the SFPUC could be accelerated and become immediately due and payable. The Commercial Paper Notes and any reimbursement obligations are payable from Net Revenues on a basis subordinate to the Bonds.

See “OBLIGATIONS PAYABLE FROM REVENUES – Subordinate Obligations.” Limitations on Rate-Setting
The generation of Revenues sufficient to satisfy the requirements of the Indenture and to pay the principal of and interest on the 2023A Bonds will require the SFPUC to raise the rates payable by its customers. The increase or maintenance of rates is subject to various substantive and procedural requirements and limitations. See “FINANCIAL OPERATIONS – Rate-Setting Process; Rates.”
Raker Act Requirements
The Raker Act, enacted in 1913, granted the City the right to construct the Hetch Hetchy Project, including O’Shaughnessy Dam at Hetch Hetchy Valley in Yosemite National Park and related infrastructure, and to operate the dam and reservoirs to generate electricity and to supply water to the City. The Raker Act further grants the City the right to sell electricity generated by the Hetch Hetchy Project to meet municipal and pumping needs, including without limitation its own needs and the needs of the Districts, and for commercial purposes, provided that such electricity may not be sold for resale to a private corporation or an individual. See “THE HETCH HETCHY PROJECT.” Wholesale electricity deliveries to the Districts are on an “as available” basis and are required by the Raker Act only after satisfying the City’s own municipal and pumping needs. Any additional excess electricity supplies are sold to certain end -user retail customers and then on the wholesale market to public entities consistent with the requirements of the Raker Act. The Raker Act does not restrict the City’s purchase, use and sale of non - Hetch Hetchy Project electricity. See “THE POWER ENTERPRISE – Wholesale Electricity Sales.” Customer Concentration
The Power Enterpri se’s customer base consists of municipal customers, retail customers and long- term wholesale customers, with excess generation sold on the wholesale short -term markets primarily during the run -off

97 spring season. Since Fiscal Year 2017 -18, there have been no sales under long- term wholesale agreements with the Districts. See “THE POWER ENTERPRISE – Wholesale Electricity Sales.” On average, approximately 72% of charges for service are from municipal sales. While those revenues have historically remained relatively constant, in recent years, the Commission has approved rate increases to municipal customers. Retail sales have grown in recent years due to customer growth in redevelopment areas and customers transferring to Hetch Hetchy power service from other providers. See “FINANCIAL OPERATIONS – Power Sales Revenues; Other Revenues” and “– Limitations on Rate-Setting.” As the Power Enterprise’s retail customers are concentrated primarily in and around San Francisco, changes in the financial condition of, or the health of the economy in, San Francisco and, to a certain extent, the greater Bay Area, may have an amplified impact on the finances of the Power Enterprise. As many customers of the Power Enterprise are municipal and other governmental entities, factors impacting the financial condition of such entities may similarly have significant impact on the finances of the Power Enterprise . See also “THE POWER ENTERPRISE – Recent Factors Impacting Power Revenues.”
Increased Operation and Maintenance Expenses
There can be no assurance that the operation and maintenance expenses of the SFPUC, such as wages and salaries, pension and other benefits, purchased power costs, and purchased transmission and distribution service costs, will not increase, perhaps substan tially, due to price inflation, volatile investment or commodities markets, economic disruption or any other factors . See “FINANCIAL OPERATIONS – Operation and Maintenance Expenses” and “THE HETCH HETCHY PROJECT –Variability of Hydroelectric Generation.” Uncertainties of Forecasting Future Load Growth
The SFPUC’s ability to serve a growing electric load may require capital investment in, and construction of, distribution facilities in advance of customers using such facilities. In addition, in creased loads may require increased power purchases and may increase overall operating expenses. See “THE HETCH HETCHY PROJECT – Variability of Hydroelectric Generation” and “– Changes in Energy Prices.” In the case of redevelopment projects, most, but not all of the costs of this investment is born by the developer. The pace of the development of such projects can be effected by overall economic conditions outside the control of the SFPUC, making financial and capital planning challenging. Similarly, the p ace of customer response to state and local mandates, like electric vehicle adoption and conversion from gas to electric home heating and cooking is also difficult to predict, making financial and capital planning challenging. To address these challenges, the SFPUC applies standard industry practices in forecasting and sensitivity analysis, monitoring project progress, and maintaining ongoing communication with large project construction plans.

Changes in Energy Prices
Energy prices have at times been subject to volatile change for numerous reasons, including market forces beyond the control of the SFPUC. See “DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION.” Higher wholesale energy market prices may increase operating costs of the Power Enterprise and reduce Net Revenues.

The State’s electricity deregulation instituted pricing mechanisms that establish market clearing prices for all electricity not purchased under forward contracts. Electricity prices are set through this auction mechanism designed to account for supply, demand and congestion. When generation supply exceeds demand, electricity prices move lower. Typically, electricity prices are lower in the spring when hydroelectric generation is abundant and demand moderate. Electricity prices tend to be higher in the late summer and fall when regional and State -wide generating resources are more limited and demand is highest. In an average year, the Power Enterprise has excess generation to sell in the first half of the year and generally purchases wholesale electricity during the second half of the year to meet its electricity demand. The Power Enterprise accounts for the seasonal differential in electricity price in its budget request for annual electricity purchases and reflects such costs in the rates it charges customers.

98 The SFPUC generally sets electric rates for enterprise customers at a level competitive with the adopted PG&E rates for each customer class; however, there is currently no explicit linkage between the SFPUC’s rates and PG&E’s rates . See “THE POWER ENTERPRISE – Power Service in San Francisco – Pacific Gas & Electric Company.” PG&E is regulated by the CPUC for its retail services and by the FERC for its wholesale service.

PG&E’s rates for retail service to customers in California are established by the CPUC after public review to determine they are “just and reasonable.”
See also “– Limitations on Rate -Setting” and “DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION.”
Changes in Transmission and Distribution Service Costs
The SFPUC pays for transmission service to the CAISO and distribution service to PG&E. The rates and terms of these services are regulated by the FERC, and are subject to change. The SFPUC monitors and participates in the proceedings conducted by FERC to review and approve changes to the rates and terms of service to protect its interests in reasonable rates and terms. These rates and terms effect the SFPUC cost of service and, in some cases, the availability of service from SFPUC to its customers. See also “– Risks Related to Power Enterprise Operations and Facilities – Interconnection Delays and Costs.”
Uncertainties of the Electric Utility Industry
The operations of the Power Enterprise and its financial condition could be adversely affected by developments in the electricity markets and related regulation. See “DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION.”
Economic, Political, Social and Environmental Conditions Changes in economic political, social, or environmental conditions on a local, State, federal, and/or international level may adversely affect investment risk generally. Such conditional changes may include (but are not limited to) disruptions in business activity, consumer prices, or financial markets, unemployment rates, availability of skilled labor , technological advancements, shortages or surpluses in natural resources or energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or terrorism, environmental damage, and natural disasters.

Pandemics; COVID-19 Pandemic
A pandemic, epidemic or outbreak of an infectious disease can have significant adverse health and financial impacts on global and local economies . For example, the COVID -19 pandemic significantly impacted the City and resulted in prolonged stay- at-home orders that impacted each of the SFPUC’s enterprises, including the Power Enterprise. In addition to certain direct impacts on the operations and finances of the Power Enterprise, COVID -19 has had significant and varied impacts on general economic activity at the local, national and global levels, including supply chain and labor market disruptions. Such disruptions have, among other effec ts, resulted in increases in materials, labor, transportation and other costs across a wide number of sectors, as well as delays in delivery of projects and equipment . The Power Enterprise has experienced, and may in the future experience, increases in certain costs and delays in the delivery of equipment , such as transformers, as a result of COVID -19’s disruption of supply chains. Additionally, such disruptions may result in schedule delays for the Power Enterprise’s capital projects or increased costs for such projects.

Constitutional, Statutory and Charter Limitations
The SFPUC is subject to limitations imposed by the Charter and by the State Constitution and statutes.

Such limitations could adversely affect the financial condition of the Power Enterprise. See “CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS.”

99 Initiative, Referendum, Charter Amendments and Future Legislation and Regulations Under the State Constitution, the voters of California have the ability to initiate legislation and require a public vote on legislation passed by the California Legislature through the powers of initiative and referendum, respectively. Under the Charter, the voters of San Francisco can restrict or revise the powers of the SFPUC through the approval of a Charter a mendment. The SFPUC is unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the SFPUC or the Power Enterprise. See “CONSTITUTIONAL, STATUTORY AND CHAR TER LIMITATIONS.” See also “– Risks Related to Power Enterprise Operations and Facilities – Proposals to Restore Hetch Hetchy Valley.” In addition, the SFPUC and its operations are subject to various laws, rules and regulations adopted by the local, State and federal governments and their agencies. The SFPUC is unable to predict the adoption or amendment of any such laws, rules or regulations, or their effect on the operations or financial condition of the Power Enterprise.

Bankruptcy of the City
The SFPUC, being an enterprise department of the City, likely cannot itself file for bankruptcy. While an involuntary bankruptcy petition cannot be filed against the City, the City is only authorized to file for bankruptcy under certain circumstances. Should the City file for bankruptcy, there could be adverse effects on the holders of the 2023A Bonds.

To the extent that the Revenues are “special revenues” under the United States Bankruptcy Code (the “Bankruptcy Code”), then Revenues collected after the date of the bankruptcy filing should be subject to the lien of the Indenture. If any or all of the Revenues are determined not to be “special revenues,” then any such amounts collected after the commencement of the bankruptcy case will likely not be subject to the lien of the Indenture. The holders of the 2023A Bonds may not be able to assert a claim against any property of the City other than the Net Revenues, and if any or all of the Revenues are no longer subject to the lien of the Indenture, then there may be limited, if any, funds from which the holders of the 2023A Bonds are entitled to be paid.

The Bankruptcy Code provides that “special revenues” can be applied to necessary operating expenses of the project or system, before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents . It is not clear precisely which expenses would constitute necessary operating expenses, and any definition in the transaction documents may not be applicable.

If the City is in bankruptcy, the parties (including the Trustee and the holders of the 2023A Bonds) may be prohibited from taking any action to collect any amount from the City or to enforce any obligation of the City, unless the permission of the bankruptcy court is obtained. These restrictions may also prevent the Trustee from making payments to the holders of the 2023A Bonds from funds in the Trustee’s possession. The rate covenants (see “SECURITY FOR THE BONDS – Rate Covenant; Rates and Charges”) may not be enforceable in bankruptcy by the Trustee or the holders of the 2023A Bonds.

Revenues are deposited with and held by the Treasurer and may be commingled with other City funds. See “SECURITY FOR THE BONDS – Flow of Funds.” If the City goes into bankruptcy, the City may not be required to turn over to the Trustee any Revenues that are in its possession at the time of the bankruptcy filing. In addition, if the City has possession of Revenues (whether collected before or after commencement of the bankruptcy) and if the City does not voluntarily turn over such Revenues to the Trustee, it is not entirely clear what procedures the Trustee and the holders of the 2023A Bonds would have to follow to attempt to obtain possession of such Revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful.

The City may be able to borrow additional money that is secured by a lien on any of its property (including the Revenues), which lien could have priority over the lien of the Indenture, or to cause some of the Revenues to be released to it, free and clear of the lien of the Indenture, in each case as long as the bankruptcy court determines that the rights of the Trustee and the holders of the 2023A Bonds will be adequately protected.

100
If the City is in bankruptcy it may be able, without the consent and over the objection of the Trustee and the holders of the 2023A Bonds, to alter the priority, interest rate, principal amount, payment terms, collateral, mat urity dates, payment sources, covenants (including tax -related covenants), and other terms or provisions of the Indenture and the 2023A Bonds, as long as the bankruptcy court determines that the alterations are fair and equitable.

There may be delays in payments on the 2023A Bonds while the court considers any of these issues. There may be other possible effects of a bankruptcy of the City that could result in delays or reductions in payments on the 2023A Bonds, or result in losses to the holders of the 2023A Bonds. Regardless of any specific adverse determinations in a City bankruptcy proceeding, the fact of a City bankruptcy proceeding could have an adverse effect on the liquidity and value of the 2023A Bonds.

The SFPUC invests Revenues in the City’s Pooled Investment Fund. See “FINANCIAL OPERATIONS – Investment of SFPUC Funds .” In the event of a bankruptcy of the City, there may be delays or reductions in payments on the 2023A Bonds.

Limitations on Remedies
The remedies available to the owners of the B onds upon the occurrence of an event of default under the Indenture in many respects depend upon judicial actions which are themselves often subject to discretion and delay and could prove both expensive and time consuming to obtain. In addition to the limitations on remedies contained in the Indenture, the rights and obligations under the Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against charter cities and counties in California. The opinion to be delivered by Bond Counsel, concurrently with the issuance of the 2023A Bonds, that the 2023A Bonds constitute valid and binding limited obligations of the SFPUC and the Indenture constitutes a valid and binding obligation of the SFPUC will also be subject to such limitations and th e various other legal opinions to be delivered concurrently with the issuance of the 2023A Bonds will be similarly qualified. See “APPENDIX C – PROPOSED FORM OF OPINION OF BOND COUNSEL.”
If the SFPUC fails to comply with its covenants under the Indenture or to pay principal of or interest on the 2023A Bonds, there can be no assurance that the available legal remedies will be adequate to protect the interests of the holders of the 2023A Bonds.

Loss of Tax Exemption/Risk of Tax Audit of Municipal Issuers As discussed under “ TAX MATTERS,” interest on the 2023A Bonds could fail to be excluded from the gross income of the owners thereof for purposes of federal income taxation retroactive to the date of the issuance of the 2023A Bonds as a result of future acts o r omissions of the SFPUC in violation of its covenants to comply with requirements of the Code, as amended. Should such an event of taxability occur, the 2023A Bonds are not subject to redemption or any increase in interest rate and could remain outstanding until maturity.

The Internal Revenue Service (the “IRS ”) has an expanded program for the auditing of tax- exempt securities issues, including both random and targeted audits. It is possible that the 2023A Bonds could be selected for audit by the IRS. It is also possible that the market value of the 2023A Bonds might be affected as a result of such an audit of the 2023A Bonds (or by an audit of similar securities).

Change in Tax Law
As discussed under “ TAX MATTERS ,” current and future legislative proposa ls, if enacted into law, clarification of the Code or court decisions may cause interest on the 2023A Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest.

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Failure to Maintain Credit Ratings
Certain rating agencies have assigned ratings to the 2023A Bonds. The ratings issued reflect only the views of such rating agencies. Any explanation of the significance of these ratings should be obtained from the respective rating agencies. See “RATINGS.” There is no assurance current ratings will continue for any given period or that such ratings will not be revised downward or withdrawn entirely by the rating agencies if, in the respective judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings could be expected to have an adverse effect on the market price or the marketing of the 2023A Bonds. The SFPUC undertakes no obligation to maintain its current credit ratings on the 2023A Bonds or to oppose any such downward revision, suspension or withdrawal.

Secondary Market
There can be no guarantee that there will be a secondary market for the 2023A Bonds or, if a secondary market exists, that the 2023A Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse developments or economic prospects connected with a particular issue, secondary trading practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Uncertainties of Projections, Forecasts and Assumptions Certain information contained in this Official Statement is based upon assumptions and projections.

Projections and assumptions are inherently subject to significant uncertainties. Inevitably, some assumptions will not be realized and unanticipated events and circumstances may occur and actual results are likely to differ, perhaps materially, from those projected. Accordingly, such projections are not necessarily indicative of future performance, and the SFPUC assumes no responsibility for the accuracy of such projections. See “FORWARD LOOKING STATEMENTS.”
Other Risks
The discussion in this section, “CERTAIN RISK FACTORS,” is not meant to be a comprehensive or definitive list of the risks associated with an investment in the 2023A Bonds. There may be other risks inherent in ownership of the 2023A Bonds in addition to those described in this section. Investors are advised to read the entire Official Statement in order to obtain information necessary to make an investment in the 2023A Bonds.

DEVELOPMENTS IN THE ELECTRICITY MARKETS AND REGULATION
Structure of the Energy Market Today
California’s electric system is part of the Western grid, one of three interconnected electric systems that cover the continental United States (the others being the Eastern grid and the Texas Interconnection). In addition to all of California, the Western grid consists of all or part of 13 other Western states, two Canadian provinces, and Baja California, Mexico. The ability of electricity to flow across this grid, subject to transmission availability, creates a regional market for electricity.

Within the Western grid, there are 38 balancing authorities. A balancing authority is an entity responsible for operating a portion of the grid (called a transmission control area or balancing authority area). The balancing authority matches electric generation with load and maintains the electric frequency of the grid.

The CAISO is the largest of the balancing authorities in the western interconnection, handling an estim ated 35 percent of the electric load in the West. The CAISO manages the flow of electricity across the high -voltage, long-distance electric transmission lines that make up 80 percent of California’s and a small part of Nevada’s electric grid. The CAISO b egan operations in 1998 as a result of FERC orders requiring transmission owners to provide nondiscriminatory access to all transmission customers and California’s restructuring of the electric industry

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with the adoption of AB 1890 in 1996. AB 1890 encouraged California’s three largest investor -owned electric utilities to turn over operational control of their transmission systems to the CAISO. The goal of AB 1890 was to make California’s electric transmission system available on an open and non -discriminatory basis to all generators and electric consumers. The CAISO is a non- profit public benefit corporation overseen by a five -member board appointed by the Governor of the State and confirmed by the State Senate. It is regulated by the FERC.

The CAISO al so operates California’s wholesale electricity market, using state -of-the-art technology to match demand with the lowest cost energy available at any given time . The CAISO runs an hourly day- ahead market and runs real -time markets every fifteen minutes an d every five minutes, facilitating over 28,000 market transactions a day . Although most of California’s electric needs are met through longer -term business relationships (such as resource ownership or long- term contracts), the CAISO day -ahead and real -time energy markets provide indicators of the current market price of electricity. The market clearing prices reflect limitations in the transmission system; if an expensive generator must operate because there is inadequate transmission capacity to bring cheaper generation into a constrained area, then all the generators in the constrained area are paid the price bid by the most expensive generator that needs to operate within the constrained area.

The CAISO began financially binding operation of the W estern Energy Imbalance Market (the “WEIM”) on November 1, 2014. In the beginning, resources were only optimized across the CAISO and PacifiCorp balancing authority areas . Since that time, NV Energy, Arizona Public Service, Puget Sound Energy, Portland General Electric, Idaho Power, Powerex, Balancing Authority of Northern California, Salt River Project, Seattle City Light, Public Service Company of New Mexico, Northwestern Energy, Los Angeles Department of Water and Power, and TID have become participants in t he WEIM. The footprint now includes portions of Arizona, California, Idaho, Nevada, Oregon, Utah, Washington, and Wyoming, even extending to the Canadian border . The WEIM allows load-serving entities located outside of the CAISO to access the CAISO’s real -time energy market which leads to a better balance of supply and demand. The CAISO board of governors and the five -member WEIM governing board jointly govern the real-time market rules affecting the WEIM.

The CAISO also ensures the reliability of its electric system by imposing resource adequacy (“ RA”) standards upon all load- serving entities within the CAISO. The RA requirements obligate each load- serving entity to procure in advance a specified amount of electricity capacity that must be made available to the CAISO to schedule and dispatch as needed to meet electricity demand. The CAISO currently has three RA obligations that the SFPUC must meet:
• A system-wide obligation to provide capacity sufficient to meet the SFPUC’s forecasted peak dem and plus a sufficient reserve margin (currently set at 15% of peak demand); • A flexible capacity obligation to ensure that a pre -determined portion of the capacity used to meet the system-wide obligation is capable of being dispatched and ramping up and down over the course of the day to meet fluctuations between supply and demand; and • A local capacity requirement to ensure that the CAISO has sufficient capacity in certain sub -regions to ensure reliable service in the event of local reliability issues.

The CAISO also engages in long- term transmission planning, identifying upgrades or expansions that are needed to meet reliability requirements, providing economic benefits, connecting new generation to the grid and/or achieving public policy goals (such as the development of new renewable generation).

The Power Enterprise’s Relationship to the CAISO
Almost all of the Power Enterprise’s electric loads are scheduled through the CAISO transmission system.

The Power Enterprise uses the CAISO’s transmission system t o deliver electricity to the Power Enterprise load , as well as to buy and sell surplus electricity. The SFPUC’s high -voltage electric transmission lines are not under the operational control of the CAISO, so the SFPUC and the CAISO have an agreement that coordinates the operation of the SFPUC’s transmission lines with the CAISO system. Some of the SFPUC’s transmission lines are also

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connected to two other balancing authorities. These are TID, which operates as its own balancing authority area, and the Balancing Authority of Northern California, which includes MID.

As it relates to NERC, the CAISO also serves as the SFPUC’s reliability coordinator, balancing authority and planning coordinator.

The Power Enterprise receives wholesale distribution service fr om PG&E under a FERC -approved tariff and receives transmission service over PG&E’s facilities under PG&E’s and the CAISO’s open access transmission tariffs. See “THE POWER ENTERPRISE – Transmission and Distribution.” Resource Adequacy Requirements
The RA compliance program is intended to ensure there is sufficient electric generating capacity available to the CAISO to meet demand at all times. The RA program requires Load Serving Entities (“LSEs”), such as the Power Enterprise to secure sufficient RA capacity resources to meet forecasted monthly peak demand plus a planning reserve margin to account for unexpected outages, higher than anticipated demand, and other contingencies.

Entities serving electric load in CAISO territory must comply with the RA compliance program requirements. However, the CPUC and other Local Regulatory Authorities (“ LRAs”) have the authority to regulate their jurisdictional LSEs with their own RA requirements, as long as they meet CAISO’s minimum standards.

There are currently three RA products that the Power Enterprise must procure to meet the RA program requirements: (1) system RA, ensuring sufficient capacity at the CAISO system- wide level (“System RA”); (2) local RA, ensuring sufficient capacity within smaller transmission -constrained geographic areas throughout PG&E’s planning area in northern and central California (“ Local RA”); and (3) flexible RA, ensuring sufficient ramping capacity to address short periods of high demand or quickly dropping demand (“ Flexible RA”). The Hetch Hetchy Project provides sufficient capacity to meet its own System RA ; however, it is not within any of the CAISO’s transmission-constrained geographic areas throughout PG&E’s planning area, and therefore cannot be used to meet Local RA obligations.

Extended Day-Ahead Market
The CAISO is investigating extending the operation of its day- ahead market to the entire WEIM footprint, with the expectation that doing so would allow for a more efficient unit commitment, reductions in required reserves and more efficient utilization of the transmission system . Before it could do so, the CAISO would need to address important issues such as transmission access charge cost allocation, congestion revenue rights allocation, minimum RA requirements, participation commitment requirements, and governance issues . The SFPUC is participating in the ongoing stakeholder process to advocate for its interests and to anticipate potential impacts of proposed rules changes.

On-Going Market Changes
The CAISO market is continually evolving to reflect changes in business needs, technological changes, and federal law and regulation.

Federal Law and Regulation
Federal Energy Regulatory Commission
The Federal Power Act, as amended, gives FERC the authority to regulate the interstate transmission of electric energy and the sale, at wholesale, of electric energy. FERC is vested with “jurisdiction over all facilities for such transmission or sale” as well as the requirement to ensure that the rates and charges for these services as well as “any rule, regulation, practice, or contract affecting such rate, charge or classification,” are not “unjust, unreasonable, unduly discriminatory or preferential.”

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Under the Federal Power Act, states retain authority over “any other sale of electric energy” and facilities used for “generation of electric energy,” “local distribution” or “transmission of electric energy in intrastate commerce.” POUs like the SFPUC are also generally exempt from FERC regulation, except for regulations pertaining to electric system reliability. POUs are affected by FERC regulation, however, to the extent they rely on FERC-regulated transmission services or energy purchases to meet their needs. Additionally, FERC has adopted a reciprocity requirement, under FERC Order 888, that a POU that benefits from the open -access requirements of a FERC-regulated transmission provider must offer comparable open- access. To date none of the Power Facilities or related transmission lines have been subject to a comparable open-a ccess request. In addition, certain FERC regulatory requirements, such as the licensing of dams, are applicable to POUs, but not to the Hetch Hetchy Project as a result of specific exemptions for such facilities in the Federal Power Act.

FERC is the prima ry regulatory agency overseeing the rates, rules and regulations that the CAISO has established for its operation. As noted above, the Power Enterprise relies on the CAISO’s transmission system to deliver energy to its load, and is subject to the CAISO’s resource adequacy requirements which are also FERC - regulated. FERC is also responsible for regulation of the wholesale energy market. This regulation affects the price that the Power Enterprise may pay for energy purchases from FERC -regulated entities, a s well as non -Raker Act energy sales. The Power Enterprise’s wholesale sales of excess energy to other public entities (which includes all sales of electric energy subject to the Raker Act) are not subject to FERC jurisdiction, but the price for such sale s is generally influenced by the broader Western energy market which is largely under FERC jurisdiction. Power Enterprise wholesale sales to other public entities may also involve the use of FERC -regulated transmission services to deliver the electricity.

When Congress initially enacted the Federal Power Act in 1935, electric utilities were mostly vertically integrated firms that constructed and operated their own generation, transmission and distribution facilities . The firms acted as separate, local monopolies, and consumers paid a single “bundled” rate for delivered electricity.

Sixty years later, the electric industry had experienced fundamental changes : electric systems had become increasingly interconnected, long- distance transmission had become increasingly economical, and smaller, lower - cost electric generating plants had begun to emerge as competitors to the vertically integrated utilities.

FERC responded to these changes and market conditions by adopting reforms to the electric industry that were designed to promote competition and create a competitive wholesale market for electricity. In FERC Order 888, FERC required each transmission provider subject to FERC regulation to “functional[ly] unbundle” its wholesale generation and transmission services and file an open -access transmission tariff that would allow non - discriminatory access to each utility’s transmission system. The goal of this change was to allow customers to have the benefits of competitively priced generation . To promote developm ent of competitive markets, FERC encouraged the formation of regional transmission organizations and independent system operators such as the CAISO to coordinate the use, operation, and planning of a region’s transmission system.

One of the results of FERC Order 888 is a competitive Western -wide wholesale energy market. FERC has adopted a pro- competition policy of letting prices in these markets be set by market forces, subject to FERC retaining authority to address instances of market abuse and manipulation.

FERC has also moved to make the market for transmission services more efficient and competitive. FERC Order 890 requires each FERC -regulated transmission provider to establish an open, transparent and coordinated transmission planning process. The CAISO utilizes a yearly transmission planning process to meet its requirements under FERC Order 890. FERC Order 1000 goes a step further and now requires inter -regional transmission planning, the development of methodologies to allocate the costs of inter-r egional transmission facilities as well as allowing for competition among transmission developers to build new projects identified as needed as a result of the transmission planning process.

North American Electric Reliability Corporation
The Energy Policy Act of 2005 required FERC to certify an Electric Reliability Organization (“ ERO”) to develop mandatory and enforceable reliability standards (“ Reliability Standards ”), subject to FERC review and approval. On July 20, 2006, FERC certified NERC as an ERO. The reliability standards developed by NERC and adopted by FERC apply to entities included on NERC’s Compliance Registry of users, owners and operators of the

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Bulk Power System that are material to the reliable operation of the Bulk Power System, as more specifically set forth in each Reliability Standard. Many Reliability Standards have since been approved by FERC.

FERC has adopted mandatory electric reliability standards developed by the North American Electric Reliability Corporation (“ NERC”) and enfor ced in the western region of the United States by the Western Electric Coordinating Council (“ WECC”). These standards require all entities that are a part of the bulk power system to demonstrate their ability to ensure reliability for all operations. The SFPUC owns both transmission and generation assets that are part of the bulk electric system and therefore are required to register and demonstrate compliance (or plans to mitigate non-compliance) in several operational areas. The SFPUC is subject to over 1,000 requirements.

NERC and its Regional Entities (“ Regional Entities ”) may enforce the Reliability Standards, subject to FERC oversight or FERC may independently enforce the Reliability Standards. The WECC is the Regional Entity for the western region. Potential monetary sanctions include fines of up to $1.31 million per violation per day.

FERC has provided NERC and the Regional Entities with the discretion necessary to assess penalties for such violations within an appropriate range, pursuant to NERC ’s FERC-approved Sanction Guidelines. In exercising its independent enforcement authority, FERC applies its own September 17, 2010, Revised Policy Statement on Penalty Guidelines. FERC clarified that it would not apply its Revised Policy Statement on Penalty Guidelines in its review of penalties assessed by NERC under the NERC Sanction Guidelines.

The SFPUC’s compliance program is audited every three years by WECC. In June 2023, WECC completed its 2023 Compliance Audit covering the period May 2020 through February 2023. The audit concluded with “No Findings” for all requirements within audit scope, and included two positive observations on the SFPUC’s compliance program.

FERC Hydroelectric Licensing
Under the Federal Power Act, FERC is also responsible for the licensing of hydroelectric plants within the United States. The Hetch Hetchy Project, however, predates FERC’s authority and is exempt from FERC regulation pursuant to specific “grandfathering” provisions in the Federal Power Act. The New Don Pedro Project, owned and operated by the Districts, is subject to FERC regulation and is currently undergoing re -licensing. See “THE HETCH HETCHY PROJECT – FERC Proceeding Regarding Relicensing of the New Don Pedro Project.” California State Law and Regulation
State Constitution
Article XI, Section 9(a) of the State Constitution allows municipal corporations, such as the City, to “establish, purchase, and operate public works to furnish its inhabitants with light, water, power, heat, transportation, or means of communication.” As a result, the SFPUC has significant discretion to establish its own rules and procedures for operating its electric utility subject to those areas where either the State has asserted jurisdiction or there is an issue of federal pre-emption.

The following is a list of California legislation that affects the Power Enterprise’s electric operations and the SFPUC’s compliance with these requirements.

Assembly Bill 32; California Air Resources Board Scoping Plan; Cap and Trade State Assembly Bill 32 (2006) (“AB 32”), known as the Global Warming Solutions Act of 2006, requires the California Air Resources Board (“CARB ”) to adopt policies and regulations to reduce GHG emissions to 1990 levels by 2020. On December 11, 2008, CARB adopted a “scoping plan” identifying the market structures, prescriptive regulations, fees and voluntary measures that need to be developed and implemented by CARB and other State agencies to achieve this goal. Among the measures identified in the scoping plan that could potentially affect the SFPUC are proposals to increase energy efficiency, promote renewable energy and distributed generation, and the increased electrification of motor vehicles.

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The scoping plan included a cap- and-trade system covering ap proximately 85% of all GHG emissions in California that was approved by CARB on December 16, 2010 and became enforceable starting on January 1, 2013.

In 2014 the program was expanded to include the province of Quebec, Canada.

For electric utilities, the c ap-and-trade compliance obligation is placed on the “first deliverers” of electric energy. First deliverers include those who generate electric energy in state or those who first import energy into California from out -of-state. As the Power Enterprise’s electric generation resources do not emit CO2 and the Power Enterprise does not purchase electric energy directly from out -of-state, the Power Enterprise has no compliance obligation under the program and is not a covered entity. GHG emissions from the Power Enterprise’s operation of the natural gas system at Treasure Island are also below the 25,000 ton CO2 level that would trigger a compliance obligation.

Under the cap -and-trade program, electric distribution utilities (“ EDUs”) such as the SFPUC receive a designated amount of allowances set by regulation. One purpose of these allowances is to at least partially compensate EDUs for the higher prices they may incur for purchasing electric energy that now has a compliance obligation. The EDU must either use the allowances to meet its own compliance obligations or put its allowances up for sale at quarterly auctions run by CARB. These allowances also serve a second purpose of covering for any potential “emissions leakage” from acquiring electricity through t he WEIM. CARB directly reduces the allowance allocation to EDUs to reflect their electricity purchases through the WEIM. All remaining allowances provided to EDUs must be used to benefit the utility’s ratepayers. Because the SFPUC does not have a compliance obligation under the program, the SFPUC must sell all of its remaining allowances through the auction process and uses the proceeds to benefit ratepayers as required by the cap-and-trade program.

Senate Bill 32; Assembly Bill 398; Assembly Bill 1279; California Air Resources Board Scoping Plan; Cap and Trade
State Senate Bill 32 (2016) (“SB 32”), known as the California Global Warming Solutions Act of 2016, requires GHG emissions reductions target of at least 40 percent below 1990 levels by 2030. State Assembly Bill 398 (2017) (“AB 398 ”) codified the continuation of the cap and trade program and required some post 2020 modifications to the program. State Assembly Bill 1279 (2022), known as the California Climate Crisis Act, requires the State to achieve net zero GHG emissions by 2045. As required by AB 32, CARB continues to update its scoping plan at least every five years identifying potential future measures to reduce GHG emissions. In its most recent scoping plan update conducted in 2022, CARB proposed changes to the cap- and-trade program to align the program with the accelerated 2030 targets and the net zero GHG targets by 2045. As part of these changes, more ambitious reductions are anticipated from the electricity sector. CARB has released a no tice in April 2023 confirming that changes are expected to the cap-and-trade program, but a formal rulemaking has not yet commenced.

Senate Bill 350; Integrated Resource Plan
State Senate Bill 350 (2015) requires all of California’s large POUs, including the Power Enterprise, to submit an Integrated Resources Plan (“ IRP”) that shows how each POU will meet California’s environmental and energy policy goals . The IRP is required to be updated once every five years . The current IRP for Hetch Hetchy Power was filed in February 2019 and subsequently approved by the California Energy Commission in June 2019.

The current IRP described the Power Enterprise’s plans to continue to provide 100% zero- GHG renewable energy to its customers through 2030, comply with RPS program requirements, and provide reliable electric service to meet its customer needs. The SFPUC is currently working on the next IRP, which is due in 2024.

Renewable Portfolio Standard
The California Renewable Energy Resources Act (the “CRERA”), effective as of December 10, 2011, established requirements for the procurement of eligible renewable resources (“Renewable Portfolio Standards” or “RPS”) for California’s retail sellers of electricity, including local POUs such as the Power Enterprise. Eligible renewable resources include wind, solar, geothermal, biomass, wave/tidal energy and hydroelectric generation that meets certain criteria.

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The CRERA generally requires all electric utilities, CCAs and energy service providers to procure 33% of their retail energy needs from renewable energy by 2020. State Senate Bill 350 (2015) set a new RPS target for 2030 of 50% which was further increased to 60% by the enactment of State Senate Bill 100 (2018) (“ SB 100”). SB 100 also established a policy to achieve 100% of total retail sales from eligible renewable energy resources and zero - carbon resources by December 31, 2045. The CRERA recognized that imposing a 60% RPS obligation upon the Power Enterprise w ould have resulted in the Power Enterprise having to displace one zero- GHG energy resource (Hetch Hetchy Project hydroelectric energy) with another zero -GHG resource (eligible renewable resources) without any reduction in GHG emissions and significantly increased costs to the SFPUC. As a result, the CRERA established an alternative compliance obligation for the Power Enterprise. Provided that the Power Enterprise receives greater than 67% of its electricity demands from the Hetch Hetchy Project, the SFPUC is only required to procure eligible renewable energy resources for its electric demands unmet by the Hetch Hetchy Project. Since the enactment of CRERA in 2011, the Power Enterprise has met its RPS obligations for every year, historically meeting about 97% of its electric demands from its Hetch Hetchy Project generation, and in most years close to 100%. As a result, the Power Enterprise generally needs to procure only small amounts of eligible renewable energy annually to meet its RPS obligations under the CRERA. Almost all of this need can be met by RPS -eligible generation from Power Enterprise’s Kirkwood Powerhouse generating units. The Power Enterprise has additionally accumulated a significant surplus of renewable energy credits from this generation that can be banked and used for future compliance if needed. This banked generation makes it unlikely that the Power Enterprise would need to procure additional RPS- eligible energy from third -parties and if this were needed, the amounts to be acquired would be relatively small and consistent with the Power Enterprise’s budget for purchased power.

For POUs, the initial responsibility for enforcing the CRERA’s requirements is placed upon the POU. To ensure that the Power Enterprise can meet applicable RPS requirements, the SFPUC adopted an enforcement program on December 13, 2011 (Resolution 11-0202), which directed staff to develop a procurement plan that was also adopted by the Commission (Resolution 12-0217). The procurement plan identifies the Power Ente rprise’s requirements under the RPS, identifies the exceptions allowed under the RPS that would allow the Power Enterprise to defer or delay meeting the RPS requirements, establishes the process for forecasting and procuring any additional RPS-eligible supplies needed to meet the RPS requirements (including unexpected contingencies) .

Resource Adequacy Requirements
Section 9620 of the California Public Utilities Code requires each POU to develop its own resource adequacy requirement and to “prudently plan for and procure resources that are adequate to meet its planning reserve margin and peak demand and operating reserves, sufficient to provide reliable electric service to its customers.” This requirement is similar to the RA requirements established by the CAISO. See “ – The Power Enterprise’s Relationship to the CAISO – Resource Adequacy Requirements.” FERC has authorized the CAISO to apply its own RA rules to any utility that has not adopted an RA program. To comply with Section 9620 of the California Public Utilities Code, on May 23, 2006, the SFPUC adopted, in its Resolution 06- 0087, an Interim Utility Resource Adequacy Plan. The Interim Utility Resource Adequacy Plan established a 15% reserve margin and established forecasting and reporting requirements to meet the California Public Utilities Code’s requirements. The Power Enterprise must demonstrate compliance with resource requirements set by the CAISO.

As discussed above, the Hetch Hetchy project complies with the CAISO’s RA program. The Hetch Hetchy Project, as discussed above, generates enough System RA attributes to meets its obligations, but not enough to meet its Flexible or Local RA obligations.

Energy Loading Order
State Senate Bill 1037 (2005), effective January 1, 2006, requires POUs to first acquire all available energy efficiency, demand reduction and renewable resources that are cost effective, reliable and feasible prior to procuring new energy generation resources. This requirement is similar to the Energy Action Plan adopted jointly by the CPUC, California Energy Commission and California Power Authority to establish an “energy loading order” for California’s electric utilities that focuses first on decreasing electricity demand by increasing energy efficiency and demand response, then meeting new generation needs first with renewable and distributed generation resources, and lastly with clean fossil-fueled generation.

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In 2008, the Board of Supervisors, in its Resolution 227-08, adopted the policy goals outlined in the Energy Action Plan and energy loading order to guide SFPUC energy procurement . San Francisco’s 2011 Updated Electricity Resource Plan, approved by the SFPUC in its Resolution 11-0035 and by the Board of Supervisors in its Resolution 349-11, reaffirmed the use of the energy loading order to meet future energy needs.

State Assembly Bill 2021 (2006), signed by then- Governor Schwarzenegger on September 29, 2006, requires that POUs establish, report and explain the basis of their annual energy efficiency and demand reduction targets over a 10- year planning horizon. The SFPUC submits annual reports to the California Energy Commission through the California Municipal Utilities Association, which submitted its 16 th Edition report in 2022.

Community Choice Aggregation Service
State law allows a local government entity to sell electricity directly to customers within the entity’s jurisdiction through a CCA program when the customers in that jurisdiction are served by a for profit, investor - owned utility. Under a CCA program, a public entity could develop a portfolio of energy supplies that it purchased or produced to meet specific local targets for renewable energy or to meet other policy and service objectives.

Transmission and distribution services would continue to be provided by the investor -owned utility subject to CPUC tariffs. Under State law, customers within a CCA’s jurisdiction may choose to opt- out of the program.

The SFPUC began serving customers through CleanPowerSF, a CCA program, in May 2016. See “THE PUBLIC UTILITIES COMMISSION – Organization, Purposes and Powers – CleanPowerSF.” CleanPowerSF is subject to CPUC rules and oversight for implementing State laws including those related to RA, IRP, and RPS, and is “Separate System” under the Indenture. See “INTRODUCTION – The San Francisco Public Utilities Commission and the Power Enterprise” and “THE PUBLIC UTILITIES COMMISSION – Organization, Purposes and Powers – CleanPowerSF.” The development of the CCA market in California, with 25 operational CCA programs servi ng more than 14 million customers in over 200 cities and counties throughout California , has resulted in more Raker Act-eligible wholesale counterparties for the Power Enterprise.

Energy Storage
State Assembly Bill 2514 (2010) (“AB 2514”) requires POUs to determine appropriate targets, if any, to procure viable and cost -effective energy storage systems to be achieved by December 31, 2016, and December 31, 2020. In response to AB 2514, the SFPUC determined in its Resolution 14-0147 that it had no near-term need for energy storage services apart from the potential use of energy storage to fulfill Local Resource Adequacy Capacity requirements, which was not cost -effective at that time. The SFPUC also decided to continue to evaluate energy storage as a procurement option going forward and to identify a pilot energy storage project . The Power Enterprise installed a solar and battery storage system in San Francisco, which became operational in 2021.

State Law Requirements Affecting Investor-Owned Utilities The California State Constitution ( Article XII) gives the CPUC the authority to regulate “[p]rivate corporations and persons that own, operate, control, or manage the production, generation, transmission, or furnishing of heat, light, water [or] power directly or indirectly to or for the public.” The CPUC does not have authority over the rates and services offered by POUs such as the Power Enterprise, but the CPUC’s regulation of investor-owned utilities, particularly PG&E, can affect the SFPUC’s operations and programs, especially as to safety standards.

Much of the SFPUC’s electric load is served off of PG&E’s distribution system, and the SFPUC relies on PG&E’s transmission system (albeit under operational control of the CAISO) to deliver energy supplies to its load.

These wholesale transactions are regulated by FERC. See “– Federal Law and Regulation.” Where SFPUC provides electric service to retail customers in the City, it does so in competition with PG&E. PG&E and Trans Bay Cable are subject to regulation by FERC with respect to applicable wholesale transactions and electricity transmission.

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Future Regulation and Other Factors
The electric industry has been highly regulated throughout its history and is subject to continuing legislative and administrative regulation and reform. State and federal entities routinely consider changes to the regulations governing the electric industry. Recent proposals have included both those aimed at further deregulating the industry and those proposing additional regulations. The SFPUC is unable to predict at this time the impact any such proposals will have on the operations and finances of the SFPUC or the electric utility industry generally.

The electric utility industry in g eneral has been, and in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization of generating and transmission facilities. In addition to the factors discussed above, such factors include, among others, (a ) the effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described above; (b) changes resulting from conservation and demand side management programs on the timing and use of electric energy; (c ) changes resulting from a national energy policy; (d) the effects of competition from other electric utilities (including increased competition resulting from merg ers, acquisitions, and “strategic alliances” of competing electric and natural gas utilities and from competitors transmitting less expensive electricity from much greater distances over an interconnected system); (e) the development and deployment of new methods of, and new facilities for, producing electricity at competitive prices; (f) the repeal of certain federal statutes that would have the effect of increasing the competitiveness of many investor owned utilities; (g ) increased competition from independent power producers and marketers, brokers and federal power marketing agencies; (h ) “self-generation” or “distributed generation” (for example, solar power, microturbines and fuel cells) by customers and others; (i ) current and future requirements relat ing to the SFPUC’s ability to issue tax-exempt obligations, including restrictions on sales to non- qualified entities of the electricity from generation projects and transmission service from transmission line projects financed with tax- exempt obligations; (j) the effects of inflation on the operating and maintenance costs of electric utilities and their facilities; (k ) actual results that differ from projected future load requirements; (l ) increases in costs and uncertain availability of capital; (m) shifts in the availability and relative costs of different fuels (including the cost of natural gas); (n) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, as occurred, for example, in California’s energy crisis in 2000 and 2001; (o ) issues relating to risk management procedures and practices with respect to, among other things, the purchase and sale of natural gas, energy and transmission capacity; (p ) other legislative changes, voter initiatives, referenda and statewide propositions; (q ) the effects of changes in the local, State, national or global economy; (r ) supply chain disruptions; (s ) the effects of possible manipulati on of the electric markets; (t) natural disasters or other physical calamities, including, but not limited to, earthquakes and flood; (u) climate change and related regulations; and (v) issues relating to cybersecurity. Any of these factors (as well as other factors) could have an adverse effect on the financial condition of an electric utility, including the Power Enterprise.

This Official Statement includes a brief discussion of certain of the factors identified in the previous paragraph. It does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. Extensive information on the electric utility industry is available from legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the 2023A Bonds should obtain and review such information. The SFPUC is unable to predict what impact such factors will have on the SFPUC’s electric system or the business operations and financial condition of the Power Enterprise, but such impacts could be significant. To the extent described herein, the SFPUC has taken steps to mitigate the potential impacts of a number of these factors.

CONSTITUTIONAL, STATUTORY AND CHARTER LIMITATIONS
State Law Limitations
Proposition 218. Proposition 218, a State ballot initiative known as the “Right to Vote on Taxes Act,” was approved by California voters in 1996. The initiative added Articles XIIIC and XIIID to the California Constitution.

Article XIIID creates additional requirements for the imposition by most local governments (including the SFPUC) of general taxes, special taxes, assessments and “property- related” fees and charges. Article XIIID explicitly exempts fees and charges for the provision of electric service from its provisions.

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Article XIIIC extends the people’s initiative powers to the reduction or repeal of local taxes, assessments and fees and charges imposed prior to its effective date (November 1996). The California Supreme Court in Bighorn-Desert View Water Ag ency v. Verjil, 46 Cal.Rptr.3d 73 (2006) concluded that, under Article XIIIC, local voters by initiative may reduce a public agency’s water rates and delivery charges, as those are “property related” fees or charges within the meaning of Article XIIID. As the terms “fees” and “charges” are not defined in Article XIIIC, however, its extension of the initiative powers may apply not only to “property- related” fees and charges, as defined in Article XIIID, but also, for example, to fees and charges for the provision of electric services which are exempted from Article XIIID. The California appellate court suggested as much in Bock v. City Council of Lompoc, 109 Cal.App.3d 43 (1980). The SFPUC is unable to determine whether the California courts will hold that rates for electric service are subject to the initiative process or, if they are, what limitations will apply to that process.

Proposition 26. The California electorate adopted Proposition 26 at the November 2, 2010 election, amending Article XIIIC of th e California Constitution. Proposition 26 imposes a majority voter approval requirement on local governments such as the City with respect to certain fees and charges for general purposes, and a two-thirds voter approval requirement with respect to certain fees and charges for special purposes. The initiative was designed to supplement tax limitations California voters adopted when they approved Proposition 13 in 1978, and other measures. Proposition 26 applies by its terms to any levy, charge or exaction imposed, increased or extended by a local government on or after November 3, 2010. Proposition 26 deems any such levy, charge or fee to be a “tax”, requiring voter approval unless it comes within one of the listed exceptions. Proposition 26 expressly excludes from its definition of a “tax”, among other things, a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.

Proposition 26 is subject to interpretation by California courts, including the extent to which it is applicable to pre -existing electric rates and general fund transfers . A number of lawsuits have been filed against public agencies in California relating to electric utility fund transfers . In Citizens for Fair REU Rates v. City of Redding (filed on January 20, 2015 and modified on February 19, 2015), for example, the California Court of Appeal considered a ratepayer challenge to a “payment in lieu of taxes” (or “PILOT”) required by the City of Redding t o be made by its electric utility as an annual budgetary transfer amount without voter approval. The city’s PILOT was designed to compensate the general fund for the costs of services that other city departments provide to the electric utility. The amount of the PILOT was equivalent to the ad valorem taxes the electric utility would have had to pay if the electric utility were privately owned. The suits alleged that the PILOT was passed through to the city’s electric utility customers as part of the rate s and charges for electric service in excess of the reasonable costs to the city of providing electric service. The Court of Appeal determined that Proposition 26 has no retroactive effect as to local taxes that existed prior to November 3, 2010, but foun d that since the PILOT was subject to the city council’s recurring discretion, the PILOT did not escape the purview of Proposition 26. The Court of Appeal concluded that the PILOT constituted a “tax” under Proposition 26 for which the city must secure voter approval unless the city proved that the amount collected was necessary to cover the reasonable costs to the city of providing electric service.

On April 29, 2015, the California Supreme Court granted review of the decision of the Court of Appeal . The California Supreme Court rendered its decision on August 27, 2018, reversing the judgment of the Court of Appeal .

The California Supreme Court determined that the budgetary transfer from the Redding electric utility to the city’s general fund, calculated by using the PILOT, itself is not the type of exaction that is subject to Article XIIIC of the California Constitution. The court reasoned that it is only the Redding electric utility rate, not the PILOT, that is imposed on customers for electric service. The California Supreme Court concluded that the challenged rate did not exceed the reasonable costs of providing electric service, and therefore did not constitute a tax.

The City does not collect a “payment in lieu of taxes” payable from the Power Enterprise, but the SFPUC does make transfers to the City’s General Fund from the Power Enterprise for direct services provided to the Power Enterprise and for general City overhead costs allocable to the Power Enterprise. See “FINANCIAL OPERATIONS – Payments to/from the City.” In addition, the City’s General Fund as well as various City departments and agencies which are supported by the City’s General Fund pay rates for power delivered by the Power Enterprise that are lower than those paid by other Power Ent erprise customers of a comparable class . See “FINANCIAL OPERATIONS – Rate-Setting Process; Rates.” The SFPUC is unable to predict the ultimate impact of Proposition 26 on the SFPUC and its charges for electricity.

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Initiative 1935. A voter initiative entitled “The Taxpayer Protection and Government Accountability Act” (“Initiative 1935”) has been determined to be eligible for the November 2024 Statewide general election and, unless withdrawn by its proponent prior to June 27, 2024, will be certified as qualified for the ballot in such election . Were it to be adopted by a majority of voters in the Statewide general election, Initiative 1935 would amend the California Constitution to, among other things, provide that charges for services or product provided directly to the payor (such as charges for power) are “taxes” subject to voter approval unless the local government can prove by clear and convincing evidence that the charge is reasonable and does not exceed the “actual cost” of providing the ser vice or product, defined as “(i ) the minimum amount necessary to reimburse the government for the cost of providing the service or the product to the payor and (ii ) where the amount charged is not used by the government for any purpose other than reimbursi ng that cost.” If adopted, Initiative 1935 would be subject to judicial interpretation. The SFPUC is unable to predict whether and how Initiative 1935, if adopted, would be interpreted by the courts, and there can be no assurance that any such interpretation or application would not have an adverse impact on the SFPUC, the Power Enterprise or Power Revenues.

Charter Limitations
The Charter generally requires that bonds (such as the Bonds) secured by revenues, other than refunding bonds, may be issued only with the assent of a majority of voters. The Charter, however, provides for specified exceptions to the voter approval requirement. See “OBLIGATIONS PAYABLE FROM REVENUES – Authority for Issuance of Revenue Bonds and Other Obligations Payable from Revenues.” Initiative Measures and Charter Amendments
Articles XIIIC and XIIID of the California Constitution and Proposition 26 were adopted pursuant to the State’s initiative process. From time to time other initiative measures could be adopted by State vote rs, or by voters of San Francisco, placing additional limitations on the ability of the SFPUC to increase revenues.

The voters could adopt additional Charter amendments in the future that could limit the ability of the SFPUC to issue debt, affect the operation of the Power Enterprise, limit the ability of the SFPUC to enact rate increases, or implement other changes affecting the SFPUC and the Power Enterprise.

LITIGATION
The SFPUC is not aware of any litigation pending or threatened questioning the politic al existence of the City or the SFPUC or contesting the SFPUC’s power to fix electric rates and charges, or in any way questioning or affecting:
(i) the proceedings under which the 2023A Bonds are to be issued; (ii) the validity of any provision of the 2023A Bonds or the Indenture; (iii) the pledge of Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, by the SFPUC under the Indenture; or (iv) the titles to office of the present members of the Board of Supervisors and the Commission.

There are a number of suits and claims pending against the City and the SFPUC, which may include personal injury, wrongful death and other suits and claims against which the City may self -insure. The aggregate amount of the self -insured liabilities of the City and the SFPUC which may result from such suits and claims if determined adversely to the City or the SFPUC will not, in the opinion of the City Attorney, materially impair the ability of the SFPUC to pay principal of or interest on the 2023A Bonds as they become due. There is no litigation pending, with service of process having been accomplished, against the City or the SFPUC which if determined adversely to the City or the SFPUC would, in the opinion of the City Attorney, materially impair the abil ity of the SFPUC to pay principal of and interest on the 2023A Bonds as they become due.

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TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial dec isions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2023A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. However, it should be noted that for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Code, generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) with respect to the 2023A Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2023A Bonds is exemp t from State of California personal income tax.

The excess of the stated redemption price at maturity of a 2023A Bond over the issue price of a 2023A Bond (the first price at which a substantial amount of the 2023A Bonds of a maturity is to be sold to the public) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to an owner of a 2023A Bond before receipt of cash attributable to such excludable income .

The amount of original issue discount deemed received by the owner will increase the owner’s basis in the applicable 2023A Bond.

Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the 2023A Bonds is based upon certain representations of fact and certifications made by the SFPUC and others and is subject to the condition that the SFPUC comply with all requirements of the Code that must be satisfied subsequent to the issuance of the 2023A Bonds to assure that interest (and original issue discount) on the 2023A Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the 2023A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2023A Bonds. The SFPUC has covenanted to comply with all such requirements.

The amount by which a 2023A Bond owner’s original basis for determining loss on sale or exchange in the applicable 2023A Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the owner’s basis in the applicable bond (and the amount of tax -exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in an owner realizing a taxable gain when a 2023A Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the 2023A Bond to the owner .

Purchasers of the 2023A Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.

The IRS has initiated an expanded program for the auditing of tax exempt bond issues, including both random and targeted audits . It is possible that the 2023A Bonds will be selected for audit by the IRS . It is also possible that the market value of the 2023A Bonds might be affected as a result of such an audit of the 2023A Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the 2023A Bonds to the extent that it materially adversely affects the exclusion from gross income of interest (and original issue discount) on the 2023A Bonds or their market value.

Subsequent to the issuance of the 2023A Bonds there might be federal, state, or local statutory changes (or judicial or regulatory changes to or interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the 2023A Bonds including the imposition of additional federal income or state taxes on owners of tax-exempt state or local obligations, such a s the 2023A Bonds. The introduction or enactment of any of such changes could adversely affect the market value or liquidity of the 2023A Bonds. No assurance can be given that subsequent to the issuance of the 2023A Bonds statutory changes will not be introduced or enacted or judicial or regulatory interpretations will not occur having the effects described above . Before purchasing any of the

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2023A Bonds, all potential purchasers should consult their tax advisors regarding possible statutory changes or judicial or regulatory changes or interpretations, and their collateral tax consequences relating to the 2023A Bonds.

Bond Counsel’s opinion with respect to the 2023A Bonds may be affected by actions taken (or not taken) or events occurring (or not occurrin g) after the date of issuance of the 2023A Bonds. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur . The Indenture and the Tax Certificate relating to the 2023A Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the 2023A Bonds for federal income tax purposes with respect to any 2023A Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.

Although Bond Counsel has rendered its opinion that interest (and original issue discount) on the 2023A Bonds is excluded from gross income for federal income tax purposes provided that the SFPUC continues to comply with certain requirements of the Code, the ownership of the 2023A Bonds and the accrual or receipt of interest (and original issue discount) on the 2023A Bonds may otherwise affect the tax liability of certain persons .

Bond Counsel expresses no opinion regarding any such tax consequences . Accordingly, before purchasing any of the 2023A Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the 2023A Bonds.

A copy of the proposed form of opinion of Bond Counsel relating to the 2023A Bonds is included in Appendix C hereto.

CERTAIN LEGAL MATTERS
Certain legal matters incident to the authorization, sale and delivery of the 2023A Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel to the SF PUC. Certain legal matters are being passed upon for the SFPUC by the City Attorney and by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Disclosure Counsel . Certain legal matters are being passed upon for the Underwriters by Husch Blackwell LLP, Oakland, California. Bond Counsel and Disclosure Counsel will receive compensation that is contingent upon the sale and delivery of the 2023A Bonds.

The form of approving opinion of Bond Counsel is set forth in Appendix C and will be available at the time of delivery of the 2023A Bonds. Bond Counsel is not passing upon and undertakes no responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

Orrick, Herrington & Sutcliffe LLP has served as Disclosure Counsel to the SFPUC and in such capacity has advised the SFPUC with respect to the requirements of applicable securities laws and participated wi th responsible SFPUC officials and staff in conferences and meetings where information contained in this Official Statement was reviewed for accuracy and completeness . Disclosure Counsel is not responsible for the accuracy or completeness of the information presented in this Official Statement and has not undertaken to independently verify any of such information. Rather, the SFPUC is solely responsible for the accuracy and completeness of the information contained in this Official Statement. Upon the is suance of the 2023A Bonds, Orrick, Herrington & Sutcliffe LLP will deliver a letter to the SFPUC concerning certain matters with respect to the Official Statement.

No purchaser or holder of the 2023A Bonds, or other person or party other than the SFPUC, w ill be entitled to rely on such letter or on the fact that Orrick, Herrington & Sutcliffe LLP has acted as Disclosure Counsel to the SFPUC .

RATINGS
The 2023A Bonds have been rated “___” by S&P Global Ratings, a division of Standard & Poor’s Financial Servi ces LLC (“ S&P”) and “___” by Fitch Ratings, Inc. (“ Fitch”). The ratings assigned by S&P and Fitch express only the views of the respective rating agencies. The explanation of the significance of these ratings, and any outlook associated with these ratings, may be obtained from S&P and Fitch, respectively. Each rating agency generally bases its rating on its own investigations, studies, and assumptions. The SFPUC has provided

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certain additional information and materials to the rating agencies (some of which does not appear in this Official Statement).

A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time . There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant . Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 2023A Bonds. The SFPUC undertakes no responsibility to maintain its current ratings on the 2023A Bonds or to oppose any such downward revision, suspension or withdrawal.

UNDERWRITING
The 2023A Bonds are being purchased by J.P. Morgan Securities LLC, as representative on behalf of itself, Morgan Stanley & Co. LLC and Siebert Williams Shank & Co., LLC (collectively, the “ Underwriters”).

The Underwriters have agreed to purchase from the SFPUC the 2023A Bonds at a purchase price of $________ (consisting of $________ aggregate principal amount of the 2023A Bonds, [plus/less] an original issue [premium/discount] of $________, less an underwriter’s discount of $________). Under the bond purchase contract to be entered into in connection with the purchase of the 2023A Bonds, the Underwriters will be obligated to purchase all of the 2023A Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions to be satisfied by the SFPUC.

The Underwriters have certified the reoffering prices or yields set forth on the inside cover page of this Official Statement for the 2023A Bonds. The SFPUC takes no responsibility for the accuracy of these prices or yields. The Underwriters may offer and sell the 2023A Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page . The offering prices may be changed from time to time by the Underwriters.

The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, advisory, investment management, principal investment, hedging, financing and brokerage activities . Certain of the Underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various investment banking services for the SFPUC for which they received or will receive customary fees.

In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the SFP UC.

J.P. Morgan Securities LLC (“JPMS”), one of the Underwriters of the 2023A Bonds, has entered into negotiated dealer agreements (each, a “Dealer Agreement ”) with each of Charles Schwab & Co., Inc. (“CS&Co. ”) and LPL Financial LLC (“LPL ”) for the retail distribution of certain securities offerings at the original issue prices.

Pursuant to each Dealer Agreement, each of CS&Co. and LPL may purchase 2023A Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to any 2023A Bonds that such firm sells.

Morgan Stanley & Co. LLC., an Underwriter of the 2023A Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC . As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC . As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the 2023A Bonds.

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FINANCIAL STATEMENTS
Audited financial statements of the SFPUC’s Power Enterprise for Fiscal Years Fiscal Years 2020 -21 and 2021-22 are attached as Appendix B. The financial statements attached as Appendix B include financial information respecting the SFPUC’s Hetch Hetchy Water and CleanPowerSF Enterprises, which are not part of the Power Enterprise. See “APPENDIX B – SFPUC POWER ENTERPRISE FINANCIAL STATEMENTS.” Such financial statements have been audited by KPMG LLP (the “Auditor”), independent certified public accountants.

The audited financial statements of the SFPUC are public documents and the SFPUC has not requested nor did the SFPUC obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has made no representation in connection with inclusion of the audits herein that there has been no material change in the financial condition of the SFPUC since the most recent audit was concluded. The Auditor has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. The Auditor also has not performed any procedures relating to this Official Statement.

CONTINUING DISCLOSURE
The SFPUC has covenanted for the benefit of the Owners and Beneficial Owners of the 2023A Bonds, under a continuing disclosure certificate dated as of the date of del ivery (the “ Disclosure Certificate”), to provide certain financial information and operating data (the “Annual Report”) not later than March 31 following the end of its Fiscal Year (presently June 30), beginning on March 31, 2024, with the report for Fisca l Year 2022 -23, and to promptly provide notices of the occurrence of certain enumerated events set forth in the Disclosure Certificate (“Listed Events”).

The SFPUC will file the Annual Report and any notice of Listed Events as described in the Disclosure Certificate. The specific nature of the information to be contained in the Annual Report or the notices of Listed Events is set forth in the Disclosure Certificate . These covenants have been made to assist the Underwriters in complying with the Rule . The form of the Disclosure Certificate is attached to this Official Statement as Appendix D.

On July 25, 2017, the SFPUC and U.S. Bank, National Association (“ U.S. Bank”) entered into revolving credit agreements (the “Revolving Credit Agreements ”) providing for the extension of credit to the SFPUC in the amount of $100,000,000 for the Water Enterprise and $75,000,000 for the Wastewater Enterprise . The SFPUC has not drawn on either credit facility and has no outstanding obligations thereunder. On January 7, 2022, the SFPUC and U.S. Bank entered into amendments to the Revolving Credit Agreements extending the respective commitment expiration dates to July 18, 2024. The SFPUC filed Listed Event notices with respect to such extensions on February 3, 2022.

MUNICIPAL ADVISOR
PFM California Advisors LLC, San Francisco, California, is acting as municipal advisor to the SFPUC with respect to the 2023A Bonds (the “Municipal Advisor”). The Municipal Advisor has assisted the SFPUC in the preparation of this Official Statement and in other matters relating to the planning, structuring, execution and delivery of the 2023A Bonds. The Municipal Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the SFPUC to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Municipal Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The Municipal Advisor will not purchase or make a market in any of the 2023A Bonds.

The compensation to be received by the Municipal Advisor from the SFPUC for services provided in connection with the planning, structuring, execution and delivery of the 2023A Bonds is contingent upon the sale and delivery of the 2023A Bonds.

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INDEPENDENT PRICING CONSULTANT
Backstrom McCarley Berry & Co., LLC, San Francisco, California, is acting as an independent pricing consultant to the SFPUC with respect to the 2023A Bonds (the “Independent Pricing Consultant”). As required by the SFPUC’s Debt Policies, the Independent Pricing Consultant will monitor the pricing process and provide an independent pricing report to the SFPUC certifying whether the pricing results were fair and reasonable to the SFPUC in light of prevailing market conditions . The Pricing Consultant has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the SFPUC to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Pricing Consultant assumes no responsibility for the accuracy or completeness of any of the information contained herein. The Pricing Consultant will not purchase or make a market in any of the 2023A Bonds.

The compensation to be received by the Pricing Consultant from the SFPUC for services provided in connection with the planning, structuring, execution and delivery of the 2023A Bonds is contingent upon the sale and delivery of the 2023A Bonds.

MISCELLANEOUS
References made herein to certain documents and reports are brief summaries thereof that do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof.

The appendices to this Official Statement are integral parts of this Official Statement. Investors must read the entire Official Statement, including the appendices, to obtain information essential to making an informed investment decision.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the SFPUC and the purchasers or owners of any of the Bonds. The preparation and distribution of this Official Statement has been authorized by the SFPUC.

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APPROVAL AND DELIVERY
This Official Statement has been duly approved, executed and delivered by the SFPUC.

PUBLIC UTILITIES COMMISSION OF THE

CITY AND COUNTY OF SAN FRANCISCO
By:

General Manager

A-1

APPENDIX A

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

B-1

APPENDIX B

SFPUC POWER ENTERPRISE FINANCIAL STATEMENTS

C-1

APPENDIX C

PROPOSED FORM OF OPINION OF BOND COUNSEL
Upon issuance of the 2023A Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form:
[Closing Date]
Public Utilities Commission of the
City and County of San Francisco
San Francisco, California
$_________
Public Utilities Commission
of the City and County of San Francisco
Power Revenue Bonds,
2023 Series A
Members of the Commission:

We have acted as bond counsel to the Public Utilities Commission of the City and County of San Francisco (the “Commission”), a commission duly constituted under the Charter (the “Charter”) of the City and County of San Francisco (the “City”), in connection with the issuance of the Commission’s Power Revenue Bonds, 2023 Series A in the aggregate principal amount of $_________ (the “Bonds”). The Bonds are being issued pursuant to authority granted by the Charter of the City, and a Trust Indenture, dated as of May 1, 2015, by and between the Commission and U.S. Bank Trust Company National Association, as successor trustee (the “Trustee”), as amended and supplemented (the “Original Indenture”), and as further supplemented by a Third Supplemental Trust Indenture, dated as of October 1, 2023 (the “Third Supplemental Indenture” and together with the Original Indenture, the “Indenture”) by and between the Commission and the Trustee. Capitalized terms not otherwise defined herei n shall have the respective meanings ascribed thereto in the Indenture.

In our capacity as bond counsel, we have reviewed the Indenture, ordinances and resolutions of the Commission and the City, certifications of the Commission, the Trustee and others, opinions of counsel to the Commission, the City and the Trustee, the Tax Certificate relating to the Bonds (the “Tax Certificate”), and such other documents, opinions and instruments as we deemed necessary to render the opinions set forth herein.

We have assumed, but have not verified, that the signatures on all documents, certificates and opinions that we have reviewed are genuine. In our examination, we have assumed, but have not verified, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies or by facsimile or other means of electronic transmission or which we obtained from sites on the internet, and the authenticity of the originals of such latter documents. As to facts and certain other matters and the consequences thereof relevant to the opinions expressed herein and the other statements made herein, we have relied without investigation or verification upon, and assumed the accuracy and completeness of certificates, letters (including opinion letters), and oral and written statements and representations of public officials, officers and other representatives of the Commission and the City, counsel for the Commission and the City, and others.

Our services as bond counsel were limited to such examination and to rendering the opinions set forth below. Furthermore, we have assumed compliance with all covenants and agreements in the Indenture and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes . With respect to the opinions expressed herein, we call attention to the fact that the enforceability of the rights and obligations under the Bonds, the Indenture and the Tax

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Certificate are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against cities and counties in the State of California.

By delivering this letter, we are not expressing any opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set- off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non -exclusivity of remedies, waiver or severability provisions contained in the Bonds or the Indenture, nor are we expressing any opinion with respect to the state or quality of title to or interest in any assets described in or as subject to the lien of the Indenture or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on any assets thereunder.

Based upon the foregoing and subject to the limitations and qualifications herein specified we are of the opinion, as of the date hereof and under existing law, that:
(1) The Bonds have been duly authorized, issued by, and constitute the valid and binding limited obligations of, the Commission.
(2) The Third Supplemental Indenture has been duly authorized, executed and delivered by the Commission, and the Indenture constitutes the valid and binding obligation of the Commission. The Indent ure creates a valid pledge of the Revenues of the Power Enterprise, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits, to secure the payment of the principal of and interest on the Bonds, as and to the extent set forth in the Indenture and subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. (3) The Bonds are limited obligations of the Commission and the Commission is not obligated to pay the principal of, or interest on, the Bonds from any source of funds other than Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits . The general fund of the City is not liable and the credit or taxing power of the City is not pledged for the payment of the Bonds or the interest thereon. The Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the City or of the Commission or any of their income or receipts, except the Revenues, after payment of Operation and Maintenance Expenses and any Priority R&R Fund Deposits. (4) Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals; however, for tax years beginning after December 31, 2022, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), interest on the Bonds might be taken into account in determining adjusted financial statement income for the purposes of computing the alternative minimum tax imposed on such corporations.
(5) The interest on the Bonds is exempt from State of California personal income tax. (6) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income . The amount of original issue discount deemed received by a Bond owner will increase the Bond owner’s basis in the applicable Bond. Original issue discount that accrues for the Bond owner is excluded from the gross income of such Bond owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals (as described in paragraph 4 above) and is exempt from State of California personal income tax.

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(7) The amount by which a Bond owner’s original basis for determining loss on sale or exchange in the applicable Bonds (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amo rtizable Bond premium, which must be amortized under Section 171 of the Code ; such amortizable Bond premium reduces the Bond owner’s basis in the applicable Bonds (and the amount of tax -exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner.

The opinions expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the Commission and others, and are subject to the condition that the Commission complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds . The Commission has covenanted to comply with all such requirements.

The Indenture and the Tax Certificate permit certain actions to be taken or to be omitted if a favorable opinion of bond counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (or original issue discount) for federal income tax purposes with respect to any Bonds if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves.

Other provisions of the Code may give rise to adverse federal income tax consequences to particular Bond owners .

Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Bonds.

The opinions expressed and the statements made herein are based on an analysis of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities . Such opinions and statements may be adversely affected by actions taken or events occurring, including a change in law, regulation or ruling (or in the application or official interpretation of any law, regulation or ruling) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions are taken or such events occur, and we have no obligation to update this letter in light of such actions or events or for any other reason.

No opinion is expressed herein on the accuracy, completeness or sufficiency of the official statement relating to the Bonds or other offering material relating to the Bonds and we expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in such official statement or other offering material.

This opinion is limited to the laws of the State of California and the federal laws of the United States. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction.

Respectfully submitted,

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APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE
$__________
Public Utilities Commission of the
City and County of San Francisco
Power Revenue Bonds, 2023 Series A
[Closing Date]
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Public Utilities Commission of the City and County of San Francisco (the “SFPUC”) in connection with the issuance of its Power Revenue Bonds, 2023 Series A (the “ 2023A Bonds”). The 2023A Bonds are being issued pursuant to a Third Supplemental Trust Indenture, dated as of October 1, 2023 (the “Third Supplemental Indenture”), by and between the SFPUC and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Third Supplemental Indenture amends and supplements the Trust Indenture, dated as of May 1, 2015, by and between the SFPUC and the Trustee (as amended and supplemented, including as supplemented by the Third Supplemental Indenture, the “Indenture”). The SFPUC covenants and agrees as follows:

SECTION 1. Pur
pose of the Disclosure Certificate . This Disclosure Certificate is being executed and delivered by the SFPUC for the benefit of the Holders and Beneficial Owners of the 2023A Bonds and in order to assist the Participating Underwriters in complying with Securities and Exchange Commission (the “S.E.C.”) Rule 15c2- 12(b)(5).

SECTION 2. Defin itions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in t his Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:
“Annual Report” s hall mean any Annual Report provided by the SFPUC pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person that: (a) has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any 2023A Bonds (including persons holding 2023A Bonds through nominees, depositories or other intermediaries) including, but not limited to, the power to vote or consent with respect to any 2023A Bonds or to dispose of ownership of any 2023A Bonds; or (b ) is treated as the owner of any 2023A Bonds for federal income tax purposes.
“Dissemination Agent ” shall mean the SFPUC, acting in its capacity as Dissemination Agent under this Disclosure Certificate, or any successor Dissemination Agent designated in writing by the SFPUC and which has filed with the SFPUC a written acceptance of such designation. “Financial Obligation” means, for purposes of the Listed Events set out in Section 5(a)(15) and Section (5)(a)(16), a (i ) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii ) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as defined in the Securities Exchange Act of 1934, as amended) as to which a final off icial statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule.
“Holder” shall mean either the registered owners of the 2023A Bonds, or, if the 2023A Bonds are registered in the name of The Depository Trust Company or another recognized depository, any applicable participant in such depository system.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive continuing disclosure filings pursuant to the Rule.

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Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB currently located at https://emma.msrb.org/.
“Official Statement” shall mean the final Official Statement, dated __________, 2023, prepared in connection with the sale and offering of the 2023A Bonds. “Participating Underwriters ” shall mean any of the original underwriters or purchasers of the 2023A Bonds required to comply with the Rule in connection with the offering of the 2023A Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the S.E.C. under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provi
sion of Annual Reports.
(a) The SFPUC shall, or shall cause the Dissemination Agent to, not later than March 31 of each year, commencing with the report for Fiscal Year 2022 -23 (which is due not later than March 31, 2024), provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is not the SFPUC, the SFPUC shall provide the Annual Report to the Dissemination Agent not later than 15 days prior to said date. The Annual Report must be submitte d in electronic format and accompanied by such identifying information as is prescribed by the MSRB, and may cross -reference other information as provided in Section 4 of this Disclosure Certificate. However, if the audited financial statements of the SFPUC are not available by the date required above for the filing of the Annual Report, the SFPUC shall submit unaudited financial statements and submit the audited financial statements as soon as they are available. If the SFPUC’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). (b) If the SFPUC is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the SFPUC shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall (if the Dissemination Agent is other than the SFPUC) file a report with the SFPUC certifying the date that the Annual Report was provided to the MSRB pursuant to this Disclosure Certificate.

SECTION 4. Content
of Annual Reports. The SFPUC’s Annual Report shall contain or incorporate by reference the following information:
(a) Audited financial statements of the Power Enterprise for the prior Fiscal Year, prepared in
accordance with generally accepted accounting principles applicable to the SFPUC from time to time. If the SFPUC’s audited financial statements are not available by the date the Annual Report is required to be filed, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available; (b) An update for the prior Fiscal Year of the table in the Official Statement entitled “TABLE 9, POWER ENTERPRISE ELECTRIC SERVICE ACCOUNTS BY CUSTOMER CATEGORY”;
(c) An update for the prior Fiscal Year of the table in the Official Statement entitled “TABLE 14, AVERAGE ELECTRIC SERVICE RATES”; and
(d) An update for the prior Fisca l Year of the table in the Official Statement entitled “TABLE 17, POWER ENTERPRISE HISTORICAL REVENUES AND OPERATION AND MAINTENANCE EXPENSES FOR FISCAL YEARS ENDED JUNE 30 (IN THOUSANDS)”.

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Any or all of the items listed above may be set forth in a document or set of documents, or may be included by specific reference to other documents, including official statements of debt issues of the SFPUC or related public entities, which are available to the public on the MSRB website. If the document included by re ference is a final official statement, it must be available from the MSRB. The SFPUC shall clearly identify each such other document so included by reference.

SECTION 5. Repor ting of Significant Events.
(a) The SFPUC shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2023A Bonds:

1. Principal and interest payment delinquencies;

2. Non-payment related defaults, if material;

3. Unscheduled draws on debt service reserves reflecting financial difficulties;

4. Unscheduled draws on credit enhancements reflecting financial difficulties;

5. Substitution of credit or liquidity providers, or their failure to perform;

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the 2023A Bonds, or other material events affecting the tax status of the 2023A Bonds;

7. Modifications to rights of Holders, if material;

8. Optional, unscheduled or contingent 2023A Bond calls, if material, and tender offers;

9. Defeasances;

10. Release, substitution, or sale of property securing repayment of the 2023A Bonds, if material;

11. Rating changes;

12. Bankruptcy, insolvency, receivership or similar event of the SFPUC;

13. The consummation of a merger, consolidation, or acquisition involving the SFPUC or the sale of all or substantially all of the assets of the SFPUC, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material;

15. Incurrence of a Financial Obligation of the SFPUC, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the SFPUC, any of which affect Holders, if material; and

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16. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the SFPUC, any of which reflect financial difficulties.

Note: For the purposes of the event identified in subs ection (a)(12), the event is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the SFPUC in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the SFPUC, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supe rvision or jurisdiction over substantially all of the assets or business of the SFPUC.
(b) Whenever the SFPUC obtains knowledge of the occurrence of a Listed Event in subs
ection(a), the SFPUC shall, or shall cause the Dissemination Agent (if not the SFPUC) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of a Listed Event desc ribed in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected 2023A Bonds under the Indenture.
(c) The SFPUC intends to comply with the Listed Events described in subsection (a)(15) and subsection (a)(16) and the definition of “Financial Obligation” in Section 2, with reference to the Rule, any other applicable federal securities laws and the guidance provided by the S.E.C. in Release No. 34-83885 dated August 20, 2018 (the “2018 Release”), and any further amendments or written guidance provided by the S.E.C. or its staff with respect to the amendments to the Rule effected by the 2018 Release.

SECTION 6. Ter
mination of Reporting Obligation . The SFPUC’s obligations unde r this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2023A Bonds.

If such termination occurs prior to the final maturity of the 2023A Bonds, the SFPUC shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

SECTION 7. Diss emination Agent. The SFPUC may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate.

SECTION 8. Amend
ment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the SFPUC may amend or waive this Disclosure Certificate or any provision of this Disclosure Certificate, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Se ctions 3(a), 3(b), 4 or 5(a), it
may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the 2023A Bonds or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of the City Attorney of the City and County of San Francisco or nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the 2023A Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

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(c) The amendment or waiver either (i ) is approved by the owners of a majority in aggregate principal amount of the 2023A Bonds or (ii ) does not, in the opinion of the City Attorney or nationally recognized bond counsel, materially impair the interests of the Holders.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the SFPUC shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the SFPUC. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (i ) notice of such change shall be given in the same manner as for a Listed Event under Section 5; and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 9. Add
itional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the SFPUC from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate.

If the SFPUC chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the S FPUC shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Defaul
t. In the event of a failure of the SFPUC to comply with any provision o f this Disclosure Certificate, any Participating Underwriters, Holder or Beneficial Owner of the 2023A Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the SFPUC to comply with its obligations under this Disclosure Certificate; provided that any such action may be instituted only in a federal or state court located in the City and County of San Francisco, State of California. Failure by the SFPUC to comply with any provision of this Disclosure Certificate shall not be deemed an Event of Default under the Indenture and the sole remedy under this Disclosure Certificate in the event of any failure of the SFPUC to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 11. Benefi
ciaries. This Disclosure Certificate shall inure solely to the benefit of the SFPUC, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the 2023A Bonds, and shall create no rights in any other person or entity.

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Dated as of the date first written above.

PUBLIC UTILITIES COMMISSION OF THE

CITY AND COUNTY OF SAN FRANCISCO
By:

General Manager
Approved as to form:

DAVID CHIU

CITY ATTORNEY
By:

Deputy City Attorney

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CONTINUING DISCLOSURE CERTIFICATE

EXHIBIT A

FORM OF NOTICE TO THE

MUNICIPAL SECURITIES RULEMAKING BOARD

OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Public Utilities Commission of the City and County of San Francisco Name of Issue: Power Revenue Bonds, 2023 Series A
Date of Issuance: October __, 2023

NOTICE IS HEREBY GIVEN that the SFPUC has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Certificate of the Public Utilities Commission of the City and County of San Francisco, dated October __, 2023. The SFPUC anticipates that the Annual Report will be filed by _______________.

Dated: _______________

PUBLIC UTILITIES COMMISSION OF

THE CITY AND COUNTY OF SAN FRANCISCO

By: [to be signed only if filed]
Title: ________________________________ ________

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APPENDIX E

SECURITIES DEPOSITORY AND THE BOOK-ENTRY SYSTEM
The information in this Appendix E has been obtained from DTC for use in securities offering documents, and the SFPUC takes no responsibility for the accuracy or completeness thereof. The SFPUC cannot and does not give any assurances that DTC, DTC Partici pants or Indirect Participants will distribute to the beneficial owners either (a) payments of interest, principal or premium, if any, with respect to the 2023AB Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the 2023AB Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

As used in this Appendix E, “Securities” means the 2023AB Bonds, “Issuer” means the SFPUC, and “Agent” means the Trustee.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully -registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC . If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amo unt of such issue.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non- U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post- trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securi ties certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.

Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive

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certificates representing their ownership interests in Secu rities, except in the event that use of the book- entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners.

In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Ag ent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. DTC may discontinue providing its servic es as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

10. Issuer may decide to discontinue use of the system of book- entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book- entry system has been obtained from sources that SFPUC believes to be reliable, but the SFPUC takes no responsibility for the accuracy thereof.

Stradling – Draft of 08/17/23

4868-2349-5786v4/200617-0010

THIRD SUPPLEMENTAL TRUST INDENTURE
By and Between

PUBLIC UTILITIES COMMISSION OF

THE CITY AND COUNTY OF SAN FRANCISCO
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
Dated as of October 1, 2023
Relating to

PUBLIC UTILITIES COMMISSION OF

THE CITY AND COUNTY OF SAN FRANCISCO

POWER REVENUE BONDS,
2023 SERIES A

i
4868-2349-5786v4/200617-0010

TABLE OF CONTENTS
Page

ARTICLE I
THIRD SUPPLEMENT; DEFINITIONS
Section 1.01 Third Supplement ...................................................................................................... 3 Section 1.02 Definitions ................................................................................................................. 3 Section 1.03 Requirements of the Master Indenture ...................................................................... 4

ARTICLE II
AUTHORIZATION AND TERMS OF THE 2023A BONDS
Section 2.01 Authorization of the 2023A Bonds ............................................................................ 4 Section 2.02 Authentication of the 2023A Bonds .......................................................................... 4 Section 2.03 Terms of the 2023A Bonds ........................................................................................ 4 Section 2.04 Form of 2023A Bonds ............................................................................................... 6

ARTICLE III

REDEMPTION PROVISIONS
Section 3.01 Optional Redemption ................................................................................................. 6 Section 3.02 Mandatory Sinking Fund Redemption ....................................................................... 6

ARTICLE IV
APPLICATION OF PROCEEDS OF 2023A BONDS; FUNDS AND ACCOUNTS Section 4.01 Application of the Proceeds of the 2023A Bonds...................................................... 7 Section 4.02 2023A Proceeds Fund ................................................................................................ 8 Section 4.03 2023A Capitalized Interest Account .......................................................................... 8 Section 4.04 2023A Costs of Issuance Account ............................................................................. 8 Section 4.05 No Reserve Account .................................................................................................. 8

ARTICLE V

MISCELLANEOUS
Section 5.01 2023A Bonds Subject to the Master Indenture .......................................................... 8 Section 5.02 Covenant to Defease or Retire Bonds Upon Acquisition of PG&E Assets ............... 9 Section 5.03 Tax Covenant ............................................................................................................. 9 Section 5.04 Continuing Disclosure ............................................................................................... 9 Section 5.05 No Priority R&R Fund Deposits ................................................................................ 9 Section 5.06 Execution in Counterparts ......................................................................................... 9 Section 5.07 Effective Date of Third Supplement .......................................................................... 9

EXHIBIT A FORM OF 2023A BON DS .................................................................................... A-1 EXHIBIT B CI TY CONTRACTING PROVISIONS ................................................................ B-1

1 4868-2349-5786v4/200617-0010

THIRD SUPPLEMENTAL TRUST INDENTURE
This THIRD SUPPLEMENTAL TRUST INDENTURE, dated as of October 1, 2023 (this “Third Supplement”), by and between THE CITY AND COUNTY OF SAN FRANCISCO (the “City”), acting by and through its PUBLIC UTILITIES COMMISSION OF THE CITY AND COUNTY OF SAN FRANCISCO (the “SFPUC”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as Trustee, which is authorized by law to exercise trust powers, and its successors in trust and assigns (the “Trustee”), is supplemental to the Trust Indenture, dated as of May 1, 2015, between the SFPUC and the Trustee, as previously amended and supplemented.

RECITALS
WHEREAS, pursuant to Section 4.112 and Article 8B of the Charter of the City (the “Charter”), the SFPUC has exclusive charge of the construction, management, supervision, maintenance, extension, operation, use and control of all water and energy supplies and utilities of the City under the SFPUC’s jurisdiction, including the Power Enterprise (the “Power Enterpri se”); and
WHEREAS, pursuant to Section 9.107(6) of the Charter, the Board of Supervisors of the City (the “Board”) is authorized to provide for the issuance of revenue bonds, without voter approval, issued for the purpose of the reconstruction or replacement of existing water facilities or electric power facilities, or combinations thereof, under the jurisdiction of the SFPUC when authorized by resolution adopted by a three-fourths majority of all of the members of the Board; and WHEREAS, pursuant to Sectio n 9.107(8) of the Charter, the Board is also authorized to provide for the issuance of revenue bonds, without voter approval, issued to finance or refinance the acquisition, construction, installation, equipping, improvement or rehabilitation of equipment or facilities for renewable energy and energy conservation; and WHEREAS, pursuant to Section 9.107 of the Charter, the Board is authorized to provide for the issuance of revenue bonds for SFPUC purposes with the assent of a majority of the voters upon any proposition for the issuance of such revenue bonds; and WHEREAS, pursuant to Article VIIIB of the Charter, as amended by Proposition A approved by the voters of the City at an election held on June 5, 2018 (“Article VIIIB”), the Board is authorized to provide for the issuance of revenue bonds (including notes, commercial paper or other forms of indebtedness), issued for the purpose of reconstructing, replacing, expanding, repairing or improving power facilities or combinations of water, clean water and power facilities under the jurisdiction of the SFPUC or for any other lawful purpose of the water, clean water, or power facilities, when authorized by ordinance approved by a two-thirds vote of the Board; and WHEREAS, pursuant to Section 9.109 of the Charter, the Board is authorized to provide for the issuance of revenue refunding bonds, without voter approval, upon satisfaction of the requirements set forth therein; and
WHEREAS, pursuant to Section 9.111 of the Charter, except as otherwise expressly provided by the Charter, the City and its commissions, including the SFPUC, have the authority to incur and 2 4868-2349-5786v4/200617-0010
refund indebtedness as provided by and pursuant to the general laws of the State of California (the “State”); and
WHEREAS, the Board, by its Ordinance No. 40-15, passed on March 24, 2015 and signed by the Mayor on April 2, 2015, established procedures for the issuance by the SFPUC of revenue bonds for its Power Enterprise and addressed certain other matters in connection therewith, including the establishment, maintenance and collection by the SFPUC and the City of rates of the Power Enterprise sufficient to pay amounts due from revenues of the Power Enterprise and to provide adequate debt service coverage as required by the Trust Indenture; and WHEREAS, the Bo ard, by Ordinance No. 41-15, passed on March 24, 2015, and signed by the Mayor on April 2, 2015 (in supplement to Ordinance No. 106-14, passed on June 24, 2014 and signed by the Mayor on July 2, 2014), Ordinance No. 113-16, passed on June 14, 2016 and signed by the Mayor on June 24, 2016, Ordinance No. 142- 18, passed on June 12, 2018 and signed by the Mayor on June 20, 2018, as amended by Ordinance No. 152-19, passed on June 25, 2019 and signed by the Mayor on June 28, 2019, Ordinance 172-20 passed on Septe mber 29, 2020 and signed by the Mayor on October 1, 2020, as amended by Ordinance No. 127-21, passed on July 27, 2021 and signed by the Mayor on August 4, 2021, and Ordinance No. 109-22, passed on June 14, 2022 and signed by the Mayor on June 24, 2022, has authorized the issuance of SFPUC Bonds for its Power Enterprise; and
WHEREAS, on May 20, 2015, the SFPUC issued its $39,555,000 aggregate principal amount of Public Utilities Commission of the City and County of San Francisco Power Revenue Bonds, 2015 Series AB under the Trust Indenture, dated as of May 1, 2015, by and between the SFPUC and the Trustee, as supplemented and amended by the First Supplemental Trust Indenture, dated as of May 1, 2015, by and between the SFPUC and the Trustee; and WHEREAS, on December 21, 2021, the SFPUC issued its $124,000,000 aggregate principal amount of Public Utilities Commission of the City and County of San Francisco Power Revenue Bonds, 2021 Series AB under the Trust Indenture, dated as of May 1, 2015, by and between the SFPUC and the Trustee, as previously supplemented and amended, and as supplemented and amended by the Second Supplemental Trust Indenture, dated as of December 1, 2021, by and between the SFPUC and the Trustee; and
WHEREAS, the Master Indenture provides that the SFPUC may issue additional Series of Bonds from time to time as authorized by a Supplemental Trust Indenture; and WHEREAS, the SFPUC deems it necessary and desirable and in the public interest to issue an additional series of revenue bonds (the “2023A Bonds”), payable from and secured by the Revenues of the Power Enterprise, after the payment of Operating and Maintenance Expenses and Priority R&R Fund deposits, if any, under and in accordance with the Charter, including Section