San Francisco Public UtilitiesCommission
Adoption of:
#8 Operating Budget, FY 2024-25 & FY 2025-26
#9 Capital Budget,FY 2024-25 & FY 2025-26
#10 10-Year Capital Improvement Plan, FY 2024-25 to FY 2033-34 #1110-Year Financial Plan, FY 2024-25 to FY 2033-34
February 13,2024
Nancy Hom, Chief Financial Officer and AGM, Business Services Laura Busch, Deputy Chief Financial Officer
Erin Corvinova, Financial Planning Director
1 Agenda
1. Budget Hearings Recap and Commission Actions
2. Budget Priorities Recap
3. Operating Budget summary
4. Capital Budget and 10-Year Capital Improvement
Plan summary
5. 10-Year Financial Plan overview
2 2024 Budget Hearing Schedule
Date Presentation Presenter(s)
January 22nd Budget Overview Dennis Herrera
Nancy Hom
Laura Busch
Erin Corvinova
Bureau Presentations: Infrastructure
Bureau, General Manager's Office,
Human Resource Services, External
Affairs, Business Services
Stephen Robinson
Dennis Herrera
Wendy Macy
Masood Ordikhani
Nancy Hom
January 26
th Wastewater Enterprise Joel Prather
January 29th Water Enterprise, Hetchy Water Steve Ritchie February 2nd Power Enterprise, CleanPowerSF Barbara Hale February 13th • 2-Year Operating Budget
• 2-Year Capital Budget
• 10-Year Capital Plans
• 10-Year Financial Plans
Laura Busch
Nancy Hom
Erin Corvinova
3 Budget Hearings
• ~12 hours of public hearings over 4 meetings prior to today’s budget adoption
• Presentations covered budget priorities, budget change drivers and details of each enterprise and bureau budget • Commission follow up questions answered
• Opportunity provided for the public to provide input, meeting our obligations under Admin Code Section 3.3
4 Commission Budget Actions
• For adoption today:
• Item #8: Operating budgets, FY 2024-25 & FY 2025-26
• Item #9: Capital budgets, FY 2024-25 & FY 2025-26
• Capital financing authorization, FY 2024-25 & FY 2025-26 • Item #10: 10-Year Capital Plans, FY 2024-25 to FY 2033-34 • Item #11: 10-Year Financial Plans, FY 2024-25 to FY 2033-34 5 Budget Priorities: Creating a Utility of the
Future
6 Affordability
Adopted affordability policy
for Water and Wastewater
Efficient capital planning
Responsible
Management
Addressing Regulatory
Requirements
Financial Sustainability
Workforce: Reducing
vacancies, increasing retention
Accountability: Racial Equity
and Transparency
Responsible management of
our system, maintenance
Investing
Where it
Matters
Contributing to economic
vitality: capital investment and
job creation
Replacing aging infrastructure
Meeting new customer
demands
Environmental stewardship
Resilience and climate change
Responding to Concerns: A Climate Lens
on This Year’s Budget
• System Resiliency in Water and Wastewater
• Protecting our systems from the worsening impacts of climate change • Climate resiliency projects ($789 Million)
• Flood resilience and stormwater management
• Bolstering Green Infrastructure staffing and support for the Green Infrastructure grant program
• Keeping the Bay healthy ($1.2 Billion)
• Nutrient reduction in the Bay
• Clean energy expansion ($780 Million)
• Investing in clean energy infrastructure
• Bringing Hetchy Power to more customers
• Customer programs in Hetch Hetchy Power and CleanPowerSF 7 Promoting Our Power Services
January 28, 2024
Item #8: Adoption of
Operating Budgets
FY 2024-25 & FY 2025-26
9 SFPUC Operating Budget Overview
10 Revenue-
funded Capital
12%
Debt Service
24%
Personnel
14%
Power Purchase and
Distribution 26%
Non-Personnel
19%
General Reserve
1%
Programmatic Projects
4%
• Capital is SFPUC’s largest
cost driver at 36% (debt
service 24% + revenue
funded capital 12%)
• Power purchase and
distribution is next at 26%
• Followed by Personnel and
Non-Personnel costs that
support daily operations at
14% and 19% respectively
Capital funding
FY2024-25
$2 Billion
Operating
Budget
-
500.0
1,000.0
1,500.0
2,000.0
2,500.0
FY2024 FY2025 FY2026
SFPUC Estimated Budget
($millions)
Operating Uses Capital Uses Purchase of Power
Operating Budget Growth: New Proposals grow the
budget by just 1.8% over the 2 years
• Budget will grow by 18% or $323
Million over next 2 years
• Capital and power purchase
remain the large cost drivers,
growing by $306 Million, or 95% of
the growth
• Operating budget new proposals
(including proposed offsetting
savings) are not a significant driver
of the overall growth. Net new
requests are roughly $33 Million,
only 10% of the growth (in other
words, growing the budget by just
1.8%)
11 11.4%
5.9%
1,788
2,110
1,992
Operating Budget Growth Drivers
12 (47)
(14)
13 18
47 78
89 139
(100) (50) - 50 100 150
$ million
Budget Growth Drivers
Revenue Funded Capital
Debt Service
Purchase of Power
New Proposals
Labor/COLA
Operations & Maintenance
Offsetting increase in Salary
Savings
General Reserve
Main 2-year budget changes, $M
New Proposals Summary
13 Water 12%
Wastewater 19%
CleanPowerSF
4%
Hetchy Power
8%
Hetchy Water
20%General
Manager 3%
HRS 6%
Business
Services 15%
Infrastructure
6%
External
Affairs 7%
Enterprise/
Bureau ($millions)
FY 2024-
25 FY 2025-
26 Total
Water $6.1 - 6.1
Wastewater 7.8 2.0 9.8
Hetchy Water 5.9 4.3 10.2
Hetchy Power 1.6 2.5 4.1
CleanPowerSF 1.4 0.4 1.8
General Manager 1.3 - 1.3
HRS 3.1 - 3.1
Business Svcs 7.4 0.2 7.6
External Affairs 3.3 - 3.3
Total New Operating $37.9 $9.4 $47.3
Salary Savings (13.1) (1.1) (14.2)
Net New Operating $24.8 $8.3 $33.1
Infrastructure (Capital funded) 2.9 - 2.9
Total SFPUC $27.7 $8.3 $36.0
New proposals, by division
Staffing Request Summary
14 Water 21 Wastewater 20
CleanPowerSF
12 Hetchy Power
26 Hetchy Water
13 General
Manager 4 HRS 20
Business
Services 33
Infrastructure
8 External
Affairs 14
Enterprise/
Bureau
New
Positions
Temp to
Perm
Substitutions
Water 9 12 42
Wastewater 16 4 28
Hetchy Water 2 11 13
Hetchy Power 17 9 12
CleanPowerSF 4 8 1
General Manager 4 - 4
HRS 12 8 10
Business Svcs 12 21 19
External Affairs - 14 17
Infrastructure 8 - 29
Total 84 87 175
171 New Permanent Positions, includes 87
Temp to Perm conversations
171 new permanent positions, most of which are temp
to perm and do not represent new headcount
15 Position Changes: Highlights
• 175 substitutions to both repurpose vacant positions for changing o
perational needs, and align job duties with classifications • 171 new positions requested, examples:
• Temporary to permanent conversions to ensure permanent operating positions are filled with PCS staff, helping with retention and recruitment • Addressing staffing shortages in key areas such as water quality, natural resources, green infrastructure maintenance, risk management • Shoring up HRS team to increase hiring
• Support for the City’s Housing for All initiative
• Increasing lead inspection in schools
• Meeting regulatory requirements
Temp to Permanent Conversions: Key Operational
Priority for Retention
• Most of the requests (87 of 171) are budget and
headcount neutral TEX Cat 18 to PCS conversions for
staff in core long-term operational positions
• Turnover is major operational challenge and ratepayer cost. Retention of staff is a high priority
• These positions are all filled at the time of the budget proposal. No new headcount results
• Costs are offset with temp reductions or attrition
increases, as we are already paying for them within
existing budget
16 Vacancies were carefully considered before
requesting new FTE
Enterprise/Bureau Budgeted
attrition %
Full time
Vacancies
Water 12.1% 206 (23%)
Wastewater 12.2% 164 (30.5%)
Hetchy Water 8.7% 60 (25.1%)
Hetchy Power 15.3% 40 (27.4%)
CleanPowerSF 16.8% 6 (14.6%)
General Manager 4.1% 4 (11.1%)
Human Resources 4.0% 20 (23.3%)
Business Services 6.4% 53 (17.9%)
External Affairs 4.9% 11 (23.4%)
Infrastructure - 109 (30.6%)
17 • We went through vacancy report and
pushed hard for substitutions instead of new
positions. We are doing 175 substitutions.
• This significantly reduced the number
of new FTE asks (from 203 initially, to
171)
• We have a “story for every vacancy”
ensuring no FTE is sitting vacant with no
active recruitment plans
• We have made significant changes in
budgeted attrition to more appropriately
reflect salary savings
• We have bolstered our HRS team to help
increase hiring
Numbers updated as of December 2023
AAO*: Operating FundedFTE growth is 4.3% in last
7 years
18 AAO total Change % change
FY2019-20 1,690
FY2020-21 1,667 -23 -1.4%
FY2021-22 1,708 41 2.5%
FY2022-23 1,718 10 0.6%
FY2023-24 1,724 5 0.3%
FY2024-25 1,762 38 2.2%
FY 2025-26 1,763 1 0.1%
73 4.3%0
200
400
600
800
1000
1200
1400
1600
1800
2000
AAO Total, budgeted and funded FTE,
excludes off budget positions and attrition
COVID
*AAO: Annual Appropriation Ordinance
…While the Operating Budget grew by 50% and our
work got more complex
19 Year
Operating Budget
$M
% Change form
prior year
FY2019-20 1,412
FY2020-21 1,434 1.6%
FY2021-22 1,504 4.9%
FY2022-23 1,652 9.8%
FY2023-24 1,788 8.3%
FY2024-25 1,992 11.4%
FY2025-26 2,110 5.9%
49.5%
-
500
1,000
1,500
2,000
2,500
Operating Budget $MCOVID
Item #9: Adoption of Capital
Budgets
FY 2024-25 & FY2025-26, including Capital Financing Authorization, FY 2024-25 & FY 2025-26
Item #10: Adoption of 10-Year
Capital Plans
FY 2024-25 to FY 2033-34
20 Capital Plan grew by $3 Billion, to $11.8 Billion
21 0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY 24-
25 FY 25-
26 FY 26-
27 FY 27-
28 FY 28-
29 FY 29-
30 FY 30-
31 FY 31-
32 FY 32-
33 FY 33-
34 Millions
Water Wastewater Hetchy Water
Hetchy Power CleanPowerSF
$Billion FY 2024-33 FY 2025-34 Change
Change
%
Water 2.3 3.0 0.7 30%
Wastewater 4.9 6.0 1.2 24%
Hetchy Water 1.0 1.5 0.5 57%
Hetchy Power 0.6 1.2 0.6 107%
CleanPowerSF 0.1 0.0 (0.0) -34%
8.8 11.8 3.0 34%
10-Year Capital Plan Comparison to Prior Plan
Capital Plan Growth drivers by Project Category
22 Regulatory
and
Environmental
45%
Clean Energy
27%
Repair and
Replacement
of Critical
Infrastructure
26%
Other Misc.
2%
The growth in this year’s
Capital Improvement Plan is
overwhelmingly driven by
climate change. Projects
driven by regulatory and
environmental obligations,
clean energy investments
and repair and replacement
of our aging critical
infrastructure are all directly
or indirectly the result of
climate impacts.
$3 Billion Growth in the Capital
Improvement Plan by type of project
FY2024-25 to FY2033-34 10-Year Capital Improvement Plan Overview: Building a Sustainable Future
Major Projects in the Capital Plan:
System Reliability and Resilience: Water
Millbrae Yard Laboratory and Shop
Improvements, SFWD Headquarters, and
replacement of water mains throughout the
system
Protecting Public Health: Wastewater
Nutrient Reduction, Biosolids Digester Facility,
stormwater/treatment plant improvements, flood
resistance, and replacement of sewer mains
throughout the system
System Sustainability and Expansion: Power
Public Power Expansion, Clean Steam, Moccasin
Penstocks, expanding clean energy sources,
enhancing reliability
Breakdown of the 10-Year CIP by Enterprise
23 Water
25%
Wastewater
51%
Hetchy Water
13%
Hetchy
Power 10% CleanPowerSF <1%
2-Year Capital Budget: Minimal change since the last version of the plan
$Million
Prior Plan
FY2024-25
Proposed
Plan
FY2024-25 Change
Prior Plan
FY2025-26
Proposed
Plan
FY2025-26 Change
Water 894.5 892.5 (2.0) 818.4 822.9 4.5
Wastewater 437.3 456.1 (18.7) 443.7 477.2 33.5
Hetchy Water 155.6 152.8 (2.8) 152.6 180.8 28.2
Hetchy Power 77.7 52.0 (25.7) 92.7 85.5 (7.2)
CleanPowerSF 2.9 2.6 (2.3) 3.0 0.5 (2.5)
1,568.0 1,554.0 -14.1 1,510.3 1,566.9 56.5
24 Due to a renewed focus on deliverability and using up prior appropriations, the 2-Capital Plan shrunk by 0.9% in FY 2024-25 and only slightly grew by 3.6% in
FY2025-26 versus the prior 10-Year Plan.
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
FY2024-25 FY 2025-26
Proposed Budget (in millions)
Fiscal Year
2-Year Budget Comparison to Prior
Plan
Prior Plan Proposed Plan
Debt Authorization
25 FY 2024-25 FY 2025-26 Total
Wastewater 911,508,795 804,162,291 1,715,671,086
Water Regional & Local 413,099,747 432,635,062 845,734,809 Hetchy Water 99,396,533 89,876,008 189,272,541
Total Water 512,496,280 522,511,070 1,035,007,350
Power 115,630,709 177,195,151 292,825,860
PUC Total 1,539,635,784 1,503,868,512 3,043,504,296
Capital Improvement Plan Summary
• $11.8 B SFPUC's largest 10-Year CIP to date:
• Capital planning process more rigorous than ever
• Developed with a focus on affordability, deliverability, racial equity, addressing the impacts of the climate crisis, and a proactive response to cost pressures
• Delivers reliable water, clean energy, and resilient infrastructure for generations to come
• Community Benefits
• Tens of thousands of local jobs created, boosting the economy, and supporting San Francisco
• Bolstering the local tax base which supports the City’s General Fund • Alignment with the Mayor's priorities, building a safer, cleaner, and more prosperous San Francisco 26
Services of the San Francisco Public Utilities Commission Item #11: Adoption of
10-Year Financial Plan
FY 2024-25 to FY 2033-34
27 Financial Plan Overview
• Annual update for 20-year rolling period required by SF Charter Section 8B.123
• Where all financial impacts come together
• Forecasts expenses, revenues, and required rate increases • Checks compliance with adopted financial policy metrics • Plans are complex Excel-based financial models and
accompanying written report
• Improvements and focus this year
• Complete rebuild of financial models
• Capital projects modelled at much greater level of detail 28 Water & Wastewater Demand Forecasts
29 Water 10-Year Financial Plan
30 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Beginning Fund Balance ($M) 148.4$ 137.1$ 137.3$ 146.6$ 165.1$ 170.3$ 175.9$ 184.1$ 187.6$ 188.4$ Sources ($M)
Retail Water Sales 345.3 367.9 385.8 404.9 420.8 437.8 455.7 469.9 485.2 500.9 Wholesale Water Sales 350.9 378.7 401.4 435.1 449.7 461.7 465.8 468.6 487.7 507.1 Other Miscellaneous Income 68.4 68.3 68.2 68.2 67.6 67.5 67.4 67.1 66.7 66.3 Total Sources 764.6$ 815.0$ 855.5$ 908.1$ 938.1$ 967.0$ 988.9$ 1,005.6 $ 1,039.6 $ 1,074.3 $ Use s ($M)
Operations & Maintenance 293.2 294.7 303.1 312.0 321.3 330.7 340.4 350.5 360.5 371.4 Hetchy Transfer 39.5 40.8 41.9 43.1 44.5 45.9 47.5 49.0 50.7 52.4 Debt Service 339.7 366.2 383.2 430.3 464.8 485.2 516.7 531.4 556.0 579.6 Revenue-Funded Projects 103.4 113.1 117.9 104.3 102.3 99.6 76.1 71.2 71.5 64.7 Total Uses 775.9$ 814.8$ 846.2$ 889.6$ 932.9$ 961.4$ 980.6$ 1,002.1 $ 1,038.8 $ 1,068.1 $ Net Revenues ($M) (11.3)$ 0.2$ 9.3$ 18.5$ 5.2$ 5.6$ 8.3$ 3.5$ 0.8$ 6.2$ Ending Fund Balance ($M) 137.1$ 137.3$ 146.6$ 165.1$ 170.3$ 175.9$ 184.1$ 187.6$ 188.4$ 194.6$ Rate Increas e - Retail 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0% Rate Increas e - Wholes ale 7.7% 4.5% 2.6% 8.2% 3.1% 2.1% 0.3% 0.0% 3.5% 3.4% Fund Balance as % of Op. Expenses 41.2% 40.9% 42.5% 46.5% 46.6% 46.7% 47.5% 47.0% 45.8% 45.9% Debt Service Coverage (Current) 1.31 1.32 1.34 1.29 1.23 1.22 1.16 1.14 1.13 1.12 Debt Service Coverage (Indenture) 1.71 1.71 1.74 1.69 1.62 1.60 1.53 1.50 1.48 1.47 Revenue-Funded % of Capital 27%
Wastewater 10-Year Financial Plan
31 FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Beginning Fund Balance ($M) 168.5$ 159.1$ 147.1$ 132.4$ 117.8$ 95.9$ 88.8$ 89.8$ 86.4$ 89.1$ Sources ($M)
Sewer Charges 434.0 478.8 535.3 598.9 664.3 730.4 803.8 885.0 948.6 1,016.7 Non-Rate Revenue 19.9 20.1 19.9 20.7 20.8 20.7 20.9 21.3 21.7 22.2 Federal Bond Interest Subsidy 3.2 3.1 3.0 2.8 2.7 2.5 2.3 2.2 2.0 1.8 Total Sources 457.2$ 501.9$ 558.2$ 622.5$ 687.8$ 753.6$ 827.1$ 908.4$ 972.2$ 1,040.6$ Use s ($M)
Operations & Maintenance 231.7 231.9 238.6 245.8 253.2 260.7 268.4 276.5 284.6 293.2 Debt Service 122.5 148.2 237.6 312.3 390.5 421.2 462.2 531.7 552.7 596.3 Revenue-Funded Projects 112.4 133.9 96.7 79.0 66.0 78.9 95.4 103.7 132.2 140.6 Total Uses 466.6$ 513.9$ 572.9$ 637.1$ 709.7$ 760.8$ 826.0$ 911.8$ 969.5$ 1,030.1$ Net Revenues ($M) (9.4)$ (12.0)$ (14.7)$ (14.6)$ (21.9)$ (7.2)$ 1.1$ (3.4)$ 2.7$ 10.5$ Ending Fund Balance ($M) 159.1$ 147.1$ 132.4$ 117.8$ 95.9$ 88.8$ 89.8$ 86.4$ 89.1$ 99.7$ Retail Rate Increas e 9.0% 9.0% 12.0% 12.0% 11.0% 10.0% 10.0% 10.0% 7.0% 7.0% Fund Balance as % of Op. Expenses 68.7% 63.4% 55.5% 47.9% 37.9% 34.1% 33.5% 31.3% 31.3% 34.0% Debt Service Coverage (Current) 1.96 1.94 1.42 1.26 1.18 1.19 1.21 1.20 1.25 1.26 Debt Service Coverage (Indenture) 3.21 2.87 1.92 1.60 1.37 1.39 1.41 1.36 1.41 1.43 Revenue-Funded % of Capital 18%
Wastewater Capital Spending
32 • Massive capital investment, driven by replacement of aging infrastructure and regulatory requirements
• Debt service grows from 24% to 58% of total expenses in 10 years • Conservative interest rate assumptions to provide buffer for risk Projected Capital Appropriations Total Expenses
Wastewater Debt Service Coverage and Fund
Balance
33 $-
$50
$100
$150
$200
$250
$300Millions
Ending Fund Balance (historic) Ending Fund Balance (projected) Minimum Fund Balance Commission Notice Fund Balance
FYE
2025
FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
2032
FYE
2033
FYE
2034
Indenture Debt Service Coverage (1.35x) 3.21 2.87 1.92 1.60 1.37 1.39 1.41 1.36 1.41 1.43 Current Debt Service Coverage (1.10x) 1.96 1.94 1.42 1.26 1.18 1.19 1.21 1.20 1.25 1.26 Wastewater Ending Available Fund Balance
• Spending down fund
balanc
e to reduce future
rate increases
• As debt issuance grows,
meeting debt service
coverage begins to drive
rate increases
Water & Sewer Affordability
34 FYE
2025*
FYE
2026*
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
10 Year
Avg.
Water Rate Increase 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 4.2% Sewer Rate Increase 9.0% 9.0% 12.0% 12.0% 11.0% 10.0% 10.0% 10.0% 7.0% 7.0% 9.6% Combined Bill Impact 8.8% 9.6% 9.6% 9.1% 9.4% 8.6% 7.7% 7.4% 4.9% 5.6% 8.1% * Adopted rates
Power Enterprise Financial Forecasting
Power-Specific Challenges
• Not a monopoly provider
• Sources of uncertainty:
• Weather impacts on Hetch Hetchy
generation
• Power supply and delivery not fully
owned – subject to market pressure
outside our control
• Seasonal variation in customer usage
patterns, customer growth
• Regulations changing wildly
• Cost structure less fixed
Strategies to Address Risk
Teams in Power heavily involved
in forecasting
Procure forecast data from third
party providers
Budgeted power supply
contingencies
Higher reserve minimum in
CleanPowerSF
35 Purchased Power Supply & Delivery
Purchased Resource Adequacy
• Power attribute for local/stable power supply to meet regulatory requirements
Miscellaneous Fees
• CAISO fees not based on volumes
Power Supply Contingency
• Budgeted amount to cover cost overages
36 Hetch Hetchy Power Purchased
Supply & Delivery
Purchased Power Supply
• Power purchases from contracts or open market
Transmission Access Charges
• Payments to CAISO to use non-owned transmission grid
Wholesale Distribution Tariffs
• Payments to PG&E to use in-city distribution system
CleanPowerSF Supply Costs
Hetch Hetchy 10-Year Financial Plan
37 ($M) FYE 2025 FYE 2026 F YE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Beginning Fund Balance 175.9$ 144.7$ 127.3$ 118.0$ 110.0$ 119.3$ 120.4$ 123.8$ 129.1$ 141.7$ Sources
Power Sales - Retail 202.5 239.7 289.6 339.9 373.1 400.5 433.4 464.6 493.2 508.9 Power Sales - Wholesale 18.9 20.1 17.5 15.1 16.4 16.5 17.4 16.6 16.1 16.2 Gas & Steam Sales 23.7 28.3 31.4 34.5 35.9 37.0 38.1 39.2 40.4 41.6 Water Sales 2.8 3.1 3.3 3.5 3.7 3.9 4.0 4.2 4.4 4.5 Hetchy Transfer 39.5 40.8 41.9 43.1 44.5 45.9 47.5 49.0 50.7 52.4 Other Misc Income 17.0 22.5 18.0 17.7 14.1 12.7 18.0 19.4 15.9 17.1 Total Sources 304.5$ 354.6$ 401.7$ 453.7$ 487.7$ 516.4$ 558.4$ 593.0$ 620.7$ 640.7$ Use s
Power Supply & Delivery Charges 138.3 148.7 171.5 181.0 196.7 206.1 218.5 234.5 249.2 255.0 Other Operations & Maintenance 171.0 177.1 181.6 187.6 193.7 200.1 206.7 213.6 220.7 228.1 Debt Service 10.5 13.6 17.7 25.9 38.1 47.1 60.4 68.8 81.2 91.0 Revenue-Funded Projects 15.9 32.6 40.2 67.2 50.0 62.0 69.5 70.8 57.0 62.5 Total Uses 335.7$ 372.0$ 411.0$ 461.7$ 478.4$ 515. 3$ 555.0$ 587.7$ 608.0$ 636.6$ Net Revenues (31.2)$ (17.4)$ (9.2)$ (8.0)$ 9.2$ 1.1$ 3.4$ 5.3$ 12.6$ 4.1$ Ending Fund Balance 144.7$ 127.3$ 118.0$ 110.0$ 119.3$ 120.4$ 123.8$ 129.1$ 141.7$ 145.8$ Retail Rate Change 14.0% 10.0% 9.0% 9.0% 5.0% 4.0% 4.0% 3.0% 3.0% 3.0% Fund Balance as % of Power Op. Expenses 55% 45% 39% 34% 35% 34% 33% 33% 34% 34% Debt Service Coverage (Current) 2.22 2.77 3.03 3.30 2.45 2.30 2.09 1.99 1.81 1.68 Debt Service Coverage (Indenture) 14.35 11.65 9.66 7.39 5.62 4.87 4.15 3.88 3.56 3.28 Revenue-Funded % of Capital 20%
Hetch Hetchy Power Rate Forecast
38 FYE
2025
FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
10 Year
Avg.
Retail Rate Increase 14.0% 10.0% 9.0% 9.0% 5.0% 4.0% 4.0% 3.0% 3.0% 3.0% 6.3% General Use Rate
Increase 18.9% 15.9% 13.7% 12.1% 10.8% 9.7% 8.9% 8.1% 7.5% 7.0% 11.2% Average Residential Bill – 10 Years Average Residential Bill – PG&E Comparison
CleanPowerSF 10-Year Financial Plan
($M) FYE 2025 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 Beginning Fund Balance 125.3$ 163.1$ 196.6$ 226.1$ 255.2$ 282.5$ 312.1$ 326.1$ 322.0$ 327.0$ Sources
Retail Power Sales 448.8 458.9 463.9 469.4 473.1 479.5 486.1 493.3 498.2 505.6 Wholesale Sales 11.1 0.0 0.0 0.7 1.1 0.4 0.0 0.0 0.0 0.0 Other Miscellaneous Income 2.8 2.9 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Total Sources 462.7$ 461.8$ 466.9$ 473.2$ 477.4$ 483.2$ 489.5$ 496.8$ 501.7$ 509.3$ Use s
Power Supply 385.0 386.2 394.2 399.4 403.8 400.4 411.4 427.3 445.1 466.5 Operations 39.4 41.5 42.8 44.2 45.6 47.0 48.5 50.0 51.6 53.3 Revenue-Funded Projects 0.6 0.5 0.4 0.5 0.7 6.2 15.5 23.6 0.1 0.5 Total Uses 425.0$ 428.3$ 437.5$ 444.1$ 450.1$ 453.6$ 475.4$ 500.9$ 496.8$ 520.2$ Net Revenues 37.8$ 33.5$ 29.4$ 29.1$ 27.3$ 29.6$ 14.1$ (4.1)$ 5.0$ (10.9)$ Ending Fund Balance 163.1$ 196.6$ 226.1$ 255.2$ 282.5$ 312.1$ 326.1$ 322.0$ 327.0$ 316.1$ Generation Rate Change 12.0% 1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Days Cash On Hand 151 183 209 232 254 281 286 272 265 245 Fund Balance as % of Op. Expenses 38% 46% 52% 58% 63% 70% 71% 67% 66% 61% 39 CleanPowerSFFinancial Metrics
40 CleanPowerSF Ending Available Fund Balance
• CleanPowerSF adopted new
reser
ve policy in 2022 as
part of rate study
• Exposure to higher
financial volatility
requires higher reserves
• Goal: build to minimum
150 days cash on hand
and target 180 days cash
on hand within 3 years
• Challenging to build reserves
during high-cost/volatile
power supply market
• FY 24-25 rate increase set to
meet 150 day minimum
FYE
2025
FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
Ending Days
Cash on Hand 151 183 209 232 254 281 286 272 265 245
CleanPowerSF Rate Forecast
41 Average Residential Bill – 10 Years Average Residential Bill – PG&E Comparison FYE
2025
FYE
2026
FYE
2027
FYE
2028
FYE
2029
FYE
2030
FYE
2031
FYE
3032
FYE
2033
FYE
2034
10 Year
Avg.
Generation Rate Increase
(CleanPowerSF) 12% 1% 0% 0% 0% 0% 0% 0% 0% 0% 1.2%
Total Bill Increase
(PG&E + CleanPowerSF) 5% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Services of the San Francisco Public Utilities Commission Questions?
42 AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
DEPARTMENT: Business Services AGENDA NO. 8
MEETING DATE: February 13, 2024
Adopt the FY 2024-25 and FY 2025-26 Biennial SFPUC Operating Budget (San Francisco Administrative Code Section 3.3(c)) : Regular Calendar Manager: Laura Busch
Summary of
Proposed
Commission Action:
Public Hearing to consider and possible action to adopt the San Francisco Public Utilities Commission Biennial Operating Budget including the Revenue Transfer for Capital in the amount of $1,992,354,768 for FY 2024- 25 and $2,110,646,439 for FY 2025-26.
Background &
Description: Budget Development
In August 2023 , the General Manager issued budget development instructions including guidance on budgetary growth for the San Francisco Public Utilities Commission (SFPUC). The budget systems remained open for six weeks for the Enterprises and Bureaus to submit their proposals for the FY 2024-25 and FY 2025-26 Operating Budgets, between the months of August and September of 2023. The executive team s reviewed the proposals and provided feedback through a series of Budget Steering Committee meetings from September to November of 2023 . General Manager review and approval occurred during additional meetings in December 2023.
Under San Francisco Administrative Code Section 3.3, the SFPUC must hold two budget meetings, the first regarding budget priorities and the second to adopt a proposed budget. The second meeting must occur at least 15 days after the first meeting and before February 14. Accor dingly, on September 26, 2023, the SFPUC held a duly noticed public meeting to
consider FY 2024- 25 budget priorities at which members of the public provided input. On January 22, 2024, the SFPUC held another duly noticed public meeting to consider budget priorities, at which members of the public provided input. Additionally, on January 26, January 29, and February 2, 2024 the General Manager and S taff presented in duly noticed public hearings the preliminary proposed FY 2024-25 and FY 2025-26 Operating Budgets to the Commission for the Water Enterprise, Wastewater Enterprise, Hetch Hetchy Water and Power (including the Power Enterprise and CleanPowerSF), as well as for the SFPUC Support Bureaus consisting of Business Services, External Affairs, Human Resources, Infrastructure, and the General Manager’s Office. Copies of this presented information are on file with the Commission Secretary and are available online at:
https://sfpuc.org/about-us/boards-commissions-committees/sfpuc- commission/agendas-minutes-resolutions-log.
With these four public budg et hearings, SFPUC has more public hearings associated with budget development and review than most City departments.
To comply with Charter Section 9.101 and the City’s Budget submittal schedule, the Commission- approved biennial budget request must be submitted to the Mayor and Controller by February 21, 2024 for incorporation into the Mayor’s proposed budget and conside ration by the Board of Supervisors. The SFPUC is scheduled to present the proposed biennial budget to the Board of Supervisors in May 2024.
Proposed Operating Budget Review per SFPUC’s Ratepayer
Assurance Policy
The SFPUC operations and maintenance budget is increasing by approximately $108.5M (9%) in FY 2024-25 and $33.9M (3%) in FY 2025- 26, excluding debt service, revenue funded capital costs , and general reserves. Over the two years, this represents an average annual increase of 6%. The city Controller has estimated inflation of 2.6%.
As required by the SFPUC Ratepayer Assurance Policy, t o the extent that operating costs are determined by SFPUC management choices, the Commission shall limit opera ting cost increases, exclusive of debt service and revenue funded capital investment, to not more that the cost of inflation.
Any proposed budget that increases operating costs above this level will be supported by findings of necessity, as described and referenced below.
The largest driver of operations and maintenance cost increases in this budget is purchase of power as well as transmission and distribution costs, which make up 61% of the overall operations and maintenance increase ($66.3M) in FY 2024-25. In FY 2025-26, power purch ase costs are projected to increase by $11.7M or 34% of the overall operations and maintenance increase. These costs are driven by energy market prices and PG&E tariffs, which have exceeded inflation.
After power purchase costs , in FY 2024-25, $37.9M (35%) of the operations and maintenance budget increase funds necessary new proposals and increasing service levels across the agency and $4.3M (4%) funds base budget inflationary increases. In FY 2025-26, $9.4M (28%) of the increase funds new proposals and increasing service levels across the agency and $12.8M (38%) of the increase funds base budget inflationary increases.
Detailed j ustifications for the necessity of all new proposals have been provided to the Commission as part of the four special hearings noted above.
Summary of Two-Year Operating Budget
The SFPUC proposed operating budget and revenue transfer for capital budget is $1,992,354,768 for FY 2024-25 and $2,110,646,439 for FY 2025-26 representing annual increases of 11% and 6% respectively.
The budget includes sufficient operating and maintence funds for the Enterprises and Bureaus including labor, contractual services, equipment,
debt service, and services of other departments.
As described in the budget hearings and above, the increases are mainly due to:
- Increases to revenue funding and debt service to fund the capital plans of each Enterprise.
- Purchase of power related mainly to the growth in the price of energy and the cost of transmission and distribution.
- City-wide COLA increases to salaries and benefits.
- Responsible management of our fac ilities and equipment, meeting regulatory requirements, and maintaining SFPUC’s IT infrastructure. - Inflationary increases to equipment and supplies due to market and inflationary pressure.
Projects that have a technology aspect to them require review and approval by the City’s Committee on Information Technology (COIT). The SFPUC will not be submitting any applications to COIT for review for the FY2024- 25 and FY 2025-26 operating budget proposal.
Budgeted salary and benefit cost increases are also partially offset by vacancy-driven salary savings. The proposed b iennial operating budget includes approximately 73 net new positions in the following areas:
Enterprise/Bureau FY 2024-25 FY 2025-26 Total
Water 7 - 7
Hetchy Water 1 1 2
Wastewater 1 - 1
Power 23 3 26
CleanPowerSF 4 - 4
External Affairs 8 - 8
Business Services 9 - 9
Total 69 4 73
Please note that the new headcount reflected in this table may not match to the FTE increases that will be included in the Annual Appropriation Ordinance, this is because of partial FTEs and increases to budgeted attrition.
The new positions:
- Convert temporary position s to permanent Civil Service positions to ensure permanent operating positions are filled with PCS staff, helping with retention and recruitment.
- Address staffing shortages in key areas such as facilities maintenance, business services, customer programs and human resources. - Add staff to implement new programs such as alternative water supply and green infrastructure maintenance.
Capital Revenue Transfers support enterprise pay-go or revenue funded capital of $228.9M for FY 2024-25 and $271.3M for FY 2025-26.
Operating FY 2024-25 FY2025-26
Water Enterprise $ 729,296,005 $ 765,536,329
Wastewater Enterprise 475,202,821 524,556,163
Hetchy Power 228,126,099 257,244,576
Hetchy Water 107,100,239 116,329,822
CleanPowerSF 452,586,209 446,936,153
Subtotal $ 1,992,354,768 $ 2,110,646,439
External Affairs $ 11,221,097 $ 11,528,621
General Manager 38,148,871 39,451,757
Business Services 96,141,486 98,357,913
Bureau Recoveries (145,511,454) (149,338,291) Infrastructure 106,499,835 110,043,883 Project Recoveries, Infrastructure (106,499,835) (110,043,883) Total SFPUC $ 1,992,354,768 $ 2,110,646,439
Capital Revenue Transfer
FY 2024-25
FY 2025-26
Water Enterprise $ 99,977,942 $ 104,353,430
Wastewater Enterprise 112,415,407 133,891,216 Hetchy Power 12,442,617 12,622,432 Hetchy Water 3,451,858 8,772,339 CleanPowerSF 564,000 499,000 Subtotal $ 228,851,824 $ 271,337,915
Result of Inaction: Delay the timely submittal of the SFPUC Operating and Programmatic Budgets to the Controller and Mayor.
Budget & Costs: Total Operating Budget*:
FY 2024-25 $1,992,354,768
FY 2025-26 $2,110,646,439
Total Capital Revenue Transfer:
FY 2024-25 $228,851,824
FY 2025-26 $271,337,915
* Includes Capital Revenue Transfer
Environmental Review: This action does not constitute a project under the California Environmental Quality Act (CEQA) Guidelines section 15378(b)(4) because adoption of the Operating Budget involves creation of a government funding mechanism or other fiscal activities and does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.
The SFPUC will consider approval of projects to be funded through this Operating Budget only after completion of any environmental review required by CEQA and Administrative Code Chapter 31 and any certification required by Proposition E (approved by the voters in 2002 for water and wastewater projects) and Proposition A (approved by the voters in 2018 for power projects).
Recommendation: SFPUC staff recommends that the Commission adopt the attached resolution.
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, On January 22, 2024, this Commission heard and considered budget priorities for the San Francisco Public Utitlies Commission (SFPUC) . Additionally, on January 26, January 19, and February 2, 2024 the General Manager and Staff presented proposed Biennial FY 2024-25 and FY 2025-26 Operating Budgets for the Water Enterprise, Wastewater Enterprise, Hetch Hetchy Water and Power, including the Power Enterprise and CleanPowerSF, as well as the SFPUC Support Bureaus (Operating Budgets); and
WHEREAS, The detailed Operating B udgets for each Enterprise and Bureau presented to the Commission at the public hearings on January 22, January 26, January 29, 202 4 and February 2 are on file with the Commission Secretary and the summaries of the budgets presented on February 13, 2024 are attached to this Resolution as Appendix A and Appendix B; and WHEREAS, This is action does not constitute a project under the California Environmental Quality Act (CEQA) Guidelines section 15378(b)(4) because adoption of the Operating Budget involves creation of a government funding mechanism or other fiscal activities and does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; and
WHEREAS, The SFPUC will consider approval of projects to be funded through this Operating Budget only after completion of any environmental review required by CEQA and Administrative Code Chapter 31 and any certification required by Proposition E (approved by the voters in 2002 for w ater and wastewater projects) and Proposition A (approved by the voters in 2018 for power projects); and
WHEREAS, The SFPUC proposed biennial Operating Budgets must be submitted to and approved by the Mayor and the Board of Supervisors, as provided under Charter Section 9.101; now, therefore, be it
RESOLVED, This Commission hereby approves the FY 20 24-25 and FY 2025-26 Operating Budgets, including the revenue transfer for capital, as set forth in Appendix A, as follows:
Operating FY 2024-25 FY2025-26
Water Enterprise $ 729,296,005 $ 765,536,329
Wastewater Enterprise 475,202,821 524,556,163
Hetchy Power 228,126,099 257,244,576
Hetchy Water 107,100,239 116,329,822
CleanPowerSF 452,586,209 446,936,153
Subtotal $ 1,992,354,768 $ 2,110,646,439
External Affairs $ 11,221,097 $ 11,528,621
General Manager 38,148,871 39,451,757
Business Services 96,141,486 98,357,913
Bureau Recoveries (145,511,454) (149,338,291) Infrastructure 106,499,835 110,043,883 Project Recoveries, Infrastructure (106,499,835) (110,043,883) Total SFPUC $ 1,992,354,768 $ 2,110,646,439
Capital Revenue Transfer
FY 2024-25
FY 2025-26
Water Enterprise $ 99,977,942 $ 104,353,430
Wastewater Enterprise 112,415,407 133,891,216 Hetchy Power 12,442,617 12,622,432 Hetchy Water 3,451,858 8,772,339 CleanPowerSF 564,000 499,000 Subtotal $ 228,851,824 $ 271,337,915
; and, be it,
FURTHER RESOLVED, That this Commission authorizes the Gene ral Manager to submit the above referenced biennial Operating Budgets to the Mayor and the Board of Supervisors for approval; and be it
FURTHER RESOLVED, That the General Manager is authorized to make further technical adjustments to these approved amounts as may be necessary or upon further direction from the Commission, the Mayor or the Board of Supervisors; and, be it
FURTHER RESOLVED, That the General Manager is authorized to adjust salaries in conformance with amendments to the Annual Salary Ordinance and mandatory fringe benefits as provided in the Controller's instructions; and, be it
FURTHER RESOLVED, That the SFPUC proposed budgets shall be filed with the Controller in conformance with the provisions of the San Francisco Charter Article IX and Administrative Code Chapter 3. Copies of the approved budget are on file in the office of the Commission Secretary; and, be it
FURTHER RESOLVED, That, as required by the Commission- adopted Ratepayer Assurance Policy of 2017, the Commission finds that the SFPUC’s budget requests for FY 2024- 25 and FY 2025-26 are greater than the projected inflation rate over the next two fiscal years , however, the Commission also finds that the details explained in the budget proposal sufficiently support the adoption of the budget requests and included cost increases nonetheless . Increases above the projected inflation rate during the period are driven by power purchase and related costs which do not reflect increased service levels.
I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of February 13, 2024.
Secretary, Public Utilities Commission