CleanPowerSF Sfpuc Commission
March 12, 2024

As a result of the above activities, net position for the year ended June 30, 2023 increased by $33,681 or

39.9% compared to prior year.

Result of Operations, Fiscal Year 2022

Hetch Hetchy

Hetch Hetchy’s total revenues were $ 491,229, an increase of $78,663 or 19.1% over prior year (see Table 2A). Charges for services in creased by $ 89,274 or 22.8% from prior year’s revenues mainly due to higher billings from CleanPowerSF and Hetchy Power. Total expenses in creased by $ 65,599 or 15.9% primarily from higher energy purchases due to volatile and increased pricing in power market. (See Table 2A).

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

24 (Continued)

Hetchy Water

Hetchy Water’s total revenues were $46,859, a decrease of $1,351 or 2.8% from prior year’s revenues (see Table 2B). Decrease was due to $2,700 in investment loss and a decrease of $873 from other non- operating revenues, offset by increases of $2,221 from charges for services and $ 1 from rents a nd concessions.

Charges for services were $ 49,200, an increase of $2,221 or 4.7% mainly due to increased water assessment fees from the Water Enterprise to fund upcountry water-related costs and higher consumption from Lawrence Livermore National Laboratory . Rents were $ 112, an increase of $ 1 or 0.9% mainly due to consumer price index adjustment. Interest and investment loss was $2,932 mainly due to unrealized losses as a result of the decline in market value of investments related to rising interest rates. Other non-operating revenues were $ 479, a de crease of $873 or 64.6% mainly due to $ 899 lower Federal and State grants revenue from the Rim Fire Projects, offset by increases of $19 in overhead charges and $7 in net gain from sale of fixed assets.

Total operating expenses, excluding interest expenses and other non-operating expenses, were $52,299, an increase of $1,780 or 3.5%. The increase was primarily due to in creases of $ 4,275 in other operating expenses mainly due to higher capital spending, $612 in services provided by other departments mainly due to higher legal service charges from City Attorney’s Office , $ 452 in depreciation and amortization mainly related to additional building, structure and equipment placed in service, $309 in general and administrative expenses mainly due to higher fees, licenses, and permit expenses, $277 in contractual services mainly from increased engineering and management consulting services , and $90 in material and supplies mainly from fuel and water treatment supplies. These increases were offset by a decrease of $4,235 in personnel services due to lower pension obligations based on actuarial reports.

Other non -operating expenses were $37, a de crease of $ 26 due to lower payments to community -based organization programs. Interest expenses were $3, an increase of $1 mainly due to implementation of GASB Statements No. 87 and 96 for leases and SBITAs. A transfer in of $ 30,001 was received from the Water Enterprise to fund various Mountain Tunnel projects.

As a result of the above activities, net position for the year ended June 30, 2022 increased by $24,521 or

10.9% compared to prior year.

Hetchy Power

Hetchy Power’s total revenues were $185,004, an increase of $29,324 or 18.8% from prior year’s revenues (see Table 2C). In creases included $36,858 from charges for services and $1 from rents and concessions, offset by decreases of $4,025 from interest and investment income and $3,510 from other non -operating revenues.

Charges for services were $173,105, an increase of $36,858 or 27.1%, due to $22,537 in billings from City departments such as San Francisco International Airport, Municipal Transportation Agency, and Port of San Francisco as a result of increased operation due to easing of COVID -19 restrictions and $14,980 in CRR credits from California Independent System Operator ( CAISO), offset by a decrease of $659 in resale of capacity to CleanPowerSF. Rents increased slightly by $1 or 0.7% to $137 mainly due to consumer price index adjustment. Interest and investment loss was $4,001, a decrease of $4,025, mainly due to unrealized losses as a result of the decline in market value of investments related to rising interest rates.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

25 (Continued)

Other non -operating revenues were $15,763 , a de crease of $ 3,510 or 18.2%, mainly due to lower collections of $3,254 from the Power System Mitigation Project, $1,371 in Cap and Trade revenue due to decrease of 97,000 allowances or 80% sold, $1,194 in revenue from Alice Griffith Housing Project due to prior year recognition of commercial deposits, $7 97 in settlement revenue from prior year litigation settlement, and $335 in overhead charges , offset by an increase of $3,441 in State and Federal grants revenue from Rim Fire Project and California Utility Arrearages Relief Payment Program for unpaid bills.

Total operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, in creased by $10,703 or 7.3%, to $156,343. The increase was primarily due to increases of $ 15,559 in purchased electricity and transmission, distribution, and other power costs due to volatile and increased pricing in power market , $2,119 in depreciation and amortization mainly for buildings, facilities, machinery, and equipment related to higher capitali zation of assets, $ 754 in contractual services mainly for management consulting and engineering services , $280 in materials and supplies mainly for electrical supplies and tools, and $116 in services provided by other departments mainly due to higher risk management costs . The increases were offset by decreases of $6,110 in personnel services due to lower pension obligations based on actuarial reports , $1,420 in general and administrative expenses mainly due to lower judgements and claims expenses , and $595 decrease in other operating expenses mainly due to higher capitalized project expenses.

Interest expenses increased by $3,655 or 185.3% mainly due to no bond interest capitalization recognized in current year resulting from the implementation o f GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period . Amortization of premium and discount increased by $411 or 187.7% mainly due to costs of issuance for 2021 Series AB revenue bond.

Other non-operating expenses were $591, a decrease of $ 311 or 34.5% mainly due to lower payments for GoSolarSF Incentive Program. Transfer out of $532 includes $500 to General Fund for repayment of Educational Revenue Augmentation Funds and $32 to the Office of the City’s Administrator for the Surety Bond Program.

As a result of the above activities, net position for the year ended June 30, 2022 increased by $21,719 or

4.6% compared to prior year.

CleanPowerSF

CleanPowerSF’s total revenues were $259,366, a $50,690 or 24.3% increase over prior year (see Table 2D). Charges for services increased by $50,195 or 24.2% mainly due to increases of $ 44,215 in electricity sales to retail and commercial customers resulting from a 16% average rate increase, $2,831 r eduction in allowance for doubtful accounts attributed to assistance received from California Utility Arrearages Relief Payment Program (CAPP) for eligible customer account arrearages, $2,817 in one-time customer assistance bill credit related to COVID-19 in prior year, and $332 from higher capacity sales to Hetchy Power. Other non- operating revenue increased by $1,832 mainly due to $ 2,424 Federal grants received from CAPP, offset by a decrease of $592 liquidated damage comp ensation received from supplier for delay of the Renewable Energy Project in prior year. Interest and investment loss was $1,286 as a result of the decline in market value of investments related to rising interest rates.

Total operating expenses, excluding interest expenses wer e $262,117, an increase of $ 49,406 or 23.2% from prior year. The increase was due to $ 48,749 in purchased electricity and transmission, distribution , and other power costs due to volatile and increased pricing in power market, and higher resource adequacy capacity purchases related to compliance requirements from the California Public Utilities Commission .

Other operating expenses increased by $ 2,895 due to $2,424 grant expense recognized for CAPP when

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

26 (Continued)

applied to custome r account arrearages and $ 471 in operating expenses mainly for the Neighborhood Steward Program and the new Local Renewable Energy. Other increases included $1,394 in general and administrative expenses mainly due to higher judgements and claims expenses , $102 in professional and contractual services mainly from higher software licensing fee, $40 in depreciation and amortization due to implementation of GASB S tatement No. 96, SBITAs, and $ 7 in material and supplies mainly for data processing equipment. These increases were offset by decreases of $3,474 in personnel services due to lower pension obligations based on actuarial reports , $307 in services provided by other departments mainly due to lower labor support from Hetchy Power. Interest expense s decreased by $20 mainly due to repayment of working capital loan to Hetchy Power completed in prior year.

As a result of the above activities, net position for the year ended June 30, 2022 decreased by $2,757 or

3.2% compared to prior year.

Capital Assets

The following tables summarize Hetch Hetchy’s changes in capital assets.

Capital Assets, Fiscal Year 2023

Hetch Hetchy

Hetch Hetchy has capital assets of $ 866,700, net of accumulated depreciation and amortization, invested in both water and power utility capital assets as of June 30, 2023 (see Table 3A). This amount represents an increase of $ 80,057 or 10.2%, resulting from increases of $ 53,940 in construction work in progress and $26,437 in facilities, improvements, machinery and equipment, offset by a decrease of $320 in amortization of intangible assets. The investment in capital assets includes land, buildings, improvements, hydropower facilities, dams, transmission lines, machinery, and equipment.

2023-2022 2022-2021
2023 2022 2021 Change Change
Hetch Hetchy
Facilities, improvements, machinery, and equipment $ 466,897 440,460 432,916 26,437 7, 544 Intangible assets 24,152 24,472 24,932 (320) (460) Land and rights-of-way 5,181 5,181 5,181 — — Co
nstruction work in progress 370,470 316,530 206,508 53,940 110, 022 Total 866,700 786,643 669,537 80,057 117,106
Hetchy Water
Facilities, improvements, machinery, and equipment 133,905 133,263 128,335 642 4,928 Intangible assets 10,167 10,374 10,581 (207) (207) Land and rights-of-way 3,232 3,232 3,232 — — Construction work in progress 72,450 54,138 35,333 18,312 18,805 Total 219,754 201,007 177,481 18,747 23,526
Hetchy Power
Facilities, improvements, machinery, and equipment 332,992 307,197 304,581 25, 795 2,616 Intangible assets 13,985 14,098 14,351 (113) (253) Land and rights-of-way 1,949 1,949 1,949 — — Co
nstruction work in progress 298,020 262,392 171,175 35,628 91, 217 Total $ 646,946 585,636 492,056 61,310 93, 580
Table 3A - Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2023, 2022, and 2021

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

27 (Continued)

Major additions to construction work in progress, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2023 include the following:

Hetchy Water

Hetchy Water has capital assets of $ 219,754, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 202 3 (see Table 3A). This amount represents an increase of $18,747 or 9.3%, primarily due to in creases of $18,312 in construction work in progress and $642 in facilities, improvements, machinery, and equipment, offset by a decrease of $207 in amortization of intangible assets.

For the year ended June 30, 2023, Hetchy Water’s major additions to construction work in progress totaled $25,032. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $6,762 (see Table 3B).

Hetchy Hetchy
Water Power 2023 Total
Moccasin Powerhouse Rewind $ — 16,920 16,920 Mountain Tunnel Improvement Project 6,835 8,353 15,188 Bay Corridor Project — 9,093 9,093
San Joaquin Pipeline Valve & Safe Entry Improvement 6,888 — 6,888 Transmission Line Clearance Mitigation Upgrade — 6,061 6,061 Cluster 7 Mitigation — 5,398 5,398
O'Shaughnessy Dam Outlet Works Phase 1 1,724 2,107 3,831 Treasure Island Capital Improvements — 3,471 3,471 Moccasin Dam Long Term Improvement and Facilities Upgrade 1,518 1,856 3,374 Repair & Replacement Life Extension Program 3,149 — 3,149 Intervening Facilities — 2,748 2,748 2023 March Winter Storm 874 1,068 1,942 Other project additions individually below $1,500 4,044 18,273 22,317 Additions to Construction Work in Progress $ 25,032 75,348 100,380 Van Ness Bus Rapid Transit $ — 13,916 13,916 Flow Control Facility Bypass Tunnel 3,291 4,022 7,313 Power Intervening Facilities — 4,953 4,953 Mission Rock Phase I — 2,075 2,075
Treasure Island Distribution Backbone — 1,792 1,792 Yerba Buena Island Underground Distribution System — 1,677 1,677 Marina Middle School Photovoltaic System — 1,587 1,587 Other project additions individually below $1,500 3,471 13,370 16,841 Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service $ 6,762 43,392 50,154 Table 3B - Hetch Hetchy
Major Additions to Construction Work in Progress and
Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service Year ended June 30, 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

28 (Continued)

Hetchy Power

Hetchy Power has capital as sets of $646,946, net of accumulated depreciation and amortization, invested in utility capital assets as of June 30, 202 3 (see Table 3A). This amount represents an increase of $61 ,310 or 10.5%, primarily due to increases of $ 35,628 in construction work in progress and $25,795 in facilities, improvements, machinery, and equipment, offset by a decrease of $113 in amortization of intangible assets.

For the year ended June 30, 2023 , Hetchy Power’s major additions to construction work in progress totaled $75,348. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $43,392 (see Table 3B).

CleanPowerSF

CleanPowerSF had no capital assets as of June 30, 2023 and 2022.

See Note 4 for additional information about capital assets.

Capital Assets, Fiscal Year 2022

Hetch Hetchy

Hetch Hetchy has capital assets of $ 786,643, net of accumulated depreciation and amortization, invested in both water and power utility capital assets as of June 30, 2022 (see Table 3A). This amount represents an increase of $117,106 or 17.5%, resulting from increases of $ 110,022 in construction work in progress and $7,544 in facilities, improvements, machinery and equipment, offset by a decrease of $460 in amortization of intangible assets. The investment in capital assets includes land, buildings, improvements, hydropower facilities, dams, transmission lines, machinery, and equipment.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

29 (Continued)

Major additions to construction work in progress, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2022 include the following:

Hetchy Water

Hetchy Water has capital assets of $ 201,007, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 202 2 (see Table 3A). This amount represents an increase of $23,526 or 13.3%, primarily due to increases of $ 18,805 in construction work in progress and $4,928 in facilities, improvements, machinery, and equipment, offset by a decrease of $207 in amortization of intangible assets.

For the year ended June 30, 2022 , Hetchy Water’s major additions to construction work in progress totaled $29,654. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $11,013 (see Table 3C).

Hetchy Power

Hetchy Power has capital assets of $ 585,636, net of accumulated depreciation and amortization, invested in utility capital assets as of June 30, 202 2 (see Table 3A). This amount represents an increase of $93 ,580 Hetchy Hetchy
Water Power 2022 Total
Bay Corridor Project $ — 46,608 46,608 Mountain Tunnel Improvement Project 16,638 20,335 36,973 Moccasin Powerhouse Rewind — 12,368 12,368 O'Shaughnessy Dam Access & Drainage Improvements and
Outlet Works 1,733 2,118 3,851
San Joaquin Pipeline Valve & Safe Entry Improvement 2,952 — 2,952 Repair and Replacement Life Extension Program 2,776 — 2,776 Intervening Facilities — 2,758 2,758 Pier 70 — 2,739 2,739
Van Ness Bus Rapid Transit — 2,423 2,423 Transmission Line Clearance Mitigation — 1,711 1,711 Other project additions individually below $1,500 5,555 19,799 25,354 Additions to Construction Work in Progress $ 29,654 110,859 140,513 San Joaquin Pipeline Tesla Valves and Installation $ 4,410 — 4,410 O'Shaughnessy Dam Access & Drainage Improvements - Stairs and Fall Protection 1,931 2,360 4,291
Pier 70 — 1,720 1,720
Transmission Line Clearance Mitigation — 1,508 1,508 Other project additions individually below $1,500 4,672 14,386 19,058 Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service $ 11,013 19,974 30,987 Table 3C - Hetch Hetchy
Major Additions to Construction Work in Progress and
Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service Year ended June 30, 2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

30 (Continued)

or 19.0%, primarily due to increases of $ 91,217 in construction work in progress and $2,616 in facilities, improvements, machinery, and equipment, offset by a decrease of $253 in amortization of intangible assets.

For the year ended June 30, 2022 , Hetchy Power’s major additions to construction work in progress totaled $110,859. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $19,974 (see Table 3C).

CleanPowerSF

CleanPowerSF had no capital assets as of June 30, 2022 and 2021.

See Note 4 for additional information about capital assets.

Debt Administration

Hetch Hetchy

As of June 30 , 2023, Hetch Hetchy has outstanding C ertificates of P articipation, Clean Renewable Energy Bonds (CREBs), Qualified Energy Conservation Bonds (QECBs), New Clean Renew able Energy Bonds (NCREBs), 2015 Series AB revenue bonds, 2021 Series AB revenue bonds, and commercial paper. The aforementioned debts are obligations of the Power Enterprise . See Hetchy Power section below for more details.

Hetchy Water

Hetchy Water did not have debt outstanding as of June 30, 2023 and 2022. Debt, including bond issuances, associated with the funding of water -related, upcountry infrastructure capital improvements is issued through the Water Enterprise, and is reflected in the Water Enterprise’s financial statements.

Hetchy Power

As of June 30, 202 3 and 2022, Hetchy Power had outstanding debt of $319,877 and $247,525, respectively, as shown in Table 4. More detailed information about the Hetchy Power ’s debt activity is presented in Notes 6, 7 and 8 to the financial statements.

CleanPowerSF

CleanPowerSF did not have any debt outstanding as of June 30, 2023 and 2022.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

31 (Continued)

The increase of $ 72,352 was mainly due to $76,333 increase in commercial paper, offset by bonds and certificates of participation principal repayments of $2,397 and $1,584 in amortization of premium and discount.

Credit Ratings and Bond Insurance – The Power Enterprise’s Power Revenue Bonds have been rated “AA -” by Fitch Inc and “AA” by Standard and Poor’s (S&P) as of June 30, 2023 and 2022, respectively.

In December 2020, Moody's Investors Service, ("Moody's") assigned a first -time A2 Issuer Rating to CleanPowerSF, with a stable outlook. Hetch Hetchy Water and Power contains the Power Enterprise as a separate enterprise fund, with CleanPowerSF a component unit of the Power Enterprise. CleanPowerSF is tracked and audited as a standalone fund, with financial statements, including revenues and expenses, separate and discrete from the Power Enterprise. As such, CleanPowerSF is deemed to be a separate credit from the Power Enterprise, with its own credit rating.

Debt Service Coverage – Pursuant to the Indenture, the Power Enterprise is required to collect sufficient net revenues each fiscal year, together with any Available Funds (except Bond Reserve Funds) which include unappropriated fund balances and reserves, and cash and book value of investments held by the Treasurer for the Hetchy Power , that the SFPUC reasonably expects would be available, to pay principal and interest becoming due and payable on all outstanding bonds as provided in the Indenture, less any refundable credits, at least equal to 1.25 times annual debt service for said fiscal year. The Series 2015 AB power revenue bonds represent the first series of senior lien revenue bonds of Hetchy Power. Pursuant to Power’s Master Trust Indenture, senior lien debt service coverage excludes debt service on subordinate obligations, such as Hetchy Power ’s existing CREBS, NCREBs, and QECBs. During fiscal year 2023, the Power Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rat e covenant requirements under the Power Enterprise’s Indenture (see Note 8).

Debt Authorization – P ursuant to Charter Section 9.107(6), the Power Enterprise can incur indebtedness upon three-fourths vote of the Board of Supervisors, for the purpose of the reconstruction or replacement of existing water facilities and electric power facilities, or combinations thereof, under the jurisdiction of the Public Utilities Commission. Pursuant to Charter Section 9.107(8), the Power Enterprise can issue revenue bonds, without voter approval, upon an affirmative vote of the Board of Supervisors, for the purpose of the acquisition, construction, installation, equipping, improvement, or rehabilitation of equipment or facilities for renewable energy and energy conservation. Pursuant to Proposition A, approved by the San Francisco voters on June 5, 2018, City Charter Section 8B.124 is amended to authorize the Power Enterprise to enter into 2023-2022 2022-2021
2023 2022 2021 Change Change
Clean Renewable Energy Bonds 2008 $ — 415 823 (415) (408) Certificates of Participation 2009 Series C — 427 838 (427) (411) Certificates of Participation 2009 Series D (BABs) 12,593 12,593 12,593 — — Qualified Energy Conservation Bonds 2011 2,583 3,138 3,687 (555) (549) New Clean Renewable Energy Bonds 2015 1,491 1,637 1,779 (146) (142) 2015 Series A Revenue Bonds 34,985 35,144 35,297 (159) (153) 2015 Series B Revenue Bonds 2,948 3,849 4,726 (901) (877) 2021 Series A Revenue Bonds 89,303 90,213 — (910) 90,213 2021 Series B Revenue Bonds 59,622 60,090 — (468) 60,090 Commercial Paper 116,352 40,019 114,671 76,333 (74,652) Total $ 319,877 247,525 174,414 72,352 73,111 Outstanding Debt, Net of Unamortized Costs
As of June 30, 2023, 2022, and 2021
Table 4 - Hetchy Power

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

32 (Continued)

indebtedness, including revenue bonds, notes, commercial paper or other forms of in debtedness, when authorized by ordinance approved by a two -thirds vote of the Board of Supervisors to reconstruct, replace, expand, repair, improve or construct new power facilities under the jurisdiction of SFPUC or for any other purpose of the Power Ente rprise, and in compliance with City Charter Section 8B.124. Proposition A expressly prohibits the SFPUC from issuing bonds to finance the construction of power plants that generate electricity using fossil fuels or nuclear energy. As of June 30, 202 3 and 2022, $163,555 of Hetchy Power revenue bonds were issued against existing authorization of $695,933 and $555,043, respectively.

Cost of Debt Capital – The Power Enterprise’s outstanding long -term senior lien debt consists of the 2015 Series AB and 2021 Series AB Power Revenue Bonds issued in May 2015 and December 2021 , respectively, which are issued under the Master Indenture and are senior in lien to all the other Enterprise’s outstanding debt obligations. Coupon interest rates range from 3.0% to 5.0%. The Power Enterprise has previously issued and incurred debt service on Tax Credit Bonds and certificates of participation, which constitute subordinate obligations. Interest rates on the Tax Credit Bonds, which include QECBs and NCREBs, ranging from 1.2% to 1.5% (net of the federal tax subsidy). Certificates of participation carried interest rates rang ing from 2.0% to 6.5%. The Power Enterprise’s short-term debt issued under it s commercial paper program has interest rates ranging from 1. 1% to 3.2 % and 0.1% to 1.1% during fiscal years 2023 and 2022, respectively.

Rates and Charges

Hetchy Water

Hetchy Water charges for services relate s to the storage and delivery of water. The water -related portion of upcountry expenditures not covered by the small quantity of water sales to upcountry customers or other miscellaneous revenues are paid by an assessment to the Water Enterprise. Assessment fees were $49,636 and $45,815 for the years ended June 30 , 2023 and 2022, respectiv ely. In fiscal year 2024 , the assessment fees will be $46,266 , a de crease of $ 3,370 or 6.8% as r eflected in the fiscal year 2024 adopted budget. The decrease is primarily due to higher projected water sales which offset a larger portion of the water-related expenditures.

Hetchy Power

Hetchy Power charges for services relate to power generation and electricity delivery to contractual, municipal, and retail customers.

All current SFPUC Rates Schedules and Fees are available at ht tps://sfpuc.org/accounts-services/water-
power-and-sewer-rates.

Municipal Rates

Departments of the City & County of San Francisco, as well as certain other non -City government agencies, are eligible for municipal power rates. Historically, municipal customers paid either the General Use rate , which was a subsidized rate below the cost of service, or an Enterprise rate, which was set to exactly follow the equivalent PG&E rate.

Based on the results of the 2022 Power Cost of Service Study, beginning in f iscal year 2023, all municipal customers are being transitioned to standardized tariff schedules set to their cost of service. For General Use customers, this means that a) instead of a single flat rate per kWh, customers are assigned to a rate schedule based on their customer class (small commercial, industrial, etc.), and b) the subsidy i s being

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

33 gradually eliminated until the General Use rate reaches the equivalent retail rate, which is projected to take 3 to 8 years, depending on the customer class. For Enterprise customers, their rates will no longer follow PG&E. Instead, they are set to a rate for their standardized customer class, and will be phased to cost of service over two years. Beginning in fiscal year 2024, all Enterprise customers will be on the same rate schedules as retail non-municipal customers.

Retail Rates

Based on the results of the 2022 Power Cost of Service Study, t he Commission approved a two-year schedule of retail electric rates for r esidential, commercial, and industrial customers where Hetch Hetchy has been designated as the power provider to be applied to meter readings on or after July 1, 20 22. These rates apply to all existing retail customers, and are the default rates for any new Hetchy Power customers.

CleanPowerSF

CleanPowerSF began offering services in May 2016, giving residential and commercial electricity consumers in San Francisco a choice of having their electricity supplied from clean renewable sources, such as solar geothermal, hydroelectric and wind, at comp etitive rates. CleanPowerSF offers two products: a “Green” product comprised of at least 50% RPS-eligible renewable energy and a “SuperGreen” product comprised of 100% renewable energy. Most customers take service under the “Green” product rates and remaining customers have opted to upgrade to “SuperGreen” product rates.

Previously, rates were set formulaically, at a percentage above or below the equivalent PG&E generation rate. In addition, the formula required rates to be set high enough to recover its costs. Whenever PG&E rates changed, rates would automatically adjust following the set formula.

Based on the results of the 2022 Power Cost of Service Study, CleanPowerSF customers have now transitioned to fixed rate schedules for the entire f iscal year. The rates for each customer class are set based on their unique cost of service, which means that the percentage difference from the equivalent PG&E rates may vary based on the rate schedule and throughout the year as PG&E’s rate change more frequently.

CleanPowerSF Rates Schedules are available at h
ttp://cleanpowersf.org/residential for residential
customers and http://cleanpowersf.org/commercial for commercial customers.

Request for Information

This report is designed to provide our citizens, customers, investors, and creditors with an overview of Hetch Hetchy’s finances and to demonstrate Hetch Hetchy’s respective accountability for the money it receives.

Questions regarding any of the informati on provided in this report or requests for additional information should be addressed to San Francisco Public Utilities Commission, Chief Financial Officer, 525 Golden Gate Avenue, 13th Floor, San Francisco, CA 94102.

This report is available at https://sf
puc.org/about-us/reports/audited-financial-statements-reports.

34 (Continued)
*Restated per GASB Statement No. 96, SBITA s.

Restated
Hetchy Hetchy 2023 Hetchy Hetchy 2022
Water Power Total Water Power Total*
Assets
Current assets:

Cash and investments with City Treasury $ 76,973 224,234 98,657 399,864 94,190 189,641 56,234 340,065 Cash and investments outside City Treasury — 154 — 154 1 16 — 17 Receivables:

Charges for services (net of allowance for doubtful accounts from 405 12,277 41,625 54,307 475 10,189 48,703 59,367 Due from other City departments, current portion — 1,134 — 1,134 — 867 — 867 Due from other governments 1,723 646 — 2,369 512 298 — 810 Interest 295 1,503 559 2,357 40 201 61 302
Restricted interest and other receivables — 4,151 — 4,151 — 4,303 — 4,303 Total current receivables 2,423 19,711 42,184 64,318 1,027 15,858 48,764 65,649 Prepaid charges, advances, and other receivables, current portion 92 1,579 5,641 7,312 216 1,911 10,550 12,677 Inventory 221 1,619 — 1,840 199 1,678 — 1,877
Restricted cash and investments outside City Treasury, current portion — 5,371 — 5,371 — 5,228 — 5,228 Total current assets 79,709 252,668 146,482 478,859 95,633 214,332 115,548 425,513 Non-current assets:

Restricted net pension asset — — — — 13,912 17,004 1,833 32,749 Restricted cash and investments with City Treasury 10,980 17,606 — 28,586 — — — — Restricted cash and investments outside City Treasury, less current portion — 3,840 — 3,840 — 8,824 — 8,824 Capital assets, not being depreciated and amortized 75,688 301,400 — 377,088 57,376 265,772 — 323,148 Capital assets, net of accumulated depreciation and amortization 144,066 345,546 — 489,612 143,631 319,864 — 463,495 Lease right-to-use assets, net of accumulated amortization 145 178 — 323 61 73 230 364 Subscription assets, net of accumulated amortization 137 114 30 281 314 256 71 641 Prepaid charges, advances, and other receivables, less current portion 141 9,540 11,424 21,105 146 9,390 12,236 21,772 Due from other City departments, less current portion — 10,352 — 10,352 — 10,937 — 10,937 Total non-current assets 231,157 688,576 11,454 931,187 215,440 632,120 14,370 861,930 Total assets 310,866 941,244 157,936 1,410,046 311,073 846,452 129,918 1,287,443 Deferred outflows of resources:

Pensions 8,858 10,826 1,292   20,976 6,696 8,183 852   15,731 Other post-employment benefits 3,248 3,969 1,009 8,226 3,272 3,999 798 8,069 Total deferred outflows of resources 12,106 14,795 2,301 29,202 9,968 12,182 1,650 23,800 Hetchy Power of $3,923 and CleanPowerSF of $7,923 as of June 30, 2023; and Hetchy Power of $1,297 and CleanPowerSF of $6,330 as of June 30, 2022)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Net Position
June 30, 2023 and 2022
(In thousands)
CleanPowerSF CleanPowerSF

35 *Restated per GASB Statement No. 96, SBITAs .

See accompanying notes to financial statements.

Restated
Hetchy Hetchy 2023 Hetchy Hetchy 202 2
Water Power Total Water Power Tot al*
Liabilities
Current liabilities:

Accounts payable $ 1,033   24,970   24,344   50,347   8,454   16,668   23,526   48,648 Accrued payroll 1,252   3,041   543   4,836   1,098   2,684   373   4,155 Accrued vacation and sick leave, current portion 1,132   1,867   394   3,393   1,034   1,747   279   3,060 Accrued workers’ compensation, current portion 216   401   —   617   215   400   —   615 Damage claims liability, current portion 300   450   16   766   228   358   15   601 Due to other City departments, current portion —   1,946   —   1,946   —   380   —    380 Lease liability, current portion 16   19   —   35   3   3   232   238 Subscription liability, current portion 80   65   18   163   170   137   39   346 Unearned revenues, refunds, and other, current portion 110   5,880   6,146   12,136   24   5,923   4,196   10,143 Bond, loan, lease, and subscription interest payable 2   1,597   —   1,599   3   1,329   1   1,333 Bonds, current portion —   1,590   —   1,590   —    1,966   —   1,966 Certificates of participation, current portion —   445   —   445   —   427   —    427 Commercial paper, current portion —   —   —   —   —   40,019   —   40,019 Current liabilities payable from restricted assets 5,747   23,119   —   28,866   6,324   19,059   —   25,383 Total current liabilities 9,888 65,390 31,461 106,739 17, 553 91,100 28,661 137,314 Long-term liabilities:

Other post-employment benefits obligations 14,907   18,220   4,053   37,180   14, 240 17,405   2,264   33,909 Net pension liability 14,105   17,239   2,124   33,468   —   —    —   — Accrued vacation and sick leave, less current portion 1,134   1,849   349   3,332   1, 135 1,850   267   3,252 Accrued workers’ compensation, less current portion 1,003   1,837   —   2,840   1, 013 1,850   —   2,863 Damage claims liability, less current portion 400   5,700   18   6,118   399 665   17   1,081 Bonds, less current portion —   189,342   —   189,342   —    192,520   —   192,520 Lease liability, less current portion 122   150   —   272   59   72   —   131 Subscription liability, less current portion 59   51   13   123   139   116   31   286 Unearned revenues, refunds, and other, less current portion —   580   —   580   110   804   9,000   9,914 Commercial paper, less current portion —   116,352   —   116,352   —   —    —   — Certificates of participation, less current portion —   12,148   —   12,148   —    12,593   —   12,593 Total long-term liabilities 31,730 363,468 6,557 401,755 17, 095 227,875 11,579 256,549 Total liabilities 41,618 428,858 38,018 508,494 34,648 318,975 40,240 393,863 Deferred inflows of resources:

Related to pensions 4,142 5,062 1,296   10,500 34,477 42, 138 5,414   82,029 Other post-employment benefits 3,084   3,769   2,922   9,775   2,734   3,342   1,594   7,670 Total deferred inflows of resources 7,226 8,831 4,218 20,275 37,211 45, 480 7,008 89,699 Net position:

Net investment in capital assets 219,754 336,281 — 556,035 201, 007 352,162 — 553,169 Restricted for debt service — 56 — 56 — 140 — 140 Restricted for capital projects 5,233 — — 5,233 — — — — Restricted for other purposes — — — — 13,912 17,004 1,833 32,749 Unrestricted 49,141 182,013 118,001 349,155 34, 263 124,873 82,487 241,623 Total net position $ 274,128 518,350 118,001 910,479 249, 182 494,179 84,320 827,681

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Net Position
June 30, 2023 and 2022
(In thousands)
CleanPowerSF CleanPowerSF

36 *Restated per GASB Statement No. 96, SBITAs.

See accompanying notes to financial statements.

Restated
Hetchy Hetchy 2023 Hetchy Hetchy 2022
Water Power Total Water Power Total*
Operating revenues:

Charges for services $ 52,570 203,847 326,777 583,194 49,200 173,105 257,893 480,198 Rents and concessions 127 156 — 283 112 137 — 249 Total operating revenues 52,697 204,003 326,777 583,477 49,312 173,242 257,893 480,447 Operating expenses:

Personnel services 18,424 39,300 10,735 68,459 15,636 34,646 4,167 54,449 Contractual services 2,956 10,819 6,559 20,334 2,675 9,459 6,780 18,914 Transmission/distribution and other power costs — 70,580 226 70,806 — 51,521 192 51,713 Purchased electricity — 8,078 265,152 273,230 — 6,731 239,546 246,277 Materials and supplies 1,605 2,612 57 4,274 1,362 2,270 33 3,665 Depreciation and amortization 6,524 17,877 270 24,671 6,480 17,769 385 24,634 Services provided by other departments 3,392 8,674 4,302 16,368 3,129 6,253 3,621 13,003 General and administrative and other 17,110 33,612 7,479 58,201 23,017 27,694 7,393 58,104 Total operating expenses 50,011 191,552 294,780 536,343 52,299 156,343 262,117 470,759 Operating income (loss) 2,686 12,451 31,997 47,134 (2,987) 16,899 (4,224) 9,688 Non-operating revenues (expenses):

Federal and state grants 1,627 937 1,173 3,737 450 4,924 2,424 7,798 Interest and investment (loss) income 457 3,741 405 4,603 (2,932) (4,001) (1,286) (8,219) Interest expenses (4) (9,486) (1) (9,491) (3) (5,627) (6) (5,636) Amortization of premium, discount, and issuance costs — 1,584 — 1,584 — (192) — (192) Net gain from sale of assets 4 3 — 7 7 9 — 16
Other non-operating revenues 230 12,665 325 13,220 22 10,830 335 11,187 Other non-operating expenses (54) (227) (218) (499) (37) (591) — (628) Net non-operating revenues (expenses) 2,260 9,217 1,684 13,161 (2,493) 5,352 1,467 4,326 Change in net position before transfers and contributions 4,946 21,668 33,681 60,295 (5,480) 22,251 (2,757) 14,014 Capital contributions — 2,535 — 2,535 — — — —
Transfers from the City and County of San Francisco 20,000 — — 20,000 30,001 — — 30,001 Transfers to the City and County of San Francisco — (32) — (32) — (532) — (532) Capital contributions and net transfers 20,000 2,503 — 22,503 30,001 (532) — 29,469 Change in net position 24,946 24,171 33,681 82,798 24,521 21,719 (2,757) 43,483 Net position at beginning of year 249,182 494,179 84,320 827,681 224,661 472,460 87,077 784,198 Net position at end of year $ 274,128 518,350 118,001 910,479 249,182 494,179 84,320 827,681

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Revenues, Expenses, and Changes in Net Position Years ended June 30, 2023 and 2022
(In thousands)
CleanPowerSF CleanPowerSF

37 (Continued)

*Restated per GASB Statement No. 96, SBITAs.

Restated
Hetchy Hetchy 2023 Hetchy Hetchy 2022
Water Power Total Water Power Total*
Cash flows from operating activities:

Cash received from customers, including cash deposits $ 52,640 201,707   324,730   579,077   49,161 183,203 237,947 470,311 C
ash received from tenants for rent 129 158   —   287   114 139 —   253 Cash received from miscellaneous revenues 30 8,689   6   8,725   22 7,237 335 7,594 Cash paid to employees for services (21,537) (42,804)  (8,063)  (72,404)  (20,430) (40,448) (5,828) (66,706) Cash paid to suppliers for goods and services (31,864) (113,682)  (275,322)  (420,868)  (25,547) (107,824) (268,917) (402,288) Cash paid for judgments and claims (331) (5,548)  (1,725)  (7,604)  (276) (2,163) (1,529) (3,968) Net cash provided by (used in) operating activities (933) 48,520   39,626   87,213   3,044 40,144 (37,992) 5,196 Cash flows from non-capital and related financing activities:

Cash received from grants 389   546   1,173   2,108   517   4,893   5,100   10,510 Cash received for license fees —   3,713   —   3,713   — 3,333 — 3,333 Cash received from settlements 200   244   —   444   —   —   —   — Cash received from Public Purpose Funds —   —   2,394   2,394   —   —   —   — Cash paid for rebates, program incentives, and other (54)  (227)  (218)  (499)  (37)  (591)  —   (628) Transfers from the City and County of San Francisco 20,000 —   —   20,000   30,001 —   —   30,001 Transfers to the City and County of San Francisco —   (32)  —   (32)  —   (532)  —   (532) Net cash provided by non-capital financing activities 20,535 4,244   3,349   28,128   30,481 7,103   5,100   42,684 Cash flows from capital and related financing activities:

Acquisition and construction of capital assets (25,856)  (72,541)  —   (98,397)  (32,558)  (108,062)  —   (140,620) Proceeds from sale of capital assets 4   3   —   7   7 9 — 16 Lease payments (18) (22)  (233)  (273)  (17) (22) (351) (390) Subscription payments (172) (139)  (39)  (350)  (179) (145) (41) (365) Proceeds from bond issuance, net of premium, discount, refunding loss, and issuance costs —   —   —   —   — 151,022 — 151,022 Principal paid on long-term debt — (2,397)  —   (2,397)  — (2,333) — (2,333) Proceeds from commercial paper borrowings —   76,333   —   76,333   —   63,058 —   63,058 Principal paid on commercial paper — —   —   —   — (137,710) — (137,710) Interest paid on long-term debt — (7,886)  —   (7,886)  — (4,695) — (4,695) Interest paid on commercial paper borrowings — (1,327)  —   (1,327)  — (59) — (59) Issuance costs paid on long-term debt — —   —   —   — (1,118) — (1,118) Federal interest income subsidy — 502   —   502   — 397 — 397 Net cash used in capital and related financing activities (26,042) (7,474)  (272)  (33,788)  (32,747) (39,658)  (392)  (72,797) Cash flows from investing activities:

Interest Income 914 3,663 1,207   5,784   329 1,003 407   1,739 Proceeds from sale of investments outside City Treasury — 10,224   —   10,224   — 7,118   —   7,118 Purchases of investments outside City Treasury — (10,224)  —   (10,224)  — (7,118)  —   (7,118) Net cash provided by investing activities 914   3,663   1,207   5,784   329   1,003   407   1,739 Increase (decrease) in cash and cash equivalents (5,526) 48,953   43,910   87,337   1,107   8,592   (32,877)  (23,178) Cash and cash equivalents:

Beginning of year 97,383 208,857   57,887   364,127   96,276   200,265   90,764   387,305 End of period $ 91,857 257,810   101,797   451,464   97,383   208,857   57,887   364,127 Reconciliation of cash and cash equivalents to the statements of net position:

Cash and investments with City Treasury:

Unrestricted $ 76,973   224,234   98,657   399,864   94,190   189,641   56,234   340,065 Restricted 10,980   17,606   —   28,586   —   —   —   — Add: Unrealized loss on investments with City Treasury 3,904   6,605   3,140   13,649   3,192   5,148   1,653   9,993 Cash and investments outside City Treasury:

Unrestricted —   154   —   154   1   16   —   17
Restricted — 9,211   —   9,211   —   14,052   —   14,052 Cash and cash equivalents at end of year on statements of cash flows $ 91,857 257,810 101,797 451,464 97,383 208,857 57,887 364,127 CleanPowerSF CleanPowerSF

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash Flows
Years ended June 30, 2023 and 2022
(In thousands)

38 *Restated per GASB Statement No. 96, SBITAs.

See accompanying notes to financial statements.

Restated
Hetchy Hetchy 2023 Hetchy Hetchy 2022
Water Power Total Water Power Total*
Reconciliation of operating income (loss) to net cash provided by (used in) operating activities:

Operating income (loss) $ 2,686 12,451 31,997 47,134 (2,987) 16,899 (4,224) 9,688 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 6,524 17,877 270 24,671 6,480 17,769 385 24,634 Miscellaneous revenues 30 8,689 6 8,725 22 7,237 335 7,594 Provision for uncollectible accounts — 2,626 1,593 4,219 — 39 845 884 Write-off of capital assets 192 211 — 403 7 648 — 655 Changes in operating assets and liabilities:

Receivables:

Charges for services 70 (4,714) 5,485 841 (33) 8,796 (21,283) (12,520) Prepaid charges, advances, and other 129 115 5,908 6,152 192 (344) (20,574) (20,726) Due from other City departments — 345 — 345 — 531 — 531 Inventory (22) 59 — 37 (8) 142 — 134
Accounts payable (7,421) 8,302 818 1,699 4,192 (6,241) 7,667 5,618 Accrued payroll 154 357 170 681 56 88 82 226
Other post-employment benefits obligations 1,041 1,272 2,906 5,219 898 1,099 (1,320) 677 Pension obligations (4,480) (5,476) (601) (10,557) (5,965) (7,291) (569) (13,825) Accrued vacation and sick leave 97 119 197 413 (16) (20) 146 110 Accrued workers’ compensation (9) (12) — (21) 108 132 — 240 Damage claims liability 73 5,127 2 5,202 102 (85) 26 43 Due to other City departments — 1,566 — 1,566 — 11 — 11 Unearned revenues, refunds, and other liabilities 3 (394) (9,125) (9,516) (4) 734 492 1,222 Total adjustments (3,619) 36,069 7,629 40,079 6,031 23,245 (33,768) (4,492) Net cash provided by (used in) operating activities $ (933) 48,520 39,626 87,213 3,044 40,144 (37,992) 5,196 Noncash transactions:

Accrued capital asset costs $ 5,747 23,119 — 28,866 6,324 19,059 — 25,383 Receivables from Wastewater —   518   — 518 —   629   — 629 Payable to MTA —   1,946   — 1,946 —   —   —   —
Unrealized loss on investments 3,904 6,605 3,140 13,649 3,192 5,148 1,653 9,993 Capital contributions — 2,535 — 2,535 — — — —
CleanPowerSF CleanPowerSF

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash Flows
Years ended June 30, 2023 and 2022
(In thousands)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

39 (Continued)

(1) Description of Reporting Entity

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

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

Approximately 61% of the electricity generated by Hetchy Power is used to provide electric service to the City’s municipal customers (including the San Francisco Mun icipal Transportation Agency, Recreation and Parks Department, the Port of San Francisco, the San Francisco International Airport and its tenants, Zuckerberg San Francisco General Hospital and Trauma Center, streetlights, Moscone Convention Center, and the Wat er and Wastewater Enterprises). The majority of the remaining 39% balance of electricity is sold to CleanPowerSF and the wholesale electric market. As a result of the 1913 Raker Act, energy produced above the City’s municipal load is sold first to the Districts (Modesto Irrigation District and Turlock Irrigation District) to cover their agricultural pumping and municipal load needs and any remaining energy is either sold to other municipalities and/or government agencies (not for resale) or sold into the California Independent System Operator ( CAISO). Hetch Hetchy operation is an integrated system of reservoirs, hydroelectric power plants, aqueducts, pipelines, and transmission lines.

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

Until August 1, 2008, the San Francisco Public Utilities Commission (SFPUC) consisted of five members, all appointed by the Mayor. Proposition E, a City and County of San Francisco Charter Section 4.112 amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the SFPUC, changed the process for appointing new members, and set qualifications for all members. Under the amended Charter, the Mayor continues to nominate candidates to the SFPUC, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four-year terms for SFPUC members and requires them to meet the following qualifications:

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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

40 (Continued)

The SFPUC is a department of the City, and as such, the financial operations of Hetch Hetchy, Wastewater, and the Water Enterprise are included in the Annual Compreh ensive Financial Report of the City as enterprise funds. These financial statements are intended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of Hetch Hetchy. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2023 and 2022, and the changes in its financial position, or, where applicable, the cash flows for the years then ended, in confor mity with U.S. generally accepted accounting principles (GAAP).

(2) Significant Accounting Policies

(a) Basis of Accounting and Measurement Focus
The accounts of Hetch Hetchy are organized on the basis of proprietary fund types and are included as enterprise funds of the City. The activities of Hetch Hetchy and each fund are accounted for with a separate set of self -balancing accounts that comprise Hetch Hetchy’s and each fund’s assets, deferred outflows, liabilities, deferred inflows, net position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity’s costs of providing services, including capital costs (such as depreciation or 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 Hetch Hetchy are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with U.S. GAAP. Under this method, all assets and liabilities associated with operations are included on the Statements of Net Position, revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operating revenues are defined as charges to customers and rental income.

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

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

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

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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

41 (Continued)

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

(f) Intangible Assets
Intangible assets are defined as identifiable, non- financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights -of-way easements, land use rights, water rights, leases, SBITAs, licenses, and permits. The Enterprise capitalizes purchased or internally developed intangible assets with a useful life extending beyond one reporting period. It has established a capitalization threshold of $100. Intangible assets are amortized over the benefit period or the contract term for leases and SBITAs, except for certain assets having an indefinite useful life . Assets with an indefinite useful life generally pro vide a benefit that is not constrained by legal or contractual limitations or any other external factor and, therefore, are not amortized (see Note 4).

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

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

(i) Accrued Vacation and Sick Leave
Accrued vacation pay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non-vesting and may be accumulated up to six months per employee.
(j) Workers’ Compensation
The Enterprise is self-insured for workers’ compensation claims and accrues the estimated cost of those claims, including the estimated cost of incurred but not reported claims (see Note 14(b)).

(k) General Liability
The Enterprise is self -insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover clai ms

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

42 (Continued)

attributed to loss from earthquake, contamination, pollution remediation efforts, and other specific naturally occurring contaminants such as mold. The liability represents an estimate of the cost of all outstanding claims, including adverse loss development and estimated incurred but not reported claims (see Note 14(a)).

(l) Arbitrage Rebate Payable
Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements of the Clean Renewable Energy Bonds (CREBs), the Qualified Energy Conservation Bonds (QECBs), and the New Clean Renewable Energy Bonds (NCREBs) stipulate that the first payment of excess investment earnings, if any, is required to be rebated to the federal government, no later than 60 days after the end of the fifth bond year of the agreement. Hetch Hetchy did not have any arbitrage liability as of June 30, 2023 and 2022.

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

(n) Revenue Recognition
Water and power revenues are based on water and power consumption and billing rates.

Generally, customers are billed monthly. Revenues earned but unbilled are accrued as charge s for services receivables on the Statements of Net Position. The unbilled amounts for the fiscal years ending June 30, 2023 and 2022 are as follows:

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

(p) Eliminations
Eliminations for internal activities between the Hetchy Power and CleanPowerSF are made in the Statements of Net Position. There were no activities requiring elimination s for fiscal year s ended June 30, 2023 and 2022.

(q) Accounting and Financial Reporting for Pollution Remediation Obligations According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations , a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted and any of the following recognition triggers occur:

Hetchy Hetchy
Water Power Cle anPowerSF Total
2023 $ —   3,470 19,694   23,164
2022 —   3,806 21, 878   25,684

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

43 (Continued)

• Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
• A government has violated a pollution prevention-related permit or license; • A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) fo r cleaning up pollution, or for paying all or some of the cost of the cleanup;
• A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
• A government begins or legally obligates itself to b egin cleanup or post -cleanup activities (limited to amounts the government is legally required to complete).

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

(r) Leases
Leases are defined as a contract that conveys control of the right to use another entity’s underlying asset for a specified period. Hetch Hetchy is a les see for various noncancellable leases of building and radio tower.

Short-term Leases – For leases with a maximum possible term of 12 months at commencement, Hetch Hetchy recognizes lease revenue if Hetch Hetchy is the lessor of the lease or lease expense if Hetch Hetchy is the lessee of the lease based on the provisions of the lease contract. Liabilities are only recognized if payments are received in advance, and receivables are only recognized if payments are received subsequent to the reporting period.

Leases other than Short -term – For all other leases (i.e. those that are not short -term), Hetch Hetchy recognizes a lease liability and intangible right -to-use lease asset as lessee leases, or lease receivable and deferred inflow of resources as lessor leases.

Measurement of Lease Amounts (Lessee) – Hetch Hetchy’s lease liability is recorded at the present value of future minimum lease payments as of the date of commencement .

Subsequently, the lease liability is reduced by the principal portion of lease payments made.

The lease asset is initially measured as the initial amount of the lease liability, less lease payments made at or before the lease commencement date, plus any initial direct costs ancillary to placing the underlyi ng asset into service, less any lease incentives received at or before the lease commencement date. Subsequently, the lease asset is amortized into depreciation and amortization expense on a straight -line basis over the lease term. If Hetch Hetchy is reaso nably certain of exercising a purchase option contained in a lease, the lease asset will be amortized over the useful life of the underlying asset.

Measurement of Lease Amounts (Lessor) – Hetch Hetchy’s lease receivable is measured at the present value of payments expected to be received during the lease term, reduced by any provision of estimated uncollectible amounts. Subsequently, the lease receivable is reduced by

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

44 (Continued)

the principal portion of lease payments collected. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term, plus lease payments received from the lease at or before the commencement of the lease term that related to future periods. Subsequently, the deferred inflow of resources as lease revenue on a straight-line basis over the lease term.

Key Estimates and Judgements – Key estimates and judgements include how Hetch Hetchy determines (a) the discount rate it uses to calculate the present value of the expected lease payments, (b) lease terms, (c) lease payments, and (d) materiality threshold for equipment.

• Hetch Hetchy generally uses its estimated incremental borrowing rate as the discount rate for leases unless the rate is implicit in the agreement. The City’s incremental borrowing rate (IBR) is established using the average of Municipal Market Data (MMD) AAA benchmark interest rate inde x by maturity date (year 1 to 30+), plus the average credit spread based on City’s Aa/AA, COP, Tax-exempt to generate the yield curve and discount rate table. The City’s incremental borrowing rate for leases is based on the rate of interest it would need to pay if it issued general obligation bonds to borrow an amount equal to the lease payments under similar terms at the commencement or remeasurement date.

• The lease term includes the noncancellable period of the lease, plus any additional periods covered by either lessee or lessor unilateral option to (1) extend for which it is reasonably certain to be exercised, or (2) terminate for which it is reasonably certain not to be exercised. Periods in which both the lessee and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the lease term.

• Payments are evaluated by Hetch Hetchy to determine if they should be included in the measurement of the lease receivables or lease liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments.

• Leases have a capitalization threshold of $100. 70% below market rent and/or ground leases are determined to be below market rent (BMR), excluded from lease capitalization.

Remeasurement of Lease – Hetch Hetchy monitors changes in circumstances that may require remeasurement of a lease. When certain changes occur that are expected to significantly affect the amount of the lease receivable or lease liability, the receivable or liability is remeasured and a corresponding adjustment is made to the deferred inflow of resources or lease asset, respectively.

Presentation in Statements of Net Position – Lease assets are reported with current and non - current assets, lease liabilities are reported with current and long -term liabilities and both lease assets and liabilities are report under net investment in capital assets in the Statements of Net Position.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

45 (Continued)

(s) Subscription-Based Information Technology Arrangements (SBITA s) SBITAs are defined as a contract that conveys control of the right to use another entity’s IT software, alone or in combination with tangible capital assets for a specified period. Hetch Hetchy has noncancellable subscription arrangements (similar to a lease) for the right to use various SBITAs.

Short-term SBITAs – For SBITAs with a maximum possible term of 12 months at commencement, Hetch Hetchy recognizes subscription expense based on the provisions of the SBITAs. Liabilities are only recognized if payments are received in advance, and receivables are only recognized if payments are received subsequent to the reporting period.

SBITAs other than Short -term – For all other SBITAs (i.e. those that are not short -term), Hetch Hetchy recognizes SBITAs liability and intangible right-to-use subscription asset.

Measurement of Subscription Amounts (Subscriber ) – Hetch Hetchy’s subscription liability is recorded at the present value of future minimum subscription payments as of the date of commencement. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made. The subscription asset is initially measured as the initial amount of the subscription liability , less payments made at or before the subscription commencement date, plus any initial direct costs ancillary to placing the underlying asset into service, less any subscription incentives received at or before the subscription commencement date. For SBITAs, subscription assets also include qualify software implementation costs. Subsequently, the subscription asset is amortized into depreciation and amortization expense on a straight -line basis over the subscription term.

Key Estimates and Judgements – Key estimates and judgements include how Hetch Hetchy determines (a) the discount rate it uses to calculate the present value of the expected subscription payments , (b) subscription terms, (c) subscription payments, and (d) materiality threshold.

• Hetch Hetchy generally uses its estimated incremental borrowing rate as the discount rate for SBITAs unless the rate is implicit in the agreement . The City’s incremental borrowing rate (IBR) is established using the average of Municipal Market Data (MMD) AAA benchmark interest rate index by maturity date (year 1 to 30+), plus the average credit spread base d on City’s Aa/AA, COP, Tax-exempt to generate the yield curve and discount rate table.

• The subscription term includes the noncancellable period of the subscription , plus any additional periods covered by either subscriber or lessor unilateral option to (1) extend for which it is reasonably certain to be exercised, or (2) terminate for which it is reasonably certain not to be exercised. Periods in which both the subscriber and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the subscription term.

• Payments are evaluated by Hetch Hetchy to determine if they should be included in the measurement of the subscription liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments.

• SBITAs have a capitalization threshold of $100.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

46 (Continued)

Remeasurement of SBITAs – Hetch Hetchy monitors changes in circumstances that may require remeasurement of a SBITA s. When certain changes occur that are expected to significantly affect the amount of the subscription liability, the liability is remeasured and a corresponding adjustment is made to the subscription asset.

Presentation in Statements of Net Position – Subscription assets are reported with current and non-current assets, subscription liabilities are reported with current and long-term liabilities and both subscription assets and liabilities are reported under net investment in capital assets in the Statements of Net Position.

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

Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Tru st Fund investments measured at fair value (see Note 12(b)).

(u) New Accounting Standards Adopted in Fiscal Year 2023 1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the compatibility and consistency of conduit debt obligation reporting and reporting of related transactions by s tate and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The Enterprise adopted the provisions of Statement No. 91 in fiscal year 2023 which did not have a significant effect on its financial statements.

2) In March 2020, the GASB Issued Statement No. 94, Public -Private and Public -Public Partnerships and Availab ility Payment Arrangements . The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public -public partnership arrangements (PPPs). The new standard is effective for periods beginning after June 15, 2022. The Enterprise adopted the provisions of Statement No. 94 in fiscal year 2023 which did not have a significant effect on its financial statements.

3) In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs). This Statement defines such arrangements as contracts that convey control of the right to use another party’s information technology software, alone or in combination with tangible capital assets, as specified in the contract for a period of time in an exchange or exchange -like transaction. The standard clarifies measurement and recognition of capitalizable costs, intangible assets, and subscription liabilities for such arrangements and also requires additional disclosures related to such arrangements . The new standard is effective for periods beginning after June 15, 2022. The Enterprise adopted the provisions of Statement No. 96 in fiscal year 2023 (see Note 10).

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

47 (Continued)

As a result of adoption, the cumulative effect of applying this Statement is recorded as adjustments to the following accounts as of July 1, 2021:

(v) GASB Statements Implemented in Fiscal Year 2022
1) In June 2017, the GASB issued Statement No. 87, Leases . GASB Statement No. 87 establishes a single model for lease accounting and requires reporting of certain lease liabilities that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. Beginning balances as of July 1, 2020 were restated as the result of adoption of this standard (see Note 9).

2) In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period . GASB Statement No. 89 establishes accounting requirements for interest cost incurred before the end of construction period. The new standard is effective for periods beginning after December 15, 2020. The Enterprise adopted the provisions of Statement No. 89 in fiscal year 2022.

3) In January 2020, the GASB issued Statement No. 92, Omnibus 2020. GASB Statement No. 92 addresses practice issues that have been identified during implementation and application of certain GASB Statements. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 92 in fiscal year 2022, which did not have significant effect on its financial statements.

4) In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 93 in fiscal year 2022, which did not have a significant effect on its financial statements.

Hetchy Water Hetchy Power CleanPowerSF Total 2022
Beginning balance:

Subscription Assets $ 468 380 106 954 Subscription Liability - Current (329) (264) (75) (668) Subscription Liability - Long Term (139) (116) (31) (286) Activities:

Subscription Assets 22 17 5 44 Accumulated Amortization (176) (141) (40) (357) Accrued Interest Payable - Current (3) (2) (1) (6) Subscription Liability - Current 159 127 36 322 Expenses (2) (1)
— (3)
Total:

Subscription Assets 490 397 111 998 Accumulated Amortization (176) (141) (40) (357) Accrued Interest Payable - Current (3) (2) (1) (6) Subscription Liability - Current (170) (137) (39) (346) Subscription Liability - Long Term (139) (116) (31) (286) Expenses (2) (1)
— (3)
Change to net position $ (2) (1) — (3)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

48 (Continued)

(w) Future Implementation of New Accounting Standards
1) In April 2022, the GASB issued Statement No. 99, Omnibus 2022. GASB Statement No. 99 addresses a variety of topics. The requirements related to extension of the use of the London Interbank Offered Rate, accounting for Supplemental Nutrition Assistance Program distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement No. 34, and terminology updates related to Statement No. 53 and Statement No. 63 are effective upon issuance and did not have a significant impact on the Enterprise for the year ended June 30, 2022. The requirements related to leases, public-public and public-private partnerships, and subscription-based information technology arrangements are effective for fiscal years beginning after June 15, 2022, and effective for the Enterprise’s year ending June 30, 2023. The requirements related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement No. 53 are effective for fiscal years beginning after June 15, 2023, and effective for the Enterprise’s year ending June 30, 2024. The Enterprise is currently analyzing its accounting practices to determine the potential impact of the provisions of Statement No. 99 applicable in future years.

2) In June 2022, the GASB issued Statement No. 100, Account ing Changes and Error Corrections. This Statement enhances accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making de cisions or assessing accountability. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 100 in fiscal year 2024.

3) In June 2022, the GASB issued Statement No. 101, Compensated Absences. This Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The new standard is effective for periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 101 in fiscal year 2025. (x) Reclassifications
Certain reclassifications are made to the prior period to conform to the current period presentation. For fiscal year 2022, restricted net pension assets in the amount of $32,749 was reclassified from unrestricted to restricted for other purposes in the Statements of Net Position.

(3) Cash, Cash Equivalents, and Investments

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

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

Restricted assets are held by an independent trustee outside the City’s investment pool. The assets are held for the purpose of paying future interest and principal on the bonds and for eligible capital project expenditures. The balances as of June 30 , 2023 and 2022 were $ 9,211 and $ 14,052,

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

49 (Continued)

respectively. The Enterprise held all investments in guaranteed investment contracts, treasury and government obligations, commercial paper, corporate bonds, and notes, as well as money market mutual funds consisting of treasury and government obligations . The balance as of June 30, 202 3 included 2021 Series AB bond proceeds of $ 5,382, 2015 Series A bond proceeds of $2, 261, certificates of participation proceeds of $1,015, 2015 Series B bond proceeds of $532, $154 held at a commercial bank in a non -interest-bearing checking account that is covered by depository insurance, and commercial paper of $21. The balance as of June 30, 2022 included 2021 Series AB bond proceeds of $10,346, 2015 Series A bond proceeds of $2,194, certificates of participation proceeds of $981, 2015 Series B bond proceeds of $516, $17 held at a commercial bank in a non- interest-bearing checking account that is covered by depository insurance, and commercial paper of $15.

Hetch Hetchy di d not have any unrealized gain and loss in the restricted cash and investments outside City Treasury as of June 30, 2023 and 2022.

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

Commercial paper is valued using a variety of techniques such as matrix pricing; market corroborat ed pricing inputs such as yield curve, indices, and other market related data. Commercial paper, money market investments, and cash and cash equivalents are exempt from fair value treatment under GASB Statement No. 72.

The following is a summary of the Hetch Hetchy restricted and unrestricted cash and investments outside City Treasury and the fair value hierarchy as of June 30, 2023 and 2022.

Credit Ratings
Investments (S&P/Moody's) Maturities Fair Value
Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 9,190 9,190 — — — Cas
h and Cash Equivalents N/A 21 21 — — —
Total Restricted Cash and Investments outside City Treasury $ 9,211 9,211 — — — Cash and Cash Equivalents N/A $ 154 154 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 154 154 — — — Hetch Hetchy Cash and Investments outside City Treasury Fair Value Measurements Using
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Unobservable
Inputs
(Level 3)
June 30, 2023
Investments
exempt from
fair value

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

50 (Continued)

For fiscal year 2023, proceeds from 2021 Series AB and 2015 Series AB bonds held as restricted cash and investments outside City Treasury in the amount of $ 8,175 were invested in U.S. Treasury Money Market with maturity date less than 90 days. For fiscal year 202 2, proceeds from 2021 Series AB and 2015 Series AB bonds held as restricted cash and investments outside City Treasury in the amount of $13,056 were invested in U.S. Treasury Money Market with maturity date less than 90 days. The credit ratings of the U.S. Treasury Money Market as of June 30, 2023 and 2022 were “AAAm” by S&P and “Aaa-mf” by Moody’s.

Hetch Hetchy’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as of June 30, 2023 and 2022:

Credit Ratings
Investments (S&P/Moody's) Maturities Fair Value
Hetchy Water
Cash and Cash Equivalents N/A $ 1 1 — —
Tot
al Unrestricted Cash and Investments outside City Treasury $ 1 1 — — — Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 14,037 14,037 — — — Cash and Cash Equivalents N/A 15 15 — — —
Total Restricted Cash and Investments outside City Treasury $ 14,052 14,052 — — — Cash and Cash Equivalents N/A $ 16 16 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 16 16 — — — Hetch Hetchy Cash and Investments outside City Treasury Fair Value Measurements Using
Quoted prices
in active
markets for
identical
ass
ets
(Level 1)
Significant
other
observable
inputs
(Le
vel 2)
Unobservable
Inputs
(Level 3)
June 30, 2022
Investments
exempt from
fair value
Hetchy Hetchy
Water Power CleanPowerSF Total 2023
Current assets:

Cash and investments with City Treasury $ 76,973 224,234 98,657 399,864 Cash and investments outside City Treasury —   154 —   154 Restricted cash and investments outside City Treasury —   5,371 —   5,371 Non-current assets:

Restricted cash and investments with City Treasury 10,980 17,606 —   28,586 Restricted cash and investments outside City Treasury —   3,840 —   3,840 Total cash, cash equivalents, and investments $ 87,953 251,205 98,657 437,815 Hetchy Hetchy
Water Power CleanPowerSF Total 2022
Current assets:

Cash and investments with City Treasury $ 94,190 189,641 56,234 340,065 Cash and investments outside City Treasury 1 16 —   17 Restricted cash and investments outside City Treasury —   5,228 —   5,228 Non-current assets:

Restricted cash and investments outside City Treasury —   8,824 —   8,824 Total cash, cash equivalents, and investments $ 94,191 203,709 56,234 354,134

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

51 (Continued)

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

(4) Capital Assets

a) Hetch Hetchy capital assets as of June 30, 2023 and 2022 consist of the following:

* Decrease in construction in progress included $403 in capital project write-offs, mainly related to 2018 Moccasin Storm Project.

The remaining difference of $ 4,117 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.

* Decrease in construction in progress included $655 in capital project write-offs, mainly related to Hope San Francisco Project in Sunnydale and Potrero . The remaining difference of $1,151 to capital asset additions was offset by direct additions to machinery and equipment.

Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2023 21.5% 18.0% 14.5% 46.0%
2022 20.2% 14.0% 14.9% 50.9%
Investment maturities (in months)
2022 Increases Decreases 2023
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 5,181 —   —   5,181
Intangible assets** 1,437 —   —   1,437
Construction work in progress 316,530 100,380 (46, 440) * 370,470 Total capital assets not being depreciated and amortized 323,148 100,380 (46,440) 377,088 Capital assets being depreciated and amortized:

Facilities and improvements 809,945 45,845 —    855,790 Intangible assets 45,715 140 —   45,855
Machinery and equipment 148,241 4,169 (185)  152,225 Total capital assets being depreciated and amortized 1,003,901 50,154 * (185)  1,053,870 Less accumulated depreciation and amortization for:

Facilities and improvements (423,731) (18,521) —   (442,252) Intangible assets (22,680) (460) —   ( 23,140) Machinery and equipment (93,995) (5,054) 183 (98,866) Total accumulated depreciation and amortization (540,406) (24,035) 183 (564,258) Total capital assets being depreciated and amortized, net 463,495 26,119 (2) 489,612 Total capital assets, net $ 786,643 126,499 (46,442) 866,700 2021 Increases Dec reases 2022
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 5,181 —   —   5, 181
Intangible assets** 1,437 —   —   1,437
Construction work in progress 206,508 140,513   (30,491) * 316,530 Tot
al capital assets not being depreciated and amortized 213,126 140,513   (30,491) 323,148 Capital assets being depreciated and amortized:

Facilities and improvements 782,963 26,982 —   809,945 Intangible assets 45,715 —   —   45,715
Machinery and equipment 144,323 4,005 (87)  148,241 Total capital assets being depreciated and amortized 973,001 30,987 * (87)  1,003,901 Les
s accumulated depreciation and amortization for:

Facilities and improvements (405,446) (18,285) —   (423,731) Intangible assets (22,220) (460) —   (22,680) Machinery and equipment (88,924) (5,158) 87 (93,995) Total accumulated depreciation and amortization (516,590) (23,903) 87 (540,406) Total capital assets being depreciated and amortized, net 456,411 7,084 —   463,495 Total capital assets, net $ 669,537 147,597 (30, 491) 786,643

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

52 (Continued)

b) Hetchy Water capital assets as of June 30, 2023 and 2022 consist of the following:

* Decrease in construction in progress included $ 192 in capital project write-offs, mainly related to Hetchy Water's share of 2018 Moccasin Storm Project. The remaining difference of $ 234 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.

* Decrease in construction in progress included $ 7 in capital project write -offs, mainly related to Hetchy Water’s share of road improvement projects. The remaining difference of $1 71 to capital asset additions was offset by direct additions to machinery and equipment.

2022 Increases Decreases 2023
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 3,232 —   —   3,232
Intangible assets** 6 —   —   6
Construction work in progress 54,138 25,032 ( 6,720)  * 72,450 Total capital assets not being depreciated and amortized 57,376 25,032 ( 6,720)  75,688 Capital assets being depreciated and amortized:

Facilities and improvements 306,116 5,196 —    311,312 Intangible assets 20,522 —   —   20, 522
Machinery and equipment 28,383 1,566 ( 58)  29,891 Total capital assets being depreciated and amortized 355,021 6,762 * (58)  361,725 Less accumulated depreciation and amortization for:

Facilities and improvements (179,839) (5,227) —   (185,066) Intangible assets (10,154) (207) —    (10,361) Machinery and equipment (21,397) (893) 58 (22,232) Total accumulated depreciation and amortization (211,390) (6,327) 58 (217,659) Total capital assets being depreciated and amortized, net 143,631 435 —   144, 066 Total capital assets, net $ 201,007 25,467 (6, 720) 219,754 2021 Increases Decreases 2022
Cap
ital assets not being depreciated and amortized:

Land and rights-of-way $ 3,232 —   —   3,232
Intangible assets** 6 —   —   6
Construction work in progress 35,333 29,654 (10,849)  * 54,138 Total capital assets not being depreciated and amortized 38,571 29, 654 (10,849)  57,376 Capital assets being depreciated and amortized:

Facilities and improvements 295,968 10,148 —   306,116 Intangible assets 20,522 —   —   20,522
Machinery and equipment 27,518 865 —   28,383 Total capital assets being depreciated and amortized 344,008 11,013 * —   355,021 Les
s accumulated depreciation and amortization for:

Facilities and improvements (174,695) (5,144) —   (179,839) Intangible assets (9,947) (207) —   (10,154) Machinery and equipment (20,456) (941) —   (21,397) Total accumulated depreciation and amortization (205,098) (6,292) —   (211,390) Total capital assets being depreciated and amortized, net 138,910 4,721 —   143,631 Total capital assets, net $ 177,481 34,375 (10, 849)  201,007

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

53 (Continued)

c) Hetchy Power capital assets as of June 30, 2023 and 2022 consist of the following:

* Decrease in construction in progress included $211 in capital project write-offs, mainly related to Hetchy Power’s share of 2018 Moccasin Storm Project. The remaining difference of $3,883 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.

* Decrease in construction in progress included $648 in capital project write-offs, mainly related to Hope San Francisco Project in Sunnydale and Potrero. The remaining difference of $980 to capital asset additions was offset by direct additions to machinery and equipment.

**See Notes 9 and 10 for additional information about the leases and SBITAs.

2022 Increases Decreases 2023
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 1,949 —   —   1,949
Intangible assets** 1,431 —   —   1,431
Construction work in progress 262,392 75,348 (39,720)  * 298,020 Total capital assets not being depreciated and amortized 265,772 75,348 (39,720)  301,400 Capital assets being depreciated and amortized:

Facilities and improvements 503,829 40,649 —   544,478 Intangible assets 25,193 140 —   25,333
Machinery and equipment 119,858 2,603 (127)  122,334 Total capital assets being depreciated and amortized 648,880 43,392 * (127)  692,145 Less accumulated depreciation and amortization for:

Facilities and improvements (243,892) (13,294) —   (257,186) Intangible assets (12,526) (253) —   (12,779) Machinery and equipment (72,598) (4,161) 125 (76,634) Total accumulated depreciation and amortization (329,016) (17,708) 125 (346,599) Total capital assets being depreciated and amortized, net 319,864 25,684 (2)  345,546 Total capital assets, net $ 585,636 101,032 (39,722)  646,946 2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 1,949 —   —   1,949
Intangible assets** 1,431 —   —   1,431
Construction work in progress 171,175 110,859 (19,642) * 262,392 Total capital assets not being depreciated and amortized 174,555 110,859 (19,642) 265,772 Capital assets being depreciated and amortized:

Facilities and improvements 486,995 16,834 —   503,829 Intangible assets 25,193 —   —   25,193
Machinery and equipment 116,805 3,140 (87)  119,858 Total capital assets being depreciated and amortized 628,993 19,974 * (87)  648,880 Less accumulated depreciation and amortization for:

Facilities and improvements (230,751) (13,141) —   (243,892) Intangible assets (12,273) (253) —   (12,526) Machinery and equipment (68,468) (4,217) 87 (72,598) Total accumulated depreciation and amortization (311,492) (17,611) 87 (329,016) Total capital assets being depreciated and amortized, net 317,501 2,363 —   319,864 Total capital assets, net $ 492,056 113,222 (19,642) 585,636

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

54 (Continued)

(5) Restricted Assets

Pursuant to the Hetchy Power Trust Indenture (the “Indenture”), established in fiscal year 2015, net revenues of the Hetchy Power are pledged first to the 2015 Series AB Bonds and 2021 Series AB Bonds, and have a priority lien on the pledge of net revenues to the outstanding CREBs, QECBs, and NCREBs (the “Subordinate Obligations”). The Lease/Purchase Agreements for the Subordinate Obligations pledge the net revenues of the Hetchy Power to these bonds, and such pledge is subordinate in lien to the net revenues pledge for the 2015 Series AB Bonds and 2021 Series AB Bonds (the “Bonds” or “Bond”).

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

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

1. The payment of operation and maintenance expenses;

2. Any priority reconstruction and replacement fund deposits;

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

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

5. Deposit in the reserve fund;

6. (i) Payment of principal and premium, if any, and interest on any Subordinate Obligations; (ii) deposit into a reserve fund securing any Subordinate Obligations; (iii) Swap Agreement payments pursuant to Swap Agreements entered into by the SFPUC with respect to an y Subordinate Obligations; and (iv) payment to any financial institution or insurance company providing any letter of credit, line of credit, or other credit or liquidity facility, including municipal bond insurance and guarantees, that secures the payment of principal 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 resolution;

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

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

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

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

11. Any other lawful purpose of the SFPUC.

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

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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

55 (Continued)

(a) Hetchy Water has the following restricted assets held in trust as of June 30, 2023 and 2022:

(b) Hetchy Power has the following restricted assets held in trust as of June 30, 2023 and 2022:

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

(6) Short-Term Debt

Effective March 2019, under Charter Sections 9.107(6) and 9.107(8), and 2018 Proposition A, the Commission and Board of Supervisors authorized the issuance of up to $250,000 in commercial paper notes for the purpose of reconstructing, replacing, expanding, repairing or improving power facilities of Hetchy Power. Interest rates for the commercial paper ranged from 1.1 % to 3.2 % and

0.1% to 1.1 % in fiscal year s 2023 and 2022, respectively . The Enterprise had $ 116,352 and $40,019 commercial paper outstanding as of June 30, 2023 and 2022, respectively. The Enterprise had $133,648 and $209,981 in unused authorization as of June 30, 2023 and 2022, respectively.

$116,352 was repaid by the 2023 Series A bonds issued on October 12, 2023 and has been reclassed to long-term liabilities on the June 30, 2023 financial statements (See Note 16).

In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt , Including Direct Borrowings and Direct Placements , Significant Events of default as specified in the Reimbursement Agreements include 1) non-payment, 2) material breach of warranty, representation, or other non - remedied breach of covenants as specified i n the respective agreements and 3) bankruptcy, which may result in all outstanding obligations to be immediately due and payable (unless waived by the respective Bank, if applicable); or issuance of a No-Issuance Notice, reduction in credit to outstanding amount plus interest coverage, and/or termination of the respective agreement. As of June 30, 2023, there were no such events described herein.

2023 2022
Cash and investments with City Treasury:

Hetch Hetchy bond construction fund $ 10,980   —
Total restricted assets $ 10,980   —
2023 2022
Cash and investments with City Treasury:

Hetch Hetchy bond construction fund $ 17,606   —
C
ash and investments outside City Treasury:
2009 Series C Certificates of participation - 525 Golden Gate 231   223 2009 Series D Certificates of participation - 525 Golden Gate 784   758 2015 Series A Revenue Bonds 2,261   2,194
2015 Series B Revenue Bonds 532   516
2021 Series AB Revenue Bonds 5,382   10,346
Commercial Paper 21   15
Total restricted cash and investments outside City Treasury 9,211   14,052 Interest and other receivables:

Hetch Hetchy bond construction fund 4,151   4,303
Total restricted assets $ 30,968   18,355

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

56 (Continued)

(7) Changes in Long-Term Liabilities
a) Hetch Hetchy’s long -term liability activities for the years ended June 30, 2023 and 2022 are as follows:

*Restated per GASB Statement No. 96, SBITAs.

Interest Maturity Restated Due within
rate (Calendar Year) 2022* Additions Reductions 2023 one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 421 —   (421) —   — Qualified Energy Conservation Bonds 4.74 2027 3,138 —   (555) 2,583 562 Ne
w Clean Renewable Energy Bonds 2015 4.62 2032 1,637 —   (146) 1,491 148 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 —   —   32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 3,735 —   (850) 2,885 880 2021 Series A Revenue Bonds 4.00 - 5.00 2052 74,280 —   —   74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2052 49,720 —   —   49,720 — Less issuance discount (6) —   6 —   — Add issuance premiums 29,536 —   (1,588) 27,948 — Total bonds payable 194,486 —   (3,554) 190,932 1,590 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 425 —   (425) —   — 2009 Series C COPs issuance premiums 2 —   (2) —   — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 —   —   12,593 445 Commercial paper 1.05 - 3.15 —   116,352   —   116,352 — Other post-employment benefits obligations 33,909 3,271   —   37,180 — Net pension liability —   33,468   —   33,468 —
Accrued vacation and sick leave 6,312 2,989   (2,576) 6,725 3,393 Accrued workers’ compensation 3,478 300   (321) 3,457 617 Damage claims liability 1,682 12,497   (7,295) 6,884 766 Due to other City departments 380 1,946   (380) 1,946 1,946 Lease liability 369 236   (298) 307 35 Subscription liability 632 —   (346) 286 163 Unearned revenues, refunds, and other 20,057 33,434   (40,775) 12,716 12,136 Total $ 274,325 204,493   (55,972) 422,846 21,091 Interest Maturity Restated Due within
rate (Calendar Year) 2021 Additions Reductions 2022* one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 843 —   (422) 421 421 Qualified Energy Conservation Bonds 4.74 2027 3,687 —   (549) 3,138 555 New Clean Renewable Energy Bonds 2015 4.62 2032 1,779 —   (142) 1,637 146 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 —   —   32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 4,550 —   (815) 3,735 850 2021 Series A Revenue Bonds 4.00 - 5.00 2052 —   74,280   —   74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2052 —   49,720   —   49,720 — Less issuance discount (20) —   14 (6) (6) Add issuance premiums 3,448 27,022 (934) 29,536 — Total bonds payable 46,312 151,022 (2,848) 194,486 1,966 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 830 —   (405) 425 425 2009 Series C COPs issuance premiums 8 —   (6) 2 2 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 —    —   12,593 — Other post-employment benefits obligations 35,006 5,135 (6,232) 33,909 — Net pension liability 62,219 —   (62,219) —   —
Accrued vacation and sick leave 6,202 2,869 (2,759) 6,312 3,060 Accrued workers’ compensation 3,238 555 (315) 3,478 615 Damage claims liability 1,639 3,840 (3,797) 1,682 601 Due to other City departments 369 11 —   380 380 Lease liability 749 —   (380) 369 238 Subscription liability —   954 (322) 632 346 Unearned revenues, refunds, and other 16,159 23,113 (19,215) 20,057 10,143 Total $ 185,324 187,499 (98,498) 274,325 17,776

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

57 (Continued)

b) Hetchy Water’s long-term liability activities for the years ended June 30, 2023 and 2022 are as follows:
*Restated per GASB Statement No. 96, SBITAs.

c) Hetchy Power’s long-term liability activities for the years ended June 30, 2023 and 2022 are as follows:

Restated Due within
2022* Additions Reductions 2023 one y ear
Other post-employment benefits obligations $ 14,240 667   —   14,907 — N
et pension liability —   14,105   —   14,105 —
Accrued vacation and sick leave 2,169 700   (603) 2,266 1,132 Accrued workers’ compensation 1,228 76   (85) 1,219 216 Damage claims liability 627 320   (247) 700 300 Lease liability 62 105   (29) 138 16 Subscription liability 309 —   (170) 139 80 Unearned revenues, refunds, and other 134 15   (39) 110 110 Total $ 18,769 15,988   (1,173) 33,584 1, 854 Restated Due within
2021 Additions Reductions 2022* one year
Other post-employment benefits obligations $ 14,444 1,921 (2,125) 14,240 — Net pension liability 26,645 —   (26,645) —   —
Accrued vacation and sick leave 2,185 749 (765) 2,169 1,034 Accrued workers’ compensation 1,120 233 (125) 1,228 215 Damage claims liability 525 253 (151) 627 228 Lease liability 78 —   (16) 62 3 Subscription liability —   468 (159) 309 170 Unearned revenues, refunds, and other 138 14 (18) 134 24 Total $ 45,135 3,638 (30,004) 18,769 1,674 Interest Maturity Restated Due within
rate (Calendar Year) 2022* Additions Red uctions 2023 one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 421 —   (421) —   — Qualified Energy Conservation Bonds 4.74 2027 3,138 —   (555) 2,583 562 New Clean Renewable Energy Bonds 2015 4.62 2032 1,637 —   (146) 1,491 148 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 —   —   32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 3,735 —   (850) 2,885 880 2021 Series A Revenue Bonds 4.00 - 5.00 2052 74,280 —   —   74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2052 49,720 —   —   49,720 — Less issuance discount (6) —   6 —   — Add issuance premiums 29,536 —   (1,588) 27,948 — Total bonds payable 194,486 —   (3,554) 190,932 1,590 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 425 —   (425) —   — 2009 Series C COPs issuance premiums 2 —   (2) —   — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 —   —   12,593 445 Commercial paper 1.05 - 3.15 —   116,352   —   116,352 — Other post-employment benefits obligations 17,405 815   —   18,220 — Net pension liability —   17,239   —   17,239 —
Accrued vacation and sick leave 3,597 1,838   (1,719) 3,716 1,867 Accrued workers’ compensation 2,250 224   (236) 2,238 401 Damage claims liability 1,023 10,439   (5,312) 6,150 450 Due to other City departments 380 1,946   (380) 1,946 1,946 Lease liability 75 131   (37) 169 19 Subscription liability 253 —   (137) 116 65 Unearned revenues, refunds, and other 6,727 10,385   (10,652) 6,460 5,880 Total $ 239,216 159,369   (22,454) 376,131 12,663

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

58 (Continued)

*Restated per GASB Statement No. 96, SBITAs.

d) CleanPowerSF’s long-term liability activities for the years ended June 30, 2023 and 2022 are as follows:

*Restated per GASB Statement No. 96, SBITAs.

Interest Maturity Restated Due within
rate (Calendar Year) 2021 Additions Reductions 2022* one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 843 —    (422) 421 421 Qualified Energy Conservation Bonds 4.74 2027 3,687 —   (549) 3,138 555 New Clean Renewable Energy Bonds 2015 4.62 2032 1,779 —   (142) 1,637 146 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 —   —   32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 4,550 —   (815) 3,735 850 2021 Series A Revenue Bonds 4.00 - 5.00 2052 —   74,280   —   74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2052 —   49,720   —   49,720 — Less issuance discount (20) —   14 (6) (6) Add issuance premiums 3,448 27,022   (934) 29,536 — Total bonds payable 46,312 151,022   (2,848) 194,486 1,966 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 830 —   (405) 425 425 2009 Series C COPs issuance premiums 8 —   (6) 2 2 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 —   —   12,593 — Other post-employment benefits obligations 17,653 2,347 (2,595) 17,405 — Net pension liability 32,566 —   (32,566) —   —
Accrued vacation and sick leave 3,617 1,856 (1,876) 3,597 1,747 Accrued workers’ compensation 2,118 322 (190) 2,250 400 Damage claims liability 1,108 2,005 (2,090) 1,023 358 Due to other City departments 369 11 —   380 380 Lease liability 94 —   (19) 75 3 Subscription liability —   380 (127) 253 137 Unearned revenues, refunds, and other 5,993 8,410 (7,676) 6,727 5,923 Total $ 123,261 166,353 (50,398) 239,216   11,341 Restated Due within
202
2* Additions Reductions 2023 one year
Other post-employment benefits obligations $ 2,264 1,789   —   4,053 — Net pension liability —   2,124 —   2,124 — Accrued vacation and sick leave 546 451 (254) 743 394 Damage claims liability 32 1,738   (1,736) 34 16 Lease liability 232 —   (232) —   —
Subscription liability 70 —   (39) 31   18 Unearned revenues, refunds, and other 13,196 23,034 (30,084) 6,146 6,146 Total $ 16,340 29,136 (32,345) 13,131 6,574 Restated Due within
2021 Additions Reductions 2022* one year
Other post-employment benefits obligations $ 2,909   867   (1,512) 2,264 — Net pension liability 3,008   —   (3,008) —   —
Accrued vacation and sick leave 400   264   (118) 546 279 Damage claims liability 6   1,582   (1,556) 32 15 Lease liability 577   —   (345) 232 232 Subscription liability —   106   (36) 70 39 Unearned revenues, refunds, and other 10,028   14,689   (11,521) 13,196 4,196 Total $ 16,928   17,508   (18,096) 16,340 4,761

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

59 (Continued)

(a) Clean Renewable Energy Bonds
In November 2008, Hetchy Power issued $6,325 of taxable CREBs to finance the installation of solar energy equipment on City-owned facilities, including Chinatown Branch Library, Maxine Hall Medical Center, City Distribution Division Warehouse, North Point Wastewater Plant, Chinatown Public Health Center, Municipal Transportation Agency Woods, and Municipal Transportation Agency Ways and Structures. The CREBs were non -rated and privately -placed with Banc of America Leasing. The net effective interest rate on the CREBs, after the federal tax subsidy, is 0% through 2022. Hetchy Power began making principal payments in the amount of $422 on December 15, 2008 and matured with the last principal payment made on December 15, 2022. Funding for these payments will be guaranteed by net power revenues. Interest payments are not required, since the effective equivalent of interest on the bonds is paid in the form of federal tax credits in lieu of interest paid by the issuer. (b) Qualified Energy Conservation Bonds
In December 2011, Hetchy Power issued $8,291 of taxable QECBs. The QECBs were issued to fund certain qualified green components for the SFPUC’s 525 Golden Gate Headquarters project. The QECBs were non-rated and privately placed with Banc of America Leasing. The net effective interest rate on the QECBs, after the federal tax subsidy, is 1.2% through 2028.

The future annual debt service relating to the QECBs outstanding as of June 30, 202 3 is as follows:

* The SFPUC received an IRS notice dated May 25 , 2023 that the federal interest subsidy is reduced by 5. 7% or a total reduction of $ 13 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.

(c) New Clean Renewable Energy Bonds 2015
In October 2015, Hetchy Power issued $4,100 of taxable 2015 NCREBs. The 2015 NCREBs were issued to fund certain qualified clean, renewable energy solar generation facilities at the Marina Middle School and the San Francisco Police Academy. The 2015 NC REBs were non - rated and privately placed with Banc of America Leasing. The net effective interest rate on the 2015 NCREBs, after the federal tax subsidy, is 1.4% through 2033. $1,272 of principal was prepaid in fiscal year 2021.

Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2024 $ 562 116 (82) 34
2025 569 89 (63) 26
2026 576 62 (44) 18
2027 582 35 (24) 11
2028 294 7 (4) 3
2,583 309 (217) 92
Less: Current portion (562)
Long-term portion as of June 30, 2023 $ 2,021

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

60 (Continued)

The future annual debt service relating to the 2015 NCREBs outstanding as of June 30, 2023 is as follows:

* The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy is reduced by 5. 7% or a total reduction of $ 14 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.

(d) Power Revenue Bonds 2015 Series A (Green) and Series B In May 2015, Hetchy Power issued tax -exempt revenue bonds, 2015 Series A (Green) in the amount of $32,025 with interest rates ranging from 4.0% to 5.0% and 2015 Series B in the amount of $7,530 with interest rates ranging from 3.0% to 4.0%. Proceeds from the bonds were used to finance reconstruction or replacement of existing facilities of the SFPUC’s Hetch Hetchy project, to fund capitalized interest on the 2015 Series AB Bonds, to fund a debt service reserve account for the 2015 Series AB Bonds, and to pa y costs of issuance of the 2015 Series AB bonds. The bonds were rated “A+” and “AA -” by S&P and Fitch, respectively. Final maturity for 2015 Series AB are November 1, 2045 and November 1, 2026, respectively. The true interest cost is 3.95%. As of June 30, 2023 and 2022, the outstanding principal amounts were $34,910 and $35,760, respectively.

The future annual debt service relating to the 2015 Series AB Bonds outstanding as of June 30, 2023 are as follows:

Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2024 $ 148 67 (44) 23
2025 150 60 (40) 20
2026 152 53 (35) 18
2027 154 47 (31) 16
2028 156 39 (26) 13
2029-2033 731 85 (56) 29
1,491 351 (232) 119
Less: Current portion (148)
Long-term portion as of June 30, 2023 $ 1,343
Fiscal years ending June 30: Principal Interest Tota l
2024 $ — 1,593 1,593
2025 — 1,593 1,593
2026 — 1,593 1,593
2027 830 1,576 2,406
2028 1,020 1,534 2,554
2029-2033 5,930 6,831 12,761
2034-2038 7,565 5,153 12,718
2039-2043 9,650 3,011 12,661
2044-2046 7,030 539 7,569
32,025 23,423 55,448
Add: Unamortized bond premium 2,960
Long-term portion as of June 30, 2023 $ 34,985
Hetchy Power - Power Revenue Bonds 2015 Series A (Green)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

61 (Continued)

(e) Power Revenue Bonds 2021 Series A (Green) and Series B In December 2021, Hetchy Power issued tax -exempt revenue bonds, 2021 Series A (Green) in the amount of $74,280 with interest rates ranging from 4.0% to 5.0% and 2021 Series B in the amount of $49,720 with interest rates ranging from 4. 0% to 5.0%. Proceeds from the bonds were used to refinance a portion of the costs of various capital projects benefiting the Power Enterprise, to fund capitalized interest on the 2021 Series AB Bonds, and to pay costs of issuance. The bonds were rated “AA” and “AA-” by S&P and Fitch, respectively. Final maturity for 2021 Series AB are November 1, 2051. The true interest cost is 2.64 %. As of June 30, 202 3 and 2022, the outstanding principal amount was $124,000. The future annual debt service relating to the 2021 Series AB Bonds outstanding as of June 30, 2023 are as follows:

Fiscal years ending June 30: Principal Interest Total
2024 $ 880 93 973
2025 910 62 972
2026 945 25 970
2027 150 3 153
2,885 183 3,068
Less: Current portion (880)
Add: Unamortized bond premium 63
Long-term portion as of June 30, 2023 $ 2,068
Hetchy Power - Power Revenue Bonds 2015 Series B
Fiscal years ending June 30: Principal Interest Total
2024 $ — 3,085 3,085
2025 1,385 3,050 4,435
2026 1,455 2,979 4,434
2027 1,530 2,905 4,435
2028 1,605 2,826 4,431
2029-2033 9,305 12,868 22,173
2034-2038 11,470 10,690 22,160
2039-2043 14,020 8,149 22,169
2044-2048 17,125 5,045 22,170
2049-2052 16,385 1,343 17,728
74,280 52,940 127,220
Add: Unamortized bond premium 15,023
Long-term portion as of June 30, 2023 $ 89,303
Hetchy Power - Power Revenue Bonds 2021 Series A (Green) Fiscal years ending June 30: Principal Int erest Total
2024 $ — 2,045 2,045
2025 585 2,030 2,615
2026 620 2,000 2,620
2027 650 1,969 2,619
2028 685 1,935 2,620
2029-2033 3,940 9,120 13,060
2034-2038 4,985 8,168 13,153
2039-2043 6,200 7,052 13,252
2044-2048 12,885 5,464 18,349
2049-2052 19,170 1,573 20,743
49,720 41,356 91,076
Add: Unamortized bond premium 9,902
Long-term portion as of June 30, 2023 $ 59,622
Hetchy Power - Power Revenue Bonds 2021 Series B

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

62 (Continued)

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

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

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

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

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

Similarly, each Enterprise is responsible for a portion of the annual base rental payment based on thei r ownership percentages less contributed equity. The percentage share of base rental payments for the Enterprises is as follows: Water (71.4%), Wastewater (18.9%), and Power (9.7%). Certificates of participation 2009 Series C have been fully repaid as of June 30, 2023.

The future annual debt service relating to the certificates of participation 2009 Series D outstanding as of June 30, 2023 is as follows:

* The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy is reduced by 5.7% or a total reduction of $174 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.

(g) Events of Default and Remedies
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, significant events of default as specified in the Power Enterprise Indenture (applicable to Power Revenue Bonds and energy bonds ) and the Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2024 $ 445 798 (263) 535
2025 463 769 (254) 515
2026 483 739 (244) 495
2027 503 709 (234) 475
2028 524 675 (223) 452
2029-2033 2,972 2,833 (935) 1,898
2034-2038 3,665 1,762 (581) 1,181
2039-2042 3,538 471 (156) 315
12,593 8,756 (2,890) 5,866
Less: Current portion (445)
Long-term portion as of June 30, 2023 $ 12,148

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

63 (Continued)

Equipment Lease/Purchase Agreement include 1) non-payment, 2) material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods) and 3) bankruptcy and insolvency events, which may result in the Trustee (upon written request by the majority of the owners (by aggregate amount of the bond obligations), declare the principal and the interest accrued thereon to be due and payable immediately. As of June 30, 2023 and 2022, there were no such events described herein.

(8) Revenue Pledge

Hetchy Power has pledged future power revenues to repay the 2008 CREBs, the 2011 QECBs, and the 2015 NCREBs. Additionally, Hetchy Power has pledged future power revenues for 2015 Series AB and 2021 Series AB power revenue bonds. Proceeds from the bonds provided financing for various capital construction and facility energy efficiency projects. 2015 Series AB and 2021 Series AB power revenue bonds are payable through fiscal year 2046 and 205 2, respectively, and are solely payable from net revenues of Hetchy Power on a senior lien basis to the 2008 CREBs, the 2011 QECBs, and the 2015 NCREBs.

The original amount of bonds issued, total principal and interest remaining, principal and interest paid during fiscal years 2023 and 2022, applicable net revenues, and funds available for debt service are as follows:

*Per Indenture, debt service for coverage is calculated using the amount of principal and interest paid during the year for t he 2015 Series AB and 2021 Series AB power revenue bonds net of capitalized interest if any , which have a senior lien on P ower Enterprise revenues; principal and interest paid during the year for the 2015 Series AB and 2021 Series AB power revenue bonds was $2,567, net of capitalized interest.

.

Hetchy Power 2023 2022
Bonds issued with revenue pledge $ 182,271   182,271
P
rincipal and interest remaining due at the end of the year 281,546   290,581 Principal and interest paid during the year* 3,905   3,928 Net revenues for the year ended June 30 52,195   54,310 Funds available for debt service 162,399   98,625

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

64 (Continued)

(9) Leases

Hetch Hetchy has entered into long -term leases for office space and other equipment. The terms and conditions for these leases varies, which ranges between 1 to 75 years.

A summary of intangible right -to-use leases during the years ended June 30, 2023 and 2022 are as follows:

2022 Increases Decreases Remeasurements 2023
Hetch Hetchy
Right-to-use assets: Building/facility $ 1,068   —   (862)  236   442 To
tal lease assets 1,068   —   (862)  236   442
Less accumulated amortization for:

Building/facility (704)  (277)  862   —   (119)
Total accumulated amortization (704)  (277)  862   —   (119) Total lease assets, net $ 364   (277)  —   236   323
Hetch Water
Right-to-use assets: Building/facility $ 67   —   26   105   198 Tot
al lease assets 67   —   26   105   198
Less accumulated amortization for:

Building/facility (6)  (21)  (26)  —   (53)
Total accumulated amortization (6)  (21)  (26)  —   (53) Total lease assets, net $ 61   (21)  —   105   145
Hetch Power
Right-to-use assets: Building/facility $ 81   —   32   131   244 Tot
al lease assets 81   —   32   131   244
Less accumulated amortization for:

Building/facility (8)  (26)  (32)  —   (66)
Total accumulated amortization (8)  (26)  (32)  —   (66) Total lease assets, net $ 73   (26)  —   131   178
CleanPowerSF
Right-to-use assets: Building/facility $ 920   —   (920)  —   — Tot
al lease assets 920   —   (920)  —   —
Less accumulated amortization for:

Building/facility (690)  (230)  920   —   —
Total accumulated amortization (690)  (230)  920   —   — Total lease assets, net $ 230   (230)  —   —   —

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

65 (Continued)

A summary of changes in the related lease liabilities during the years ended June 30, 2023 and 2022 are as follows:

2021 Increases Decreases Remeasurements 2022
Hetch Hetchy
Right-to-use assets: Building/facility $ 1,126   —   (58)  —   1,068 Total lease assets 1,126   —   (58)  —   1,068
Less accumulated amortization for:

Building/facility (387)  (375)  58   —   (704)
Total accumulated amortization (387)  (375)  58   —   (704) Total lease assets, net $ 739   (375)  —   —   364
Hetch Water
Right-to-use assets: Building/facility $ 93   —   (26)  —   67 Total lease assets 93   —   (26)  —   67
Less accumulated amortization for:

Building/facility (19)  (13)  26   —   (6)
Total accumulated amortization (19)  (13)  26   —   (6) Total lease assets, net $ 74   (13)  —   —   61
Hetch Power
Right-to-use assets: Building/facility $ 113   —   (32)  —   81 Total lease assets 113   —   (32)  —   81
Less accumulated amortization for:

Building/facility (23)  (17)  32   —   (8)
Total accumulated amortization (23)  (17)  32   —   (8) Total lease assets, net $ 90   (17)  —   —   73
CleanPowerSF
Right-to-use assets: Building/facility $ 920   —   —   —   920 Total lease assets 920   —   —   —   920
Less accumulated amortization for:

Building/facility (345)  (345)  —   —   (690)
Total accumulated amortization (345)  (345)  —   —   (690) Total lease assets, net $ 575   (345)  —   —   230

Beginning End of Due within
Fiscal years of year Additions Remeasurements Deductions year one year Hetch Hetchy
369$ —   236   (298) 307 35
749 —   —   (380) 369 238
Hetchy Water
62$ —   105   (29) 138 16 78 —   —   (16) 62 3 Hetchy Power
75$ —   131   (37) 169 19 94 —   —   (19) 75 3 CleanPowerSF
232$ —   —   (232) —   —
577 —   —   (345) 232 232
2023
2022
2023
2022
2023
2022
2023
2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

66 (Continued)

Future annual lease payments as of the years ended June 30, 2023 and 2022 are as follows:

* Excluded $28 payment from remeasurements due to lease renewal.

* Excluded $34 payment from remeasurements due to lease renewal.

Hetchy Water
Fiscal years ending June 30: Principal Interest Total
2024 $ 16 2 18
2025 16 2 18
2026 16 2 18
2027 16 2 18
2028 17 1 18
2029-2033 30 4 34
2034-2038 19 2 21
2039-2042 8 —   8
138 15 153
Less: Current portion (16)
Long-term portion as of June 30, 2023 $ 122
Hetchy Power
Fiscal years ending June 30: Principal Interest Total
2024 $ 19 3 22
2025 19 3 22
2026 20 2 22
2027 20 2 22
2028 20 2 22
2029-2033 38 5 43
2034-2038 23 2 25
2039-2042 10 —   10
169 19 188
Less: Current portion (19)
Long-term portion as of June 30, 2023 $ 150
Hetchy Water
Fiscal years ending June 30: Principal Interest Total
2023* $ 3 1 4
2024 3 1 4
2025 3 1 4
2026 3 1 4
2027 3 1 4
2028-2032 17 4 21
2033-2037 18 3 21
2038-2042 12 1   13
62 13 75
Less: Current portion (3)
Long-term portion as of June 30, 2022 $ 59
Hetchy Power
Fiscal years ending June 30: Principal Interest Total
2023* $ 3 2 5
2024 4 2 6
2025 4 1 5
2026 4 1 5
2027 4 1 5
2028-2032 20 5 25
2033-2037 23 3 26
2038-2042 13 1   14
75 16 91
Less: Current portion (3)
Long-term portion as of June 30, 2022 $ 72

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

67 (Continued)

Variable Lease Payments – Variable lease payments, other than those payments that depend on an index or rate or are fixed in substance, are excluded from the measurement of the lease liability. Such amounts are recognized as lease expenses in the period in which the obligation for those payments is incurred.

Certain equipment or facility rental leases require Hetch Hetchy to make variable lease payments that based on usage, related to the property taxes levied on the lessor, and insurance payments made by the lessor; these amounts are generally determined annually. During the year ended June 30, 2023, the amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $160 for CleanPowerSF and $0 for Hetchy Water and Hetchy Power. During the year ended June 30, 2022, the amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $45 for Hetch Hetchy, of which $ 1 for Hetchy Water, $1 for Hetchy Power and $43 for CleanPowerSF.

(10) Subscription-Based Information Technology Arrangements (SBITAs)

Hetch Hetchy has noncancellable subscription arrangements (similar to a lease) for the right to use various SBITAs. The terms and conditions for these subscriptions varies, which ranges between 1 to 5 years.

A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:

CleanPowerSF
Fiscal years ending June 30: Principal Interest Total
2023 $ 232 1 233
Less: Current portion (232)
Long-term portion as of June 30, 2022 $ —
2022 Increases Decreases Remeasurements 2023
Hetch Hetchy
Subscription assets $ 998   —   —   —   998
Less accumulated amortization (357)  (360)  —   —   (717) Total subscription assets, net $ 641   (360)  —   —   281 Hetch Water
Subscription assets $ 490   —   —   —   490
Less accumulated amortization (176)  (177)  —   —   (353) Total subscription assets, net $ 314   (177)  —   —   137 Hetch Power
Subscription assets $ 397   —   —   —   397
Less accumulated amortization (141)  (142)  —   —   (283) Total subscription assets, net $ 256   (142)  —   —   114 CleanPowerSF
Subscription assets $ 111   —   —   —   111
Less accumulated amortization (40)  (41)  —   —   (81)
Total subscription assets, net $ 71   (41)  —   —   30

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

68 (Continued)

*Restated per GASB Statement No. 96, SBITAs.

A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows: 51

*Restated per GASB Statement No. 96, SBITAs.

Future annual subscription payments as of the years ended June 30, 2023 and 2022 are as follows:

2021 Increases Decreases Remeasurements 202 2*
Hetch Hetchy
Subscription assets $ 954   44   —   —   998
Less accumulated amortization —   (357)  —   —   (357)
Total subscription assets, net $ 954   (313)  —   —   641 Hetch Water
Subscription assets $ 468   22   —   —    490
Less accumulated amortization —   (176)  —   —   (176)
Total subscription assets, net $ 468   (154)  —   —   314 Hetch Power 2021 Increases Decreases Rem easurements 2022 Subscription assets $ 380   17   —   —   397
Less accumulated amortization —   (141)  —   —   (141)
Total subscription assets, net $ 380   (124)  —   —   256 CleanPowerSF
Subscription assets $ 106   5   —   —    111
Less accumulated amortization —   (40)  —   —   (4 0)
Total subscription assets, net $ 106   (35)  —   —   71 Beginning End of Due within
Fiscal years of year Additions Remeasurements Deductions year one year Hetch Hetchy
632$ —   —   ( 346) 286 163
954 —   —   (322) 632 346
Hetchy Water
309$ —   —   (170) 139 80
468 —   —
(159) 309 170
Hetchy Power
253$ —   —   (137) 116 65
380 —   —
(127) 253 137
CleanPowerSF
70$ —   —   (39) 31 18 106 —   —   (36) 70 39 2023
2022*
2023
2022*
2023
2022*
2023
2022*
Hetchy Water
Fiscal years ending June 30: Principal Interest Total
2024 $ 80 2 82
2025 30 2 32
2026 29 1
30 139 5 144
Less: Current portion (80)
Long-term portion as of June 30, 2023 $ 59

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

69 (Continued)

As of June 30, 2023 and 2022, no variable subscription payments were noted for Hetch Hetchy’s subscription IT arrangements.

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

In 2007, the Board of Supervisors adopted the resolution to enter into two non-exclusive licenses with the Trans bay Cable LLC (the Licensee) for the Transb ay Cable Project. The Licensee proposed to install, operate, and maintain approximately 53 miles of high-voltage direct current transmission cable Hetchy Power
Fiscal years ending June 30: Principal Interest Total
2024 $ 65 1 66
2025 25 1 26
2026 26 —   26
116 2 118
Less: Current portion (65)
Long-term portion as of June 30, 2023 $ 51
Clean Power
Fiscal years ending June 30: Principal Interest Total
2024 $ 18 —   18
2025 6 —   6
2026 7 —   7
31 —   31
Less: Current portion (18)
Long-term portion as of June 30, 2023 $ 13
Hetchy Water
Fiscal years ending June 30: Principal Interest Total
2023 $ 170 3 173
2024 80 2 82
2025 30 1 31
2026 29 1 30
309 7 316
Less: Current portion (170)
Long-term portion as of June 30, 2022 $ 139
Hetchy Power
Fiscal years ending June 30: Principal Interest Tota l
2023 $ 137 2 139
2024 65
1 66
2025 25 1 26
2026 26 —   26
253 4 257
Less: Current portion (137)
Long-term portion as of June 30, 2022 $ 116
Clean Power
Fiscal years ending June 30: Principal Int erest Total
2023 $ 39 —   39
2024 18
—   18
2025 6 —   6
2026 7 —   7
70 —   70
Less: Current portion (39)
Long-term portion as of June 30, 2022 $ 31

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

70 (Continued)

running from the City of Pittsburg to the City. The first license was a Construction License to install a 400 MW high -voltage transmission line, with a four -year term. The Licensee paid Hetchy Power $3,500 in Renewable Energy, Transmission and Grid Reliability . The Construction licensing fees were fully spent as of 2020.

The second license is an operational license for operation of the transmission line with 25-year term and an option to renew for 10 years. The project came on line November 29, 2010 and cumulative revenues of $22,708 were recorded. Per agreement, the SFPUC shall consider specifically renewable energy, conservation, and environmental health programs, which benefit low -income, at -risk, and environmentally disadvantaged communities. The San Francisco Electricity Re liability Payment shall also be partly used for green jobs training and placement programs, which benefit low-income, at-risk, and environmentally disadvantaged communities. As of June 30, 202 3, cumulative expenses of $12,487 have been incurred, with $1,351 and $1,525 in fiscal years 2023 and 2022, respectively.

(12) Employee Benefits

(a) Pension Plan

Retirement Plan – Hetch Hetchy participates in a cost-sharing multiple-employer defined benefit pension Plan (SFERS Plan). The SFERS Plan is administered by the San Francisco City and County Employees’ Retirement System ( SFERS). For purposes of measuring the net pension liability, deferred outflows/inflows of resources related to pensions, pension expense, information about the fiduciary net position of the SFERS Plan, and additions to/deductions from the SFERS Plan’s fiduciary net position have been determined on the same basis as they are reported by the SFERS Plan. Contributions are recognized in the period in which they are due pursuant to legal requir ements. Benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

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

SFERS Plan – The City is an employer of the plan with a proportionate share of 94.87% as of June 30, 2022 (measurement date), 0.23% increased from prior year, and 94.64% as of June 30, 2021 (measurement date). Hetch Hetchy’s allocation percentage was determined based on its employer contributions divided by the City’s total employer contributions for fiscal years 2022 and 2021. Hetch Hetchy’s net pension liability, deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/inflows, and pension expense is based on its allocated percentage. Hetch Hetchy’s allocation of the City’s proportionate share was 1.3 1%, of which 0.5 5% for Hetchy Water, 0.6 8% for Hetchy P ower, and 0.08 % for CleanPowerSF as of June 30, 2022 (measurement date). Hetch Hetchy’s allocation of the City’s proportionate share was 1. 33%, of which 0.57% for Hetchy Water, 0.69% for Hetchy Power, and 0.07% for CleanPowerSF as of June 30, 2021 (measurement date).

SFERS Plan Description – The Plan provides basic service retirement, disability, and death benefits based on specified percentages of defined final average monthly salary and provides Fiscal Year 2023 Fiscal Year 2022
Valuation Date (VD) June 30, 2021 updated to June 30, 2022 Jun e 30, 2020 updated to June 30, 2021 Measurement Date (MD) June 30, 2022 June 30, 2021
Measurement Period (MP) July 1, 2021 to June 30, 2022 July 1, 2020 to June 30, 2021

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

71 (Continued)

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

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

a) Miscellaneous Non-Safety Members – staff, operational, supervisory, and all other eligible employees who are not in special membership categories. b) Sheriff’s Department and Miscellaneous Safety members – sheriffs assuming office on and after January 7, 2012, and undersheriffs, deputized personnel of the Sheriff’s department, and miscellaneous safety employees hired on and after January 7, 2012. c) Firefighter Members – firefighters and other employees whose principal duties are in fire prevention and suppression work or who occupy positions designated by la w as firefighter member positions.
d) Police Members – police officers and other employees whose principal duties are in active law enforcement or who occupy positions designated by law as police member positions.

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

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

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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

72 (Continued)

and in addition for these members, Supplemental COLAs will not be permanent adjustments to retirement benefits. That is, in years when a Supplemental COLA is not paid, all previously paid Supplemental COLAs will expire.

Funding and Contribution Policy

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

Employee contributions are mandatory as required by the Charter. Employee contribution rates varied from 7.5% to 12.0% and 7.5% to 13.0% as a percentage of gross covered salary in fiscal years 2023 and 2022. Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The City is required to contribute at an actu arially determined rate. Based on the July 1, 2021 actuarial report, the required employer contribution rate for fiscal year 2023 range from 17.85% to 21.35%. Based on the July 1, 2020 actuarial report, the required employer contribution rate for fiscal year 2022 range from 19.91% to 24.41%.

Employer contributions and employee contributions made by the employer to the Plan are recognized when due and the employer has made a formal commitment to provide the contributions. The City’s proportionate share of employer contributions recognized by the Retirement System in fiscal years ended June 30, 2022 and 2021 (measurement years) were $729,578 and $791,736, respectively. Hetch Hetchy’s allocation of employer contributions were $9, 766, of which $4,149 for Hetchy Water, $5, 071 for Hetchy Power, and $ 546 for CleanPowerSF for fiscal year 2022 (measurement period). Hetch Hetchy’s allocation of employer contributions were $9,644, of which $4,130 for Hetchy Water, $5,048 for Hetchy Power, and $466 for CleanPowerSF for fiscal year 2021 (measurement period).

Pension (Assets)/Liabilities, Pension Expenses, and Deferred Outflows and Inflows of Resources Related to Pensions

Fiscal Year 2023

As of June 30, 2023, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $2, 552,996. The City’s NPL/net pension assts (NPA) for each of its cost -sharing plans is measured as a proportionate share of the plans’ NPL/(NPA). The net pension liability of the SFERS Plan is measured as of June 30, 2022 (measurement date), and the total pension liability for the SFERS Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the City’s long -term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. Hetch Hetchy’s allocation of the City’s proportionate share of the net pension liability for the SFERS Plan as of June 30, 2023 was $ 33,468, of which $14,105 for Hetchy Water, $17,239 for Hetchy Power, and $2,124 for CleanPowerSF.

For the year ended June 30, 2023, the City’s recognized pension expense was $1,771, which includes Retirement Benefit Plan pension expense of $ 14,967. Hetch Hetchy’s allocation of pension (benefit) including amortization of deferred outflows/inflows related pension items were ($2,192), of which ($955 ) for Hetchy Water, ($ 1,168) for Hetchy Power, and ($ 69) for CleanPowerSF. Pension (benefit) increased from the prior yea r, largely due to the amortization of deferrals.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

73 (Continued)

At June 30, 2023, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions from the following source:

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

Fiscal Year 2022

As of June 30, 2022, the City reported net pension assets (NPA) for its proportionate share of the net pension asset of the SFERS Plan of $ 2,446,564. The City’s NPL/(NPA) for each of its cost-sharing plans is measured as a proportionate share of the plans’ NPL/(NPA) . The net pension asset of the SFERS Plan is measured as of June 30, 2021 (measurement date), and the total pension (asset) /liability for the SFERS Plan used to calculate the net pension (asset)/liability was determined by an actuarial valuation as of June 30, 2020 rolled fo rward to June 30, 2021 using standard update procedures. The City’s proportion of the net pension (asset)/liability for the SFERS Plan was based on a projection of the City’s long -term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. Hetch Hetchy’s allocation of the City’s proportionate share of the net pension (asset) /liability for the SFERS Plan as of June 30, 2022 was ($32,749), of which ($13,912) for Hetchy Water, ($17,004) for Hetchy Power, and ($1,833 ) for CleanPowerSF.

For the year ended June 30, 2022, the City’s recognized pension (benefit) was ( $922,979), which includes Retirement Benefit Plan pension expense of $28,735. Hetch Hetchy’s allocation of pension (benefit) including amortization of deferred outflows/inflows related pension items were ($4,058), of which ($1,816) for Hetchy Water, ($2,220) for Hetchy Power, and ($22) for CleanPowerSF. Pension (benefit) increased from the prior year, largely due to the amortization of deferrals.

Hetchy Hetchy Hetchy Het chy
Fiscal Year 2023 Water Power CleanPowerSF Total Water Power CleanPowerSF Total Pension contributions subsequent to the $ 3,525 4,308 531 8,364 —   —   —   — measurement date
Differences between expected and actual
experience 1,288 1,574 194 3,056 —   —   —   — Changes in assumptions 3,665 4,479 552 8,696 1,100 1,344 166   2,610 Net difference between projected and actual
earnings on pension plan investments —   —   —   —   1,753 2,143 264   4,160 Change in employer's proportion 380 465 15 860 1,289 1,575 866   3,730 Total $ 8,858 10,826 1,292 20,976 4,142 5,062 1,296 10,500 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources
Fiscal Hetchy Het chy
years Water Power CleanPowerSF Total
2024 $ (1,163) (1,422) (509) (3,094) 2025 (1,366) (1,669) (426) (3,461) 2026 (2,405) (2,939) (477) (5,821) 2027 6,125 7,486 877 14,488
$ 1,191 1,456 (535) 2,112

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

74 (Continued)

At June 30, 2022, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions from the following source:

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

Hetchy Hetchy Het chy Hetchy
Fiscal Year 2022 Water Power CleanPowerSF Total Water Power CleanPowerSF Total Pension contributions subsequent to the $ 4,149 5,071 546 9,766 —   —   —   — measurement date
Differences between expected and actual
experience 1,278 1,561 168 3,007 45 56 6   107 Changes in assumptions 941 1,151 124 2,216 2,443 2,985 322   5,750 Net difference between projected and actual
earnings on pension plan investments —   —   —   —   30,223 36,939 3,982   71,144 Change in employer's proportion 328 400 14 742 1,766 2,158 1,104 5,028 Total $ 6,696 8,183 852 15,731 34,477 42,138 5,414 82,029 Resources Resources
Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2023 $ (8,033) (9,817) (1,407) (19,257) 2024 (7,470) (9,130) (1,278) (17,878) 2025 (7,679) (9,386) (1,194) (18,259) 2026 (8,748) (10,693) (1,229) (20,670) $ (31,930) (39,026) (5,108) (76,064)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

75 (Continued)

Actuarial Assumptions

Fiscal Year 2023

A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for SFERS Plan as of June 30, 2022 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2021 actuarial valuation. Refer to the July 1, 2021 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org.

Mortality rates for health Miscellaneous members were based upon adjusted PubG -2010 Employee and Retiree tables for non-annuitants and retirees, respectively. Mortality rates were then projected generationally from the base year using the MP-2019 projection scale.

The actuarial assumptions used at the June 30, 202 2 measurement date was based upon the result of a demographic experience study for the period July 1, 2014 through June 30, 2019 and an economic experience study as of July 1, 2021.

Key Actuarial Assumptions
Valuation Date June 30, 2021 updated to June 30, 2022
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 2.16% as of June 30, 2021

3.54% as of June 30, 2022
Bond Buyer 20-Bond GO Index, June 24, 2021 and June 30, 2022 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 7.40% as of June 30, 2021

7.20% as of June 30, 2022
Administrative Expenses 0.60% of payroll as of June 30, 2021

0.60% of payroll as of June 30, 2022
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire,
Charters A8.595
and A8.596
Old Police & Fire,
Charters A8.559
and A8.585
June 30, 2021 2.00% 1.90% 2.50% 3.60%
June 30, 2022 2.00% 1.90% 2.50% 3.60%
SFERS Plan

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

76 (Continued)

Fiscal Year 2022

A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for SFERS Plan as of June 30, 2021 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2020 actuarial valuation. Refer to the July 1, 2020 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org.

Mortality rates for health Miscellaneous members were based upon adjusted PubG -2010 Employee and Retiree tables for non-annuitants and retirees, respectively. Mortality rates were then projected generationally from the base year using the MP-2019 projection scale.

The actuarial assumptions used at the June 30, 2021 measurement date was based upon the result of a demographic experience study for the period July 1, 2014 through June 30, 2019 and an economic experience study as of July 1, 2020.

Discount Rate

Fiscal Year 2023

SFERS Plan – The beginning and end of ye ar measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7. 20% as of June 30, 2022 (measurement date) and 7.40% as of June 30, 2021 (measurement date).

The discount rate used to measure the Total Pension Liability as of June 30, 2022 was 7.20%.

The projection of cash flows used to determine the discount rate assumed that plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2021 actuarial valuation. That policy includes contributions equal to the employer portion of the entry age normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

Key Actuarial Assumptions
Valuation Date June 30, 2020 updated to June 30, 2021
Measurement Date June 30, 2021
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.40% net of investment expenses Municipal Bond Yield 2.21% as of June 30, 2020

2.16% as of June 30, 2021
Bond Buyer 20-Bond GO Index, June 25, 2020 and June 24, 2021 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based on employee classification and years of service Discount Rate 7.40% as of June 30, 2020

7.40% as of June 30, 2021
Administrative Expenses 0.60% of payroll as of June 30, 2020

0.60% of payroll as of June 30, 2021
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire,
Charters A8.595
and A8.596
Old Police & Fire,
Charters A8.559
and A8.585
June 30, 2020 2.00% 2.50% 3.10% 4.20%
June 30, 2021 2.00% 1.90% 2.50% 3.60%
SFERS Plan

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

77 (Continued)

The amortization payment is based on closed periods that vary in length depending on the source. Charter amendments prior to July 1, 2014 are amortized over 20 years. After July 1, 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member benefits, including Supplemental COLAs, are amortized over 5 years. The remaining unfunded actuarial liability not attributable to Charter amendments as of July 1, 2013 is amortized over a 19 -year period commencing July 1, 2014. Experience gains and losses and assumption or method changes on or after July 1, 2014 are amortized over 20 years. The full amortization payment for the 2015 assumption changes is phased in over a p eriod of 5 years.

For the July 1, 2016 valuation, the increase in the unfunded actuarial liability attributable to the Supplemental COLAs granted on July 1, 2013 and July 1, 2014 are amortized over 17-years and 5-years respectively. All amortization schedu les are established as a level percentage of payroll so payments increase 3.25% each year. The unfunded actuarial liability is based on an actuarial value of assets that smooths investment gains and losses over five years and a measurement of the actuarial liability that excludes the value of any future Supplemental COLAs.

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

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

Because the probability of a Supplemental COLA depends on the current funded level of the Retirement System for certain members, an assumption was developed as of June 30, 2022 for the probability and amount of Supplemental COLA for each future year. A full Supplemental COLA will be paid to all retired members, and their beneficiaries, who were retired effective July 1, 2022. The table below shows the net assumed Supplemental COLA for members with a

2.00% Basic COLA for sample years.

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

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

Projected benefit payments are discounted at the long-term expected return on assets of 7.20% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 3.54% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2022 is 7.20%.

Assumed Supplemental COLA for Members with a 2.00% Basic COLA Fiscal years
2024 0.75 % 0.70 %
2025 0.75 0.60
2026 0.75 0.60
2027+ 0.75 0.50
96 - Prop C
Before 11/6/96
or After Prop C

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

78 (Continued)

The long-term expected rate of return on pension plan investments was 7.20%. It was set by the Retirement Board after consideration of both expected future returns and historical returns experienced by the Retirement System. Expected future returns were determined by using a building-block method in which best-estimate ranges of expected future real rates of return were developed for each major asset class. These ranges were combined to produce the long -term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Target allocation and best estimates of geometric long-term expected real rates of return (net of pension plan investment expense and inflation) for each major asset class are summarized in the following table.

Fiscal Year 2022

SFERS Plan – The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of June 30, 2021 (measurement date) and June 30, 20 20 (measurement date).

The discount rate used to measure the Total Pension Liability as of June 30, 2021 was 7.40%.

The projection of cash flows used to determine the discount rate assumed that plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2020 actuarial valuation. That policy includes contributions equal to the employer portion of the entry age normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

The amortization payment is based on closed periods that vary in length depending on the source. Charter amendments p rior to July 1, 2014 are amortized over 20 years. After July 1, 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member benefits, including Supplemental COLAs, are amortized over 5 years. The remaining unfunded actuarial liability not attributable to Charter amendments as of July 1, 2013 is amortized over a 19 -year period commencing July 1, 2014. Experience gains and losses and assumption or method changes on or after July 1, 2014 are amortized over 20 years. The full amortization payment for the 2015 assumption changes is phased in over a period of 5 years.

For the July 1, 2016 valuation, the increase in the unfunded actuarial liability attributable to the Supplemental COLAs granted on July 1, 2013 and July 1, 2014 are amortized over 17-years and 5-years respectively. All amortization schedules are established as a level percentage of payroll so payments increase 3.25% each year. The unfunded actuarial liability is based on an actuarial value of assets that smooths investment gains and losses over five years and a measurement of the actuarial liability that excludes the value of any future Supplemental COLAs.

Asset Class
Target
Allocation
Long-Term Expected Real
Rate of Return
Global Equity 37.0 % 4.8 % Private Equity 23.0 7.9
Private Credit 10.0 5.8
Real Assets 10.0 4.7
Hedge Funds/Absolute Return 10.0 3.4
Treasuries 8.0 0.6
Liquid Credit 5.0 3.5
Leverage (3.0) 0.6
Total 100.0

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

79 (Continued)

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

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

Because the probability of a Supplemental COLA depends on the current funded lev el of the Retirement System for certain members, an assumption was developed as of June 30, 2021 for the probability and amount of Supplemental COLA for each future year. A full Supplemental COLA will be paid to all retired members, and their beneficiaries, who were retired effective July 1, 2021.

The table below shows the net assumed Supplemental COLA for members with a 2.00% Basic COLA for sample years.

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

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

Projected benefit payments are discounted at the long-term expected return on assets of 7.40% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 2.16% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2021 is 7.40%.

The long-term expected rate of return on pension plan investments was 7.40%. It was set by the Retirement Board after consideration of both expected future returns and historical returns experienced by the Retirement System. Expected future returns were determined by using a building-block method in which best-estimate ranges of expected future real rates of return were developed for each major asset class. These ran ges were combined to produce the long -term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Fiscal years
2023 0.75 % 0.70 %
2025 0.75 0.70
2027 0.75 0.60
2029 0.75 0.60
2031 0.75 0.60
2033+ 0.75 0.50
96 - Prop C
Before 11/6/96
or After Prop C

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

80 (Continued)

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

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

The following presents Hetch Hetchy’s allocation of the employer’s proportionate share of the net pension liability/ (asset) for the SFERS Plan, calculated using the discount rate, as well as what Hetch Hetchy’s allocation of the employer’s proportionate s hare of the net pension (asset)/liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.

(b) Other Post-Employment Benefits

Hetch Hetchy participates in a single-employer defined benefit other post-employment plan (the Plan). The Plan is maintained by the City and is administered through the City’s Health Service System. It provides post -employment medical, dental and vision insurance benefits to eligible employees, retired employees, surviving spouses, and domestic partners. 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.

Asset Class
Target
Allocation
Long-Term Expected Real
Rate of Return
Global Equity 37.0 % 4.2 % Private Equity 23.0 7.9
Private Credit 10.0 5.1
Real Assets 10.0 5.1
Hedge Funds/Absolute Returns 10.0 2.9
Treasuries 8.0 0.0
Liquid Credit 5.0 2.3
Leverage (3.0) 0.1
Total 100.0
Hetchy Hetchy
Fiscal Year 2023 Water Powe r CleanPowerSF Total
$ 38,624 47,207 5,817 91,648
14,105 17,239 2, 124 33,468
(6,108) (7,466) (920) (14,494) Hetchy Hetchy
Fiscal Year 2022 Water Powe r CleanPowerSF Total
$ 9,272 11,333 1,221 21,826
(13,912) (17,004) (1,833) (32,749)
(33,053) (40,398) (4,354) (77,805)
1% Decrease Share of NPL @ 6.20%
Share of NPL @ 7.20%
1% Increase Share of NPA @ 8.20%
1% Decrease Share of NPL @ 6.40%
Share of NPA @ 7.40%
1% Increase Share of NPA @ 8.40%

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

81 (Continued)

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

Hetch Hetchy’s proportionate share percentage of the Plan was determined based on its percentage of citywide “pay -as-you-go” contributions for the year s ended June 30, 2022 and June 30, 2021. Hetch Hetchy’s net OPEB liability, deferred outflows/inflows of resources related to OPEB, amortization of deferred outflows/inflows and OPEB expense to each department is based on its allocated percentage. Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.98%, of which 0.40% for Hetchy Water, 0.47% for Hetchy Power, and 0.11% for CleanPowerSF as of June 30, 2022 (measurement date). Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.92%, of which 0.39% for Hetchy Water, 0.47% for Hetchy Power, and 0.06% for CleanPowerSF as of June 30, 2021 (measurement date).

Benefits

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

Normal Retirement Miscellaneous Age 50 with 20 years of credited service1 Age 60 with 10 years of credited service
Safety Age 50 with 5 years of credited service
Disabled Retirement2 Any age with 10 years of credited service Terminated Vested 5 years of credited service at separation

1 Age 53 with 20 years of credited service, age 60 with 10 years of credited service, or age 65 for Miscellaneous members hired on or after January 7, 2012 under Charter Section 8.603. 2 No service requirement for Safety members retiring under the industrial disability benefit or for surviving spouses/domestic partners of those killed in the line of duty.

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

Medical: PPO – Blue Shield (self-insured) and UHC Medicare Advantage (fully-insured) HMO – Kaiser (fully-insured) and Blue Shield (flex-funded) and Health Net (flex-funded) Dental: Delta Dental, DeltaCare USA and United Healthcare Dental Vision: Vision benefits are provided under the medical insurance plans and are administered by Vision Service Plan.

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

Fiscal Year 2023 Fiscal Year 2022
Valuation Date (VD) Jun e 30, 2022 June 30, 2020 updated to June 30, 2021 Measurement Date (MD) June 30, 2022 June 30, 2021
Measurement Period (MP) July 1, 2021 to June 30, 2022 July 1, 2020 to June 30, 2021 San Francisco Health Service System Retiree Plan - Single-Employer

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

82 (Continued)

Contributions

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

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

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

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

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

Fiscal Year 2023

For the fiscal year ended June 30, 2023, the City’s funding was based on “pay as you go” plus a contribution of $45,241 to the Retiree Healthcare Trust Fund. The “pay as you go” portion paid by the City was $215,408 for a total contribution of $260,649 for the fiscal year ended June 30, 2023. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 2023 were $2,588: $1,038 for Hetchy Water, $1 ,268 for Hetchy Power, and $ 282 for CleanPowerSF and will be recognized as a reduction of the net OPEB liability in the subsequent fiscal period.

Fiscal Year 2022

For the fiscal year ended June 30, 2022, the City’s funding was based on “pay as you go” plus a contribution of $41,841 to the Retiree Healthcare Trust Fund. The “pay as you go” portion paid by the City was $211,025 for a total contribution of $252,866 for the fiscal year ended June 30, 2022. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 2022 were $2,322: $975 for Hetchy Water, $1,192 for Hetchy Power, and $155 for CleanPowerSF and will be recognized as a reduction of the net OPEB liability in the subsequent fiscal period.

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

Fiscal Year 2023

As of June 30, 2023, the City reported net OPEB liabilities related to the Plan of $3, 746,270.

Hetch Hetchy’s proportionate share of the City’s net OPEB liability as of June 30, 2023 was $37,180: $14,907 for Hetchy Water, $18,220 for Hetchy Power, and $4,053 for CleanPowerSF.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

83 (Continued)

For the year ended June 30, 2023, the City’s recognized OPEB expense was $256,974.

Amortization of the City’s deferred outflows and inflows is included as a component of OPEB expense. Hetch Hetchy’s proportionate share of the City’s OPEB expense was $ 7,804: $2,078 for Hetchy Water and $2,540 for Hetchy Power, and $3,186 for CleanPowerSF.

As of June 30, 2023, Hetch Hetchy reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

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

Fiscal Year 2022

As of June 30, 2022, the City reported net OPEB liabilities related t o the Plan of $ 3,691,122.

Hetch Hetchy’s proportionate share of the City’s net OPEB liability as of June 30, 2022 was $33,909: $14,240 for Hetchy Water, $17,405 for Hetchy Power, and $2,264 for CleanPowerSF.

For the year ended June 30, 2022, the City’s recognized OPEB expense was $272,001 .

Amortization of the City’s deferred outflows and inflows is included as a component of OPEB expense. Hetch Hetchy’s proportionate share of the City’s OPEB expense was $3,002: $1,874 for Hetchy Water and $2,291 for Hetchy Power, offset by a decrease of $1,163 expense for CleanPowerSF.

Hetchy Hetchy Hetchy Hetchy
Water Power CleanPowerSF Total Water Power CleanPowerSF Total Contributions subsequent to measurement date $ 1,038   1,268   282   2,588   —   —   —   — Differences between expected and actual
experience 331   404   90   825   2,482   3,033   675   6,190 Changes in assumptions 636   778   173   1,587   —   —   —   — Net difference between projected and actual
earnings on plan investments
240   293   65   598   —   —   —   —
Change in proportion 1,003   1,226   399   2,628   602   736   2,247   3,585 Total $ 3,248 3,969 1,009 8,226 3,084 3,769 2,922 9,775 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2024 $ (193) (236) (527) (956) 2025 (189) (231) (526) (946) 2026 (39) (48) (485) (572) 2027 (130) (159) (384) (673) Thereafter (323) (394) (273) (990) Total $ (874) (1,068) (2,195) (4,137) Deferred Outflows/(Inflows) of Resources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

84 (Continued)

As of June 30, 2022, Hetch Hetchy reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

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

Hetchy Hetchy Hetchy Hetchy
Water Power CleanPowerSF Total Water Power CleanPowerSF Total Contributions subsequent to measurement date $ 975   1,192   155   2,322   —   —   —   — Differences between expected and actual
experience 428   523   68   1,019   2,193   2,680   348   5,221 Changes in assumptions 602   735   96   1,433   —   —   —   — Net difference between projected and actual
earnings on plan investments
—   —   —   —   269   329   43   641
Change in proportion 1,267   1,549   479   3,295   272   333   1,203   1,808 Total $ 3,272 3,999 798 8,069 2,734 3,342 1,594 7,670 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2023 $ (105) (128) (264) (497) 2024 (106) (130) (264) (500) 2025 (103) (125) (264) (492) 2026 46 57 (167) (64) 2027 (43) (53) (59) (155) Thereafter (126) (156) 67 (215) Total $ (437) (535) (951) (1,923) Deferred Outflows/(Inflows) of Resources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

85 (Continued)

Actuarial Assumptions

Fiscal Year 2023

A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2022 (measurement date) is provided below:

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

Key Actuarial Assumptions
Valuation Date June 30, 2022
Measurement Date June 30, 2022
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 7.74% trending down to ultimate rate of 3.93% in 2076 Medicare trend starts at 7.74% trending down to ultimate rate of 3.94% in 2076 10-County average trend starts at 5.00% trending down to ultimate rate of 3.94% in 2076 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

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

Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

86 (Continued)

Fiscal Year 2022

A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2021 (measurement date) is provided below:

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

Key Actuarial Assumptions
Valuation Date June 30, 2020, updated to June 30, 2021
Measurement Date June 30, 2021
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 6.74% trending down to ultimate rate of 4.04% in 2075 Medicare trend starts at 7.24% trending down to ultimate rate of 4.04% in 2075 10-County average trend starts at 5.50% trending down to ultimate rate of 4.04% in 2075 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

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

Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

87 (Continued)

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

The following presents Hetch Hetchy’s proportionate share of the City’s net OPEB liability calculated using the healthcare cost trend rate, as well as what its allocation of the City’s net OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1% lower or 1% higher than the current rate as of June 30, 2023 and June 30, 2022:

Discount Rate

Fiscal Year 2023

The discount rate used to measure the Total OPEB Liability as of June 30, 2022 was 7.00%.

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

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

Hetchy Hetchy
Water Power CleanPowerSF 2023
1% Decrease $ 12,753 15,586 3,467   31,806
Healthcare Trend 14,907 18,220 4,053   37,180
1% Increase 17,579 21,486 4,779   43,844
Hetchy Hetchy
Water Power CleanPowerSF 2022
1% Decrease $ 12,121 14,814 1,927   28,862
Healthcare Trend 14,240 17,405 2,264   33,909
1% Increase 16,882 20,634 2,685   40,201

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

88 (Continued)

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

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

Fiscal Year 2022

The discount rate used to measure the Total OPEB Liability as of June 30, 2021 was 7. 00%.

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

The long-term expected rate of return on OPEB plan investments was 7. 00% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation.

Asset Class
Target
Allocation
Long-term
Expected Real
Rate of Return
Equities
U.S. Large Cap 28.0 % 6 .8 % U.S. Small Cap 3.0 7.4
Developed Market Equity (non-U.S.) 15.0 7.5
Emerging Market Equity 13.0 8.4
Credit
Bank Loans 3.0 4.0
High Yield Bonds 3.0 4.4
Emerging Market Bonds 3.0 4.2
Rate Securities
Investment Grade Bonds 9.0 2.4
Long-term Government Bonds 4.0 2.8
Short-term Treasury Inflation-Protected Securities (TIPS) 4.0 1.9 Private Markets
Private Equity 5.0 10.0
Core Private Real Estate 5.0 6.1
Risk Mitigating Strategies
Global Macro 5.0 5.0
Total 100.0 %
Hetchy Hetchy
Water Power Cle anPowerSF Total
1% Decrease 6.00% $ 17,355 21, 211 4,718   43,284
Discount Rate 7.00% 14,907 18,220 4,053   37,180
1% Increase 8.00% 12,899 15,765 3,507   32,171

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

89 (Continued)

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

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

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

(13) Related Parties

(a) Hetch Hetchy
Various common costs incurred by the SFPUC are allocated among Hetch Hetchy, Water, and Wastewater Enterprises. The allocations are based on the SFPUC management’s best estimate and may change from year to year depending on the activities incurred by each Enterprise and the information available. For the year s ended June 30, 202 3 and 2022, the SFPUC allocated $26,362 or 23.1% and $22,221 or 20.7% respectively, in administrative costs including COVID- 19 Project expenses, which is presented in the financial statements under various expense categories. These costs are then allocated to Hetchy Water, Hetchy Power, and CleanPowerSF in Asset Class Target Allocation
Long-term
Expected Real
Rate of Return
Equities
U.S. Large Cap 28.0 % 8.2 % U.S. Small Cap 3.0 9.5
Developed Market Equity (non-U.S.) 15.0 8.9 Emerging Market Equity 13.0 11.0 Credit
Bank Loans 3.0 4.4
High Yield Bonds 3.0 4.4
Emerging Market Bonds 3.0 4.3 Rate Securities
Investment Grade Bonds 9.0 1.9 Long-term Government Bonds 4.0 3.2 Short-term Treasury Inflation-Protected Securities (TIPS) 4.0 1.5 Private Markets
Private Equity 5.0 13.0
Core Private Real Estate 5.0 6.2 Risk Mitigating Strategies
Global Macro 5.0 4.4
Total 100.0 %
Hetchy Hetchy
Water Power CleanPowerSF Total
1% Decrease 6.00% $ 16,652 20,352 2,648   39,652
Discount Rate 7.00% 14,240 17,405 2,264   33,909
1% Increase 8.00% 12,271 14,997 1,951   29,219

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

90 (Continued)

the Hetch Hetchy f inancial statements, using the periodically reviewed department overhead allocation model.

The City performs certain administrative services such as maintenance of accounting records and investment of cash for all fund groups within the City. The various funds are charged for these services based on the City’s indirect cost allocation plan. Some City departments provide direct services such as engineering, purchasing, legal, data processing, telecommunication, and human resources to Hetch Hetchy and charge amounts designed to recover those departments’ costs. These charges totaling approximately $16,368 and $13,003 for the years ended June 30, 2023 and 2022, respectively, have been included in services provided by other departments in the accompanying financial statements.

SFPUC’s 75-year lease agreement with the San Francisco Recreation and Parks Department, for the use of parking spaces for its fleet of vehicles at the Civic Center Garage, commenced on February 1, 2011. Total payment under this agreement is $6,274, which was fully made as of fiscal year 2015. The expenses and prepayments among the three SFPUC Enterprises are based on 525 Golden Gate occupancy. As of June 30, 2023 , Hetch Hetchy’s allocable shares of expenses and prepayment were $17 and $ 887, respectively, and as of June 30, 2022 were $18 and $904, respectively.

(b) Hetchy Water
For the years ended June 30, 202 3 and 2022, the SFPUC allocated $11,778 or 10.3% , and $10,886 or 10.2%, respectively, in administrative costs including COVID-19 Project expense to Hetchy Water.

The Water Enterprise purchases water from Hetchy Water. Included in the operating revenues are the water assessment fees of $49,636 and $45,815 for the years ended J une 30, 2023 and 2022, respectively. The water assessment fees represent a recovery to fund upcountry, water-related costs that are not otherwise funded through Hetchy water -related revenue or Water revenue bonds.

Hetchy Water received $ 20,000 and $30,001 for the years ended June 30, 2023 and 2022, respectively, from the Water Enterprise to fund upcountry projects.

(c) Hetchy Power
For the years ended June 30, 2023 and 2022, the SFPUC allocated $9,452 or 8.3% , and $8,820 or 8.2% respectively, in administrative costs including COVID -19 Project expense to Hetchy Power.

For the years ended June 30, 202 3 and 2022, operating revenues in sales of power to departments within the City were $121,046 and $116,334, respectively.

The Water Enterprise also purchases electricity and gas from Hetchy Power. This amount totaled $11,398 and $11,394 for the years ended June 30, 2023 and 2022, respectively.

The Wastewater Enterprise purchases electricity and gas from Hetchy Power. This amount totaled $14,876 and $11,887 for the years ended June 30, 2023 and 2022, respectively.

The Low Carbon Fuel Standard (LCFS) program , overseen by the California Air Resources Board (CARB), seeks to reduce the carbon intensity of California’s transportation fuel. Trans portation

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

91 (Continued)

fuel suppliers can achieve this goal by either reducing the carbon intensity of their fuels or purchasing LCFS credits from other fuel suppliers that have a lower carbon intensity. In 2017, the San Francisco Municipal Transportation Agency (SFMTA ) joined the LCFS program, signing up its transit fleet of electric buses, cable cars, and light rail vehicles and generating LCFS credits. Through a Memorandum of Understanding (MOU) with SFMTA, approved by the SFPUC Commission in Resolution 17 -0199, net proceeds from the sale of LCFS credits would be shared 50/50 between SFMTA and Hetchy Power. In Ordinance 0199- 19, the Board of Supervisors authorized Hetchy Power to establish the Low Carbon Fuel Standard Fund to account for the revenue and expenditure fr om the credit sales . The Ordinance also allowed Hetchy Power to sell LCFS credits on behalf of other City agencies. During the fiscal years ended June 30, 2023 and 2022, Hetchy Power received total payments of LCFS credits attributable to SFMTA of $1,123 and $2,367, respectively. Among these amounts, $561 in fiscal year 2023 and $1,184 in fiscal year 2022, respectively, were transferred to SFMTA, and the remaining portion was reported as other non -operating reve nues on the Statements of Revenues, Expenses, and Change in Net Position.

In fiscal year 2023, municipal customers entering into an LCFS Partnership Agreement will pay for premium charges. The Port of San Francisco (Port) started earning its own LCFS cred its on January 1, 2022, through the provision of shoreside power to docked ships . Hetchy Power has subsequently started selling the Port’s LCFS credits in fiscal year 2023 and recognized $32 revenues from credit sales. Total of $210 was transferred to Port for fiscal year 2023.

Due from other City departments was $ 11,486 and $11,804 as of June 30, 2023 and 2022, respectively. Hetchy Power serves as the City’s department for energy efficiency projects and maintains the Sustainable Energy Account (SEA) (formerly known as the Mayor’s Energy Conservation Account) fund to sponsor and financially support such projects at various City departments. In this role, Hetchy Power may secure low -interest financing to supplement funds available in the SEA fund. At June 30, 2023 and 2022, projects completed or under way throughout the City amounted to $ 3,544 and $4,050, respectiv ely and are recorded as due from other City Departments.

Hetch Hetchy funded a project for the Treasure Island Development Authority and recorded receivables in connection with an upgraded submarine power cable, and gas and electrical charges for the Treasure Island as due from other City departments . This amount totaled $7,177 and $6,666 for the years ended June 30, 2023 and 2022, respectively.

As of June 30 , 2023 and 2022, Hetchy Power recorded receivables of $518 and $629, respectively, due from Wastewater Enterprise for its share of costs relating to SFPUC Headquarters Living Machine System. Details of due from other City departments are as follows:

2023 2022
Treasure Island Development Authority $ 7,177 6,666
SEA-related project: Moscone Center 3,544 4,050
Wastewater - 525 Golden Gate Headquarters Project 518 629 San Francisco Recreation and Park 209 314
Department of Public Works 38 145
Total due from other City departments 11,486 11,804
Less: current portion (1,134) (867)
Long-term portion as of June 30, net $ 10,352 10,937

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

92 (Continued)

As of June 30, 2023, Hetchy Power had payables in the amount of $1,946 for claim settlement reimbursement to SFMTA. As of June 30, 2022, Hetchy Power had payable s in the amount of $380, of which $369 to the Port for Pier 70 Shoreside Power Project and $11 to the Department of Public Works for painting of light poles.

(d) CleanPowerSF
For the years ended June 30, 2023 and 2022, the SFPUC allocated $ 5,132 or 4.5%, and $2,515 or 2.4%, respectively, in administrative costs to CleanPowerSF.

As of June 30, 2023, and 202 2, operating revenue in sales of power to Hetchy Power were $1,549 and $2,332, respectively. Operating expenses in purchase of power from Hetchy Power were $ 5,846 and $1,589, respectively. Wholesale sales of energy, capacity and/or other electric power related products may be made between the CleanPowerSF and Hetchy Power, when available. CleanPowerSF and Hetchy Power transact for such produ cts at prevailing market prices.

CleanPowerSF received program support services from Hetchy Power. This amount totaled $2,850 and $1,861 for the years ended June 30, 2023 and 2022, respectively.

(14) Risk Management

The Enterprise’s Risk Management program includes both self -insured (i.e., self -retention) and insured exposures at risk. Risk assessments and purchasing of insurance coverage are collaboratively coordinated by SFPUC Enterprise Risk Management and the City’s Office of Risk Management. With certain exceptions, the City and the Enterprise’s general approach is to first evaluate the exposure at risk for self -insurance. Based on this analysis, internal mitigation strategies and financing through a self-retention mechanism are generally more economica l, as the SFPUC in coordination with the City Attorney’s Office administers, adjusts, settles, defends, and pays claims from budgeted resources (i.e., pay -as-you-go fund). When economically more viable or when required by debt financing covenants, the Enterprise obtains commercial insurance. At least annually, the City actuarially determines general liability and workers’ compensation risk exposures. The Enterprise does not maintain commercial earthquake coverage, with certain minor exceptions, such as a sub-limit for fire- sprinkler leakage due to earthquake under the SFPUC Property Insurance Program. In the past three years, there was no settlements that exceeded insurance coverage.

Risk Coverage Approach
(a) General Liability Self-Insured
(b) Workers’ Compensation Self-Insured through Citywide Pool (c) Property Purchased Insurance and Self-Insured
(d) Public Officials Liability Purchased Insurance
(e) Employment Practices Liability Purchased Insurance
(f) Cyber Liability Purchased Insurance
(g) Crime Purchased Insurance
(h) Electronic Data Processing Purchased Insurance and Self-Insured (i) Surety Bonds Purchased and Contractual Risk Transfer (j) Errors and Omissions Purchased and Contractual Risk Transfer (k) Builders’ Risk Contractual Risk Transfer

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

93 (Continued)

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

The changes for the general liability (damage claims) for the years ended June 30, 2023 and 2022 are as follows:

(b) Workers’ Compensation
The City actuarially determines and allocates workers’ compensation costs to the Enterprise according to a formula based on the following: (i) the dollar amount of claims; (ii) yearly projections of payments based on historical experience; and (iii) the size of the Enterprise’ s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent ye ars. The City continues to develop and implement improved programs, such as return -to-work programs, to lower or mitigate the growth of workers’ compensation costs. Programs include accident prevention, investigation, and duty modification for injured empl oyees with medical restrictions so return to work can occur as soon as possible.

Beginning Claims and changes Claims End of
Fiscal years of ye ar in estimates paid year
Hetch Hetchy
1,682$ 12,497   (7,295) 6,884
1,639 3,840   (3,797) 1,682
Hetchy Water
627$ 320   (247) 700
525 253   (151) 627
Hetchy Power
1,023$ 10,439   ( 5,312) 6,150
1,108 2,005   (2,090) 1,023
CleanPowerSF
32$ 1,738   (1,736) 34
6 1,582   (1,556) 32 2022 2023
2023
2023
2023
2022
2022
2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

94 (Continued)

The changes for the workers’ compensation liabilities for the years ended June 30, 2023 and 2022 are as follows:

*CleanPowerSF had no workers’ compensation liabilities as of June 30, 2023 and 2022.

(c) Property
The Enterprise’s property risk management approach varies depending on whether the facility is currently under construction, the property is part of revenue -generating operations, the property is of high value, or is mission-critical in nature. During the course of construction, the Enterprise requires each contractor to provide its own insurance, while ensuring the full scope of work is covered with satisfactory levels to limit the Enterprise’s risk exposure. Once construction is complete, the Enterprise performs an assessment to determine whether liability/loss coverage will be obtained through the commercial property policy or self -insurance. The majority of property scheduled in the insurance program is for (1) revenue generating facilities, (2) debt - financed facilities, (3) mandated coverage to meet statutory requirements for bonding of various public officials, or (4) high-value, mission-critical property or equipment.

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

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

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

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

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

Beginning Claims and changes End of
Fiscal years of year Claims in estimates year
Hetch Hetchy
3,478$ 300   (321) 3,457
3,238 555   (315) 3,478
Hetchy Water
1,228$ 76   (85) 1,219
1,120 233   (125) 1,228
Hetchy Power
2,250$ 224   (236) 2,238
2,118 322   (190) 2,250
2023
2022
2023
2022
2023
2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

95 (Continued)

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

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

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

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

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

(15) Commitments and Litigation

(a) Commitments
As of June 30, 202 3 and 2022, Hetch Hetchy has outstanding commitments with third parties of $136,322 and $199,283, respectively, for various capital projects and other purchase agreements for materials and services.

Hetchy Water

To meet certain requirements of the Don Pedro Reservoir operating license, the City entered into an agreement with the Modesto Irrigation District (MID) and Turlock Irrigation District (TID) in which the Districts would be responsible for an increase in water flow releases from the reservoir in exchange fo r annual payments from the City, which are included in Hetchy Water’s

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

96 (Continued)

operating expenses. The payment amounts were $5, 329 and $5,129 for fiscal years 2023 and 2022, respectively. The payments are to be made for the duration of the license, but may be terminated with one year’s prior written notice after 2001. The City and the Districts have also agreed to monitor the fisheries in the lower Tuolumne River for the duration of the license. A maximum monitoring expense of $1,400 is to be shared between the City and the Districts over the term of the license. The City’s share of the monitoring costs is 52%, while the Districts are responsible for 48% of the costs.

Hetchy Power

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

Upon expiration of the City’s previous Interconnection Agreement with PG&E, the City beg an taking service in 2015 under the WDT for distribution service and under the CAISO Open-Access Transmission Tariff for transmission service. The FERC-regulated Wholesale Distribution Tariff is implemented by PG&E through the City specific Service Agreements and Interconnection Agreements. The terms of these agreements have been in contention since the effective date.

The City continues to negotiate with PG&E and, where necessary, file complaints and protests at FERC. In September 2020, PG&E filed a revised WDT. Under the terms of the new WDT, the City would pay substantially higher rates, at least twice to potentially four times the current charges, and be required to install costly and inefficient equipment not needed for technical, safety or reliability of operations. In addition, Hetchy Power would no longer be allowed to connect to the “network” grid in the center of San Francisco; have new secondary interconnections; and/or serve any small, typically unmetered loads, such as streetlights, Distributed Antenna System (DAS), traffic signals, and bus shelters.

Staff prepare regular reporting to the Board of Supervisors outlining on -going disputes with PG&E over project requirements, costs and delays. During fiscal years 202 3 and 2022, Hetchy Power purchased distribution services for $ 29,008 and $22,404, respectively, from PG&E under the terms of the Service Agreements and Interconnection Agreements that implement the WDT. The City continues to litigate and dispute these terms at FERC and in the court systems; and pursue the purchase of PG&E’s electric grid in San Francisco.

Western System Power Pool and other Market Purchases and Sales

Hetchy Power may purchase or sell energy and other related products (such as ancillary services, spinning reserves, resource adequacy products, and congestion revenue rights) with different market entities through the Western System Power Pool (WSPP) and the CAISO. Du ring fiscal years 2023 and 2022, Hetchy Power purchased $3,676 and $4,152 of power and other related products, respectively. Sales of excess power, after meeting Hetch Hetchy’s obligations, were $1,157 or 155,000 MWh for 2023 and $0 for 2022, respectively.

Power Purchase Agreement (PPA)

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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

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The PPA sets the starting purchase price of generated energy at $ 235/MWh, increasing by 3% each year throughout the term of the agreement, and it is expected that the facility will generate 6,560 MWh per year. In fiscal year 2023 , the facility generated 6,006 MWh and the rate was at $344/MWh. In the event that the facility generates more energy tha n expected due to better than normal meteorological conditions, the PPA requires the Buyer to purchase all the excess energy but generation in excess of 120% of expected is purchased at no cost. The PPA also requires the Seller to generate a minimum amount of energy from the facility annually. If energy production falls below 50% of expected, the Seller must provide replacement power, and if energy falls below 90% of expected, the price for energy generated is lowered. In fiscal years 2023 and 2022, purchases of energy under the Agreement were $2,037, or 6,006 MWh, and $2,225, or 6,460 MWh, respectively.

APX, Inc

Hetchy Power and CleanPowerSF participate in the CAISO energy markets which requires the SFPUC to have a contract with a certified Scheduling Coordinator (SC). In June 2022, CleanPowerSF renewed a 5-year contract with APX, Inc with contract amount not to e xceed $134,743 to fulfill this requirement. APX, Inc provides a number of services including but not limited to an interface with the CAISO’s energy scheduling portal, manage invoice payments to the CAISO and communications between the CAISO and the SFPUC, and dispatch of the Hetch Hetchy plant 24 hours a day, seven days a week. The contract also provides that APX, Inc will act as the SC for renewable generation plants under some of CleanPowerSF’s Power Purchase Agreements. Hetchy Power’s share was $ 471 and $456 as of June 30, 2023 and 2022, respectively. CleanPowerSF’s share was $226 and $192 as of June 30, 2023 and 2022.

On January 6, 2023, Amendment No. 1 was requested and approved to increase this contact by $125,000, increasing the total contract to $ 259,743, with no change to the agreement duration. On March 17, 2023, Amendment No. 2, was approved to increase the contract by $636,000 for a total not to exceed contract amount of $895,74 3, with no change to the agreement duration. The drive rs for these Amendments were higher than anticipated p ower prices, due to extreme weather, draught conditions, and global energy shortages.

CleanPowerSF

CleanPowerSF regularly adds new short-term and medium-term contracts with multiple counterparties pursuant to master agreements, including the WSPP Master Agreement, to purchase renewable, carbon-free and conventional energy and resource adequacy capacity.

CleanPowerSF has also entered into long-term contracts for renewable energy and capacity with renewable energy developers including sPower, Terra -Gen, NextEra , Intersect Power and EDF Renewables. These contracts have been entered to allow CleanPowerSF to meet its existing retail sales obligations, to support future retail sales from anticipated load growth , and to comply with State requirement that 65% of CleanPowerSF’s Renewables Portfolio Standard (RPS) compliance targets be fulfilled by RPS -eligible electricity from contracts of 10 o r more years. Citywide enrollment was completed in 2020. Since it began serving customers in 2016 , CleanPowerSF’s cumulative opt -out rate is 4. 4% of all enrolled accounts. The total power purchase cost, net of wholesale sales, were $259,532 and $238,149 in fiscal years 2023 and 2022, respectively.

CleanPowerSF contracts with Calpine Energy Solutions to provide meter data management, billing a nd customer care support. Calpine is responsible for calculating and providing CleanPowerSF charges to PG&E, which in turn bills both CleanPowerSF and PG&E customers for

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

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electricity transmission, distribution , and CleanPowerSF generation services. PG&E rem its payments received from customers for CleanPowerSF charges to the City. During fiscal years 2023 and 2022, amounts paid were $4,679 and $4,730, respectively.

CleanPowerSF Power Purchase Agreement (PPA)

In November 2020, CleanPowerSF executed a Power and Storage Purchase Agreement to purchase solar product and storage product from a solar powered generation facility and battery storage facility located at Livermore pursuant to the 25-year PPA with IP Aramis, LLC (Seller). As of June 30, 2022, CleanPowerSF has cash collateral of $9,000 for Development Assurance and Performance Assurance from the Seller . The $9,000 cash collateral was returned to the seller as of June 30, 2023.

CleanPowerSF Guarantee

In March 2018, CleanPowerSF entered into a five -year, $75,000 Credit Agreement with JPMorgan Chase Bank, National Association (“Bank”) to provide letters of credit or loans from the Bank to guarantee certain power purchase agreement payment obligations of CleanPowerSF and to meet working capital needs, if necessary. In November 2021 the Credit Agreement was decreased (at the request of CleanPowerSF) the available amount from $75,000 to $20,000, and the stated term of the agreement was extended to March 2024.

Additional changes to the agreement effected by the November 2021 Amendments include elimination of target reserve requirements, revisions to debt service coverage (allowing for a liquidity test two times in the aggregate for any consecutive four quarter s) and rate -setting covenants, changes to ongoing reporting requirements to the Bank, and changes to events of default, including the addition of an event of default if CleanPowerSF’s long -term unenhanced credit rating is downgraded below investment grade or suspended, withdrawn or otherwise unavailable. In May 2022 CleanPowerSF executed another amendment to its Credit Agreement to eliminate and change certain financial covenants contained in the 2018 Credit Agreement.

Specifically, this Amendment eliminate d the covenant of the Commission to maintain a specified debt service coverage ratio and changed such financial covenant to commit the Commission to maintain a specified level of Day Liquidity on Hand (as defined in the Credit Agreement). The Credit Agreem ent is secured by CleanPowerSF’s net revenues; there is no pledge of, or lien on net revenues that ranks senior to the obligations under the Credit Agreement. The Bank issued letters of credit in the face amounts totaling $ 6,183 and $5,847 for fiscal years ending June 30, 2023 and 2022, respectively. CleanPowerSF did not draw on the Credit Agreement during fiscal years 202 3 and 2022. Accordingly, the uncommitted credit capacity under the Credit Agreement was $1 3,817 and $14,153 during fiscal years 2023 and 2022, respectively.

Original financial covenants include that CleanPowerSF maintain a Debt Service Coverage Ratio as defined in the Credit Agreement of not less than 1.05 for each fiscal quarter, as determined for the four consecutive fiscal quarter periods ended on the last day of such fiscal quarter. As of June 30, 2021, CleanPowerSF was not in compliance with this financial covenant as calculated for the four consecutive fiscal quarters ended on such date, resulting in a covenant event of default under the Credit Agreement. In connection with subsequent amendments to the Credit Agreement, JPMorgan Chase granted a waiver of such event of default for the period ended June 30, 2021. CleanPowerSF was in compliance with other covenants and requirements of the Credit Agreement as of June 30, 2021. CleanPowerSF was in compliance with all covenants and requirements of the Credit Agreement as amended as of June 30, 2023 and 2022.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)

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

Green Tariff and Community Solar Green Tariff Programs for Disadvantaged Communities

In June 2018. the CPUC established the Disadvantaged Communities-Green Tariff (DAC-GT) and Community Solar Green Tariff (CSGT) program to address barriers to solar adoption faced by low-income electric customers in neglected communities. The DAC -GT program provides a 20% rate discount on 100% RPS eligible electricity service to income-qualified customers residing in Disadvantaged Communities (DACs) as defined by the California Environmental Protection Agency’s (Cal EPA). Similar to DAC-GT, the CSGT program allows primarily for the DACs to benefit from the development of solar generation projects located in their own or nearby DACs. CSGT projects must also have a local community -based sponsor that supports site selection and customer enrollment.

The CPUC a pproved CleanPowerSF’s application to establish DAC -GT and CSGT programs in April 2021 and to receive funds to cover program administration and a portion of electricity supply costs. CleanPowerSF began enrolling customers in the DAC -GT program branded as “SuperGreen Saver” on June 1, 2022. The CSGT program is expected to start serving customers during fiscal year 2026, once CleanPowerSF is able to procure electricity from a CSGT -eligible solar project(s). As of June 30, 2023 and 2022, CleanPowerSF received $ 868 and $1,150, respectively, from a combination of ratepayer funds and California Cap and Trade Auction proceeds.

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

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

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

(16) Subsequent Event

Power Revenue Bonds, 2023 Series A Issuance
In October 2023, the SFPUC issued its San Francisco Power Revenue Bonds, 2023 Series A with a principal of $123,905 to finance or refinance Power Enterprise projects through the refunding and retirement of commercial paper issued as interim financing for such projects in furtherance of the Power Capital Improvement Program.

www.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Blvd., Suite 750
Walnut Creek, CA94596
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Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
Honorable Mayor and the Board of Supervisors
City and County of San Francisco, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contai ned in Government Auditing Standards issued by the Comptroller General of the United States ( Government Auditing Standards ), the financial statements of each major fund of Hetch Hetchy Water and Power and CleanPowerS F (Hetch Hetchy), an enterprise fund of the City and County of San Francisco (City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, and have issued our report thereon dated December 26, 2023.

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

Accordingly, we do not express an opinion on the effectiveness of Hetch Hetchy’s internal control.

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

Our consideration of internal c ontrol was for the limited purpo se described in the first paragraph of this section and was not designed to i dentify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations , during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether Hetch Hetchy’s financial statements are free from material misstatement, we performed tests of its compliance wit h certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on complian ce with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
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Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. A ccordingly, this communication is not suitable for any other purpose.

Walnut Creek, California
December 26, 2023