Other non -operating expenses were $99 , a decrease of $ 128 or 56.4% mainly due to lower incentive payments for Electric Vehicle Charge Program . Capital contributions of $2 9,200 were for assets at Pier 70, Treasure Island, and Yerba Buena Island . Transfer out of $108 included $76 to General Fund for Public Power Expansion Project 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, 2024 increased by $51,552 or
9.9% compared to prior year.
CleanPowerSF
CleanPowerSF’s total revenues were $372,884 , a $ 44,204 or 13.4% increase over prior year (see Table 2D). Charges for services increased by $ 39,817 or 12.2% mainly due to increases of $38,403 in electricity sales to retail and commercial customers from 15.0% average rate increase and $3,606 in wholesale sales due to excess energy , offset by $2,192 in lower capacity sales to counter parties . Capacity sales are based on availability. Interest and investment income was $5,904 , an increase of $5,499 mainly due to unrealized gain in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates. Other non-operating revenue de creased by $1, 112 mainly due to $ 1,173 decrease in Federal CAPP grants which ended in prior year , offset by an increase of $ 61 in revenue mainly from Disadvantaged Communities (DAC) Programs.
Total operating expenses, excluding interest expenses and non- operating expenses were $311,518, an increase of $16,738 or 5.7% from prior year. P urchased electricity and transmission, distribution, and other power costs increased by $ 19,517 due to volatile and increased pricing in power market . Other increases included $490 in services provided by other departments mainly due to higher legal service charges from City Attorney’s Office and $3 in material and supplies mainly for minor data processing equipment. These increases were offset by decreases of $1,413 in personnel services due to lower OPEB obligations based on
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
22 (Continued)
actuarial reports, $739 in other operating expenses mainly due to recognition of grant expense related to CAPP in prior year, $552 in general and administrative expenses due to lower judgments and claims expenses, $315 in contractual services mainly due to lease termination at 544 Golden Gate, and $253 in depreciation and amortization related to fewer leases and subscription assets. Other non -operating expenses increased by $659 mainly due to rebates for the Electrify My Ride Program . Interest expenses decreased by $1 related to SBITAs.
As a result of the above activities, net position for the year ended June 30, 202 4 increased by $60,489 or
51.3% compared to prior year.
Result of Operations, Fiscal Year 2023
Hetch Hetchy
Hetch Hetchy’s total revenues were $605,044, an increase of $113,815 or 23.2% over prior year (see Table 2A). Charges for services increased by $ 102,996 or 21.4% from prior year’s revenues mainly due to higher billings from CleanPowerSF and Hetchy Power. Total expenses increased by $6 7,534 or 14.2% primarily from higher energy purchases due to volatile and increased pricing in power market. (See Table 2A).
Hetchy Water
Hetchy Water’s total revenues were $55,01 5, an increase of $8,15 6 or 17.4% from prior year’s revenues (see Table 2B). Increases included $3,370 in charges for services, $3,38 9 in interest and investment income, $1,382 in other non-operating revenues, and $15 in rents and concessions.
Charges for services were $ 52,570, an increase of $ 3,370 or 6.8% mainly due to increased water assessment fees from the Water Enterprise to fund upcountry water -related costs. Interest and investment income was $457, an increase of $3,38 9 mainly due to decrease in unrealized loss in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates . Other non-operating revenues were $1,861, an increase of $1,382 mainly due to increase of $1,177 in State grants revenue for the 2018 Moccasin Storm Project related to emergency repa irs, $200 revenue related to labor settlements, and $9 in overhead charges , offset by de creases of $ 3 in net gain from sale of fixed assets and $1 in miscellaneous revenue . Rents were $127 , an increase of $15 mainly due to higher collections from recreational rentals.
Total operating expenses, excluding interest expenses and other non- operating expenses, were $50,011 , a decrease of $2,288 or 4.4%. Other operating expenses decreased by $ 7,358 mainly due to lower capital spending on the Mountain Tunnel Improvement Project, offset by increases of $2,788 in personnel services due to higher personnel and fringe benefit costs and 5.25% increase in COLA, $1,451 in general and administrative expenses due to higher fees, licenses, and permit expenses, $ 281 in contractual services from increased management consulting services, $263 in services provided by other departments mainly due to higher bureau allocations related to accounting services support from the Controller’s Office, $243 in material and supplies from fuel and minor data processing equipment, and $44 in depreciation and amortization mainly related to additional facilities and improvements placed in service.
Other non-operating expenses were $ 54, an increase of $ 17 due to higher payments to community -based organization programs. Interest expenses were $4, an increase of $1 mainly due to implementation of GASB Statement No. 96, SBITA s. A transfer in of $ 20,000 was received from the Water E nterprise to fund various Mountain Tunnel Projects.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
23 (Continued)
As a result of the above activities, net position for the year ended June 30, 2023 increased by $24,946 or
10.0% compared to prior year.
Hetchy Power
Hetchy Power’s total revenues were $221,3 49, an increase of $36,345 or 19.6% from prior year’s revenues (see Table 2C). Increases included $30,742 from charges for services, $7,742 from interest and investment income, and $19 from rents and concessions, of fset by a decrease of $ 2,158 from other non -operating revenues.
Charges for services were $203,847, an increase of $30,742 or 17.8%, mainly due to increases of $19,450 in wholesale revenue from Congestion Revenue Right (CRR) credits from California Independent System Operator ( CAISO) and $12,159 in billings from non -work order City departments as a result of increased operation due to easing of COVID -19 restrictions, offset by a decrease of $867 in resale of capacity to CleanPowerSF. Interest and investment income was $3,741, an increase of $7,742 mainly due to decrease in unrealized loss in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates . Rents increased by $19 or 13.9% to $ 156 mainly due to higher collections from recreational rentals.
Other non-operating revenues were $ 13,605, a decrease of $ 2,158 or 13.7%, mainly due to decreases of $3,987 in State and Federal grants revenue from the Rim Fire Project and California Arrearages Payment Program (CAPP) to provide relief for customer unpaid bills, $590 in Low Carbon Fuel Standard credits, $306 Cap and Trade revenue due to decrease of 10,606 allowances sold, $22 in bond interest subsidies from IRS mainly du e to lower subsidy for 2015 NCREBs, and $6 in net gain from sale of fixed assets , offset by increases of $ 2,084 from the Power System Mitigation Project, $244 in settlement revenue, $220 in Distributed Antenna System and miscellaneous revenue, and $205 in overhead charges.
Total operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $35,209 or 22.5% to $191,552. Increases included $20,406 in purchased electric ity and transmission, distribution, and other power costs attributed to volatile and higher pricing in power market, $10,988 in general and administrative expenses due to higher judgments and claims expenses , $4,654 in personnel services due to higher personnel and fringe benefit costs and 5.25% increase in COLA, $2,421 in services provided by other departments mainly due to higher legal service charges from City Attorney’s Office , $1,360 in contractual services for construction contracts , $342 in materials and supplies for electrical supplies and fuel, and $ 108 in depreciation and amortization mainly related to additional facilities and improvements placed in service. These increases were offset by a decrease of $5 ,070 in other operating expenses mainly due to lower capital spending for Bay Corridor Project.
Interest expenses increased by $3,859 or 68.6% due to higher outstanding bond s and commercial paper.
Amortization of premium and discount decreased by $1,776 due to higher costs of issuance for 2021 Series AB revenue bonds in prior year.
Other non-operating expenses were $227, a decrease of $ 364 or 61.6% mainly due to lower payments for GoSolarSF Incentive Program. Capital contributions of $2,535 were from the Sunnydale and Potrero Hope Projects. Transfer out of $32 to the Office of the City’s Administrator was for the Surety Bond Program.
As a result of the above activities, net position for the year ended June 30, 2023 increased by $24,171 or
4.9% compared to prior year.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
24 (Continued)
CleanPowerSF
CleanPowerSF’s total revenues were $328,680 , a $ 69,314 or 2 6.7% increase over prior year (see Table 2D). Charges for services increased by $ 68,884 or 26.7% mainly due to $70,629 in electricity sales to retail and commercial customers from increased consumption of 1.1 % or 30,441 MW h, offset by $997 in lower capacity sales to Hetchy Power and $748 increase in allowance for uncollectible attributed to lower assistance received from CAPP for eligible customer account arrearages. Interest and investment income was $ 405, an increase of $1,691 mainly due to decrease in unrealized loss in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates . Other non-operating revenue decreased by $1, 261 mainly due to $ 1,251 decrease in Federal grants received from CAP P and $330 in liquidated damage compensation received from supplier for delay of the Renewable Energy Project in prior year , offset by an increase of $320 in revenue mainly from Disadvantaged Communities (DAC) Programs.
Total operating expenses, excluding interest expenses were $294,780, an increase of $32,663 or 12.5% from prior year. P urchased electricity and transmission, distribution, and other power costs increased by $25,640 due to volatile and increased pricing in power market, and higher resource adequacy capacity purchases related to compliance requirements from the CPUC . Other increases include $6,568 in personnel services due to higher personnel and fringe benefit costs and 5.25% increase in COLA, $681 in services provided by other departments mainly due to higher bureau allocations related to accounting services support from the Controller’s Office , $112 in other operating expenses mainly due to higher bureau allocations, and $24 in material and supplies mainly for minor data processing equipment . These increases were offset by decreases of $221 in professional and contractual services mainly from lower management consulting and financial services, $115 in depreciation and amortization due to lease termina tion for 544 Golden Gate, and $26 in general and administrative due to lower bank fees. Other non-operating expenses increased by $218 in solar rebates for the Inverter Replacement Program . Interest expenses were $1, a decrease of $5 related to lease termination.
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.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
25 (Continued)
Capital Assets
The following tables summarize Hetch Hetchy’s changes in capital assets.
Capital Assets, Fiscal Year 2024
Hetch Hetchy
Hetch Hetchy has capital assets of $ 995,251, net of accumulated depreciation and amortization, invested in both water and power utility capital assets as of June 30, 2024 (see Table 3A). This amount represents an increase of $127,947 or 14.8%, resulting from increases of $ 68,961 in facilities, improvements, machinery and equipment and $59,667 in construction work in progress , offset by decrease s of $488 in amortization of intangible assets and $193 in right-to-use lease and subscription assets. The investment in capital assets includes land, buildings, improvements, hydropower facilities, dams, transmission lines, machinery, a nd equipment. Hetch Hetchy had capital commitments of $65,261 as of June 30, 2024.
2024-2023 2023-2022
2024 2023 2022 Change Change
Hetch Hetchy
Facilities, improvements, machinery, and equipment $ 535,858 466,897 440,460 68,961 26,437 Intangible assets 23,664 24,152 24,472 (488) (320) Land and rights-of-way 5,181 5,181 5,181 — — Right-to-use lease and subscription assets 411 604 1,005 (193) (401) Construction work in progress 430,137 370,470 316,530 59,667 53,940 Total 995,251 867,304 787,648 127,947 79,656
Hetchy Water
Facilities, improvements, machinery, and equipment 138,220 133,905 133,263 4,315 642 Intangible assets 9,960 10,167 10,374 (207) (207) Land and rights-of-way 3,232 3,232 3,232 — — Right-to-use lease and subscription assets 190 282 375 (92) (93) Construction work in progress 85,884 72,450 54,138 13,434 18,312 Total 237,486 220,036 201,382 17,450 18,654
Hetchy Power
Facilities, improvements, machinery, and equipment 397,638 332,992 307,197 64,646 25,795 Intangible assets 13,704 13,985 14,098 (281) (113) Land and rights-of-way 1,949 1,949 1,949 — — Right-to-use lease and subscription assets 208 292 329 (84) (37) Construction work in progress 344,253 298,020 262,392 46,233 35,628 Total 757,752 647,238 585,965 110,514 61,273
CleanPowerSF
Right-to-use lease and subscription assets 13 30 301 (17) (271) Total $ 13 30 301 (17) (271) Table 3A - Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2024, 2023, and 2022
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
26 (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, 2024 include the following:
Hetchy Water
Hetchy Water has capital assets of $ 237,486, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 202 4 (see Table 3A). This amount represents an increase of $17,450 or 7.9%, primarily due to in creases of $13,434 in construction work in progress and $4,315 in facilities, improvements, machinery, and equipment, offset by decrease s of $207 in amortization of intangible assets and $92 in right-to-use lease and subscription assets.
For the year ended June 30, 202 4, Hetchy Water’s major additions to construction work in progress totaled $23,029. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $10,538 (see Table 3B).
Hetchy Hetchy
Water Power 2024 Total
Cluster 7 Mitigation $ — 21,505 21,505 2023 March Winter Storm 5,970 7,297 13,267 Moccasin Powerhouse Rewind — 12,636 12,636 Mountain Tunnel Improvement 3,611 4,413 8,024 Power Asset Acquisition Analysis — 7,770 7,770 Bay Corridor — 7,658 7,658
O'Shaughnessy Dam Outlet Works Phase 1 3,282 4,012 7,294 Repair & Replacement Life Extension Program and Powerhouse 3,629 1,542 5,171 Sunnydale HOPE SF — 4,686 4,686
Intervening Facilities — 3,312 3,312 Pier 70 — 2,682 2,682
Moccasin Dam Long Term Improvement and Facilities Upgrade 1,698 2,075 3,773 Distribution Services Retail Customers — 1,899 1,899 SFO Substation — 1,833 1,833
Other project additions individually below $1,500 4,839 15,093 19,932 Additions to Construction Work in Progress $ 23,029 98,413 121,442 Transmission Line Clearance Mitigation - Lines 7/8 $ — 32,494 32,494 Contributed Capital - Pier 70 Streetlights and Trench — 16,896 16,896 2023 Emergency Cherry Lake Road Repair 5,050 6,172 11,222 Contributed Capital - Treasure Island Switchyard, Trench, and Streetlights — 9,698 9,698 2023 Emergency Hetch Hetchy Road Repair 1,424 1,740 3,164 Intervening Facilities — 2,323 2,323 Contributed Capital - Yerba Buena Island Trench — 1,862 1,862 Other project additions individually below $1,500 4,064 11,556 15,620 Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service $ 10,538 82,741 93,279 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, 2024
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
27 (Continued)
Hetchy Power
Hetchy Power has capital assets of $ 757,752, net of accumulated depreciat ion and amortization, invested in utility capital assets as of June 30, 2024 (see Table 3A). This amount represents an increase of $110,514 or 17.1%, primarily due to increases of $ 64,646 in facilities, improvements, machinery, and equipment and $46,233 in construction work in progress , offset by decrease s of $281 in amortization of intangible assets and $84 in right-to-use lease and subscription assets.
For the year ended June 30, 202 4, Hetchy Power’s major additions to construction work in progress tot aled $98,413. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $82,741 (see Table 3B).
CleanPowerSF
CleanPowerSF has capital assets of $13, net of accumulated amortization, for right -to-use lease and subscription assets as of June 30, 2024 (see table 3A).
See Note 4 for additional information about capital assets.
Capital Assets, Fiscal Year 2023
Hetch Hetchy
Hetch Hetchy has capital assets of $ 867,304, 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 $79,656 or 10.1%, resulting from increases of $5 3,940 in construction work in progress and $26,437 in facilities, improvements, machinery and equipment, offset by decrease s of $401 in right- to-use lease and subscription assets and $320 in amortization of intangible assets. The investment in capital assets includes land, buildings, improvements, hydropower facilities, dams, transmission lines, machinery, and equipment. Hetch Hetchy had capital commitments of $99,568 as of June 30, 2023.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
28 (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 $ 220,036, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2023 (see Table 3A). This amount represents an increase of $18,654 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 decrease s of $207 in amortization of intangible assets and $93 in right-to-use lease and subscription 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 3C).
Hetchy Power
Hetchy Power has capital assets of $ 647,238, net of accumulated depreciation and amortization, invested in utility capital assets as of June 30, 2023 (see Table 3A). This amount represents an increase of $ 61,273 Hetchy Hetchy
Water Power 2023 Total
Moccasin Powerhouse Rewind $ — 16,920 16,920 Mountain Tunnel Improvement 6,835 8,353 15,188 Bay Corridor — 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 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, 2023
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
29 (Continued)
or 10.5%, primarily due to inc reases of $35,628 in construction work in progress and $25 ,795 in facilities, improvements, machinery, and equipment, offset by decrease s of $113 in amortization of intangible assets and $37 in right-to-use lease and subscription assets.
For the year ende d 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 3C).
CleanPowerSF
CleanPowerSF has capital assets of $30, net of accumulated amortization, for right -to-use lease and subscription assets as of June 30, 2023 (see table 3A).
See Note 4 for additional information about capital assets.
Debt Administration
Hetch Hetchy
As of June 30 , 2024, Hetch Hetchy has outstanding C ertificates of P articipation, Qualified Energy Conservation Bonds (QECBs), New Clean Renew able Energy Bonds (NCREBs), 2015 Series AB revenue bonds, 2021 Series AB revenue bonds, 2023 Series A revenue bond, 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, 2024 and 2023. 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 4 and 2023, Hetchy Power had outstanding debt of $ 421,601 and $319,877, 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, 2024 and 2023.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
30 (Continued)
The increase of $101 ,724 was due to $131,230 from issuance of 2023 Series A Revenue Bonds and $91,635 from commercial paper issuance, offset by commercial paper repayment of $117,333, bonds and certificates of participation principal repayments of $ 2,035, and $1, 773 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 S&P Global Ratings (S&P) as of June 30, 2024 and 2023, 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 Amended and Restated Indenture, the Power Enterprise is required to collect sufficient net revenues each fiscal year, together with any Power Enterprise funds (except Bond Reserve Funds), which are availa ble for payment of debt service and are not budgeted to be expended, at least equal to 1.25 times annual debt service for said fiscal year, and for the SFPUC’s debt service coverage policy, at least equal to 1.35 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 NCREBs and QECBs . During fiscal year s 2024 and 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 rate covenant requireme nts under the Power Enterprise’s Amended and Restated Indenture and the SFPUC’s debt service coverage policy (see Note 8).
Debt Authorization – Pursuant 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 2024-2023 2023-2022
2024 2023 2022 Change Change
Clean Renewable Energy Bonds 2008 $ — — 415 — (415) Certificates of Participation 2009 Series C — — 427 — (427) Certificates of Participation 2009 Series D (BABs) 12,148 12,593 12,593 (445) — Qualified Energy Conservation Bonds 2011 2,021 2,583 3,138 (562) (555) New Clean Renewable Energy Bonds 2015 1,343 1,491 1,637 (148) (146) 2015 Series A Revenue Bonds 34,819 34,985 35,144 (166) (159) 2015 Series B Revenue Bonds 2,033 2,948 3,849 (915) (901) 2021 Series A Revenue Bonds 88,375 89,303 90,213 (928) (910) 2021 Series B Revenue Bonds 59,142 59,622 60,090 (480) (468) 2023 Series A Revenue Bonds 131,066 — — 131,066 — Commercial Paper 90,654 116,352 40,019 (25,698) 76,333 Total $ 421,601 319,877 247,525 101,724 72,352 Table 4 - Hetchy Power
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2024, 2023, and 2022
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
31 (Continued)
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 Se ction 8B.124 is amended to authorize the Power Enterprise to enter into indebtedness, including revenue bonds, notes, commercial paper or other forms of indebtedness, 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 Enterprise, and in compliance with City Charter Section 8B.124. Proposition A expressly prohibits the SFP UC from issuing bonds to finance the construction of power plants that generate electricity using fossil fuels or nuclear energy. As of June 30, 202 4 and 2023, $287,460 and $163,555 of Hetchy Power revenue bonds were issued against existing authorization of $1,029,790 and $695,933, respectively.
Cost of Debt Capital – The Power Enterprise’s outstanding long -term senior lien debt consists of the 2015 Series AB, 2021 Series AB, and 2023 Series A Power Revenue Bond issued in May 2015, December 2021, and October 2023, 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 2. 8% to 3. 7% and 1.1% to 3 .2% during fiscal years 2024 and 2023, respectively.
Rates and Charges
Hetchy Water
Hetchy Water charges for services relate 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 $46,266 and $49,636 for the years ended June 30, 2024 and 2023, respectiv ely. In fiscal year 202 5, the assessment fees will be $ 49,241, an in crease of $ 2,975 or 6.4% as r eflected in the fiscal year 2025 adopted budget. The increase is primarily to cover a portion of the Water share of Hetchy Water capital projects with current year revenues rather than revenue bonds.
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 https://www.sfpuc.gov/accounts- services/water-power-sewer-rates/rates. Rates for meter readings on or after July 1, 2024 were approved by the Commission in May 2024.
Municipal Rates
Departments of the City and 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.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
32 (Continued)
Based on the results of the 2022 Power Cost of Service Study, beginning in fiscal 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 is being gradually eliminated until the General Use rate reaches the equivalent retail rate, w hich is projected to take 3 to 8 years, depending on the customer class. For Enterprise customers, their rates 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, almost all Enterprise customers are on equivalent rate schedules as retail non-municipal customers.
Retail Rates
Based on the results of the 2022 Power Cost of Service Study, the Commission approved a two -year schedule of retail electric rates for residential, commercial, and industrial customers where Hetch Hetchy has been designated as the power provider to be appl ied to meter readings on or after July 1, 2022. 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 comme rcial electricity consumers in San Francisco a choice of having their electricity supplied from clean renewable sources, such as solar geothermal, hydroelectric and wind, at competitive rates. CleanPowerSF offers t hree products: a “Green” default product comprised of at least 50% RPS-eligible renewable energy and two optional products, “SuperGreen” comprised of 100% RPS-eligible renewable energy at a small additional cost and “SuperGreen Saver” also comprised of 100% RPS -eligible renewable energy to qualifying low -income customers at a 20% bill discount.
Previously, rates were set formulaically, at a percentage at or below the equivalent PG&E generation rate. In addition, the formula required rates to be set high enoug h to allow CleanPowerSF 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 fiscal 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. Rates for meter readings on or after July 1, 2022 were approved by the Commission in May 2022; rates for meter readings on or after July 1, 2023 were approved by the Commission in May 2023; rates for meter readings on or after July 1, 2024 were approved by the Commission in May 2024.
CleanPowerSF Rates Schedules are available at http://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 information 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.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
33 This report is available at https://www.sfpuc.gov/about-us/reports/audited-financial-statements-reports.
34 (Continued)
Hetchy Hetchy 2024 Hetchy Hetchy 2023
Water Power Total Water Power Total
Assets
Current assets:
Cash and investments with City Treasury $ 46,471 215,370 159,811 421,652 76,973 224,234 98,657 399,864 Cash and investments outside City Treasury — 41 — 41 — 154 — 154 Receivables:
Charges for services (net of allowance for doubtful accounts from
471 16,356 50,993 67,820 405 12,277 41,625 54,307 Due from other City departments, current portion — 1,558 — 1,558 — 1,134 — 1,134 Due from other governments 1,664 574 — 2,238 1,723 646 — 2,369 Interest 578 2,823 1,692 5,093 295 1,503 559 2,357 Restricted interest and other receivables — 169 — 169 — 4,151 — 4,151 Total current receivables 2,713 21,480 52,685 76,878 2,423 19,711 42,184 64,318 Prepaid charges, advances, and other receivables, current portion 754 6,341 441 7,536 92 1,579 5,641 7,312 Inventory 199 1,690 — 1,889 221 1,619 — 1,840
Restricted cash and investments outside City Treasury, current portion — 6,849 — 6,849 — 5,371 — 5,371 Total current assets 50,137 251,771 212,937 514,845 79,709 252,668 146,482 478,859 Non-current assets:
Restricted cash and investments with City Treasury 31,330 50,732 — 82,062 10,980 17,606 — 28,586 Restricted cash and investments outside City Treasury, less current portion — 7,202 — 7,202 — 3,840 — 3,840 Capital assets, not being depreciated and amortized 89,122 347,633 — 436,755 75,688 301,400 — 377,088 Capital assets, net of accumulated depreciation and amortization 148,174 409,911 — 558,085 144,066 345,546 — 489,612 Lease right-to-use assets, net of accumulated amortization 129 157 — 286 145 178 — 323 Subscription right-to-use assets, net of accumulated amortization 61 51 13 125 137 114 30 281 Prepaid charges, advances, and other receivables, less current portion 138 10,843 11,763 22,744 141 9,540 11,424 21,105 Due from other City departments, less current portion — 9,863 — 9,863 — 10,352 — 10,352 Total non-current assets 268,954 836,392 11,776 1,117,122 231,157 688,576 11,454 931,187 Total assets 319,091 1,088,163 224,713 1,631,967 310,866 941,244 157,936 1,410,046 Deferred outflows of resources:
Pensions 11,929 14,580 2,187 28,696 8,858 10,826 1,292 20,976 Other postemployment benefits 3,191 3,899 996 8,086 3,248 3,969 1,009 8,226 Total deferred outflows of resources 15,120 18,479 3,183 36,782 12,106 14,795 2,301 29,202 Hetchy Power of $1,699 and CleanPowerSF of $9,226 as of June 30, 2024; and Hetchy Power of $3,923 and CleanPowerSF of $7,923 as of June 30, 2023)
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Net Position
June 30, 2024 and 2023
(In thousands)
CleanPowerSF CleanPowerSF
35 See accompanying notes to financial statements.
Hetchy Hetchy 2024 Hetchy Hetchy 2023
Water Power Total Water Power Total
Liabilities
Current liabilities:
Accounts payable $ 969 13,505 29,018 43,492 1,033 24,970 24,344 50,347 Accrued payroll 1,428 3,292 639 5,359 1,252 3,041 543 4,836 Accrued vacation and sick leave, current portion 1,272 2,038 413 3,723 1,132 1,867 394 3,393 Accrued workers’ compensation, current portion 228 417 — 645 216 401 — 617 Damage claims liability, current portion 121 1,872 17 2,010 300 450 16 766 Due to other City departments, current portion — — — — — 1,946 — 1,946 Lease liability, current portion 16 19 — 35 16 19 — 35 Subscription liability, current portion 30 25 6 61 80 65 18 163 Unearned revenues, refunds, and other, current portion 106 6,604 7,986 14,696 110 5,880 6,146 12,136 Bond, loan, lease, and subscription interest payable 1 2,691 — 2,692 2 1,597 — 1,599 Bonds, current portion — 3,599 — 3,599 — 1,590 — 1,590 Certificates of participation, current portion — 463 — 463 — 445 — 445 Commercial paper, current portion — 90,654 — 90,654 — — — — Current liabilities payable from restricted assets 4,027 25,513 — 29,540 5,747 23,119 — 28,866 Total current liabilities 8,198 150,692 38,079 196,969 9,888 65,390 31,461 106,739 Long-term liabilities:
Arbitrage rebate payable — 184 — 184 — — — — Net other postemployment benefits liability 16,269 19,883 4,189 40,341 14,907 18,220 4,053 37,180 Net pension liability 19,090 23,332 3,563 45,985 14,105 17,239 2,124 33,468 Accrued vacation and sick leave, less current portion 1,208 1,939 347 3,494 1,134 1,849 349 3,332 Accrued workers’ compensation, less current portion 1,069 1,919 — 2,988 1,003 1,837 — 2,840 Damage claims liability, less current portion 147 1,902 4 2,053 400 5,700 18 6,118 Bonds, less current portion — 315,200 — 315,200 — 189,342 — 189,342 Lease liability, less current portion 106 131 — 237 122 150 — 272 Subscription liability, less current portion 29 26 7 62 59 51 13 123 Unearned revenues, refunds, and other, less current portion — 580 — 580 — 580 — 580 Liabilities payable from restricted assets, less current portion — 3,354 — 3,354 — — — — Commercial paper, less current portion — — — — — 116,352 — 116,352 Certificates of participation, less current portion — 11,685 — 11,685 — 12,148 — 12,148 Total long-term liabilities 37,918 380,135 8,110 426,163 31,730 363,468 6,557 401,755 Total liabilities 46,116 530,827 46,189 623,132 41,618 428,858 38,018 508,494 Deferred inflows of resources:
Pensions 1,941 2,372 925 5,238 4,142 5,062 1,296 10,500 Other postemployment benefits 2,897 3,541 2,292 8,730 3,084 3,769 2,922 9,775 Total deferred inflows of resources 4,838 5,913 3,217 13,968 7,226 8,831 4,218 20,275 Net position:
Net investment in capital assets 233,276 343,297 — 576,573 214,014 313,171 — 527,185 Restricted for debt service — — — — — 56 — 56
Restricted for capital projects 31,330 28,625 — 59,955 10,980 21,702 — 32,682 Unrestricted 18,651 197,980 178,490 395,121 49,134 183,421 118,001 350,556 Total net position $ 283,257 569,902 178,490 1,031,649 274,128 518,350 118,001 910,479
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Net Position
June 30, 2024 and 2023
(In thousands)
CleanPowerSF CleanPowerSF
36 See accompanying notes to financial statements.
Hetchy Hetchy 2024 Hetchy Hetchy 2023
Water Power Total Water Power Total
Operating revenues:
Charges for services $ 49,330 214,154 366,594 630,078 52,570 203,847 326,777 583,194 Rents and concessions 162 198 — 360 127 156 — 283 Total operating revenues 49,492 214,352 366,594 630,438 52,697 204,003 326,777 583,477 Operating expenses:
Personnel services 24,908 48,175 9,322 82,405 18,424 39,300 10,735 68,459 Contractual services 4,035 13,623 6,244 23,902 2,956 10,819 6,559 20,334 Transmission/distribution and other power costs — 62,392 264 62,656 — 70,580 226 70,806 Purchased electricity — 15,558 284,631 300,189 — 8,078 265,152 273,230 Materials and supplies 1,755 2,451 60 4,266 1,605 2,612 57 4,274 Depreciation and amortization 6,522 18,460 17 24,999 6,524 17,877 270 24,671 Services provided by other departments 3,501 6,828 4,792 15,121 3,392 8,674 4,302 16,368 General and administrative and other 3,229 33,114 6,188 42,531 17,110 33,612 7,479 58,201 Total operating expenses 43,950 200,601 311,518 556,069 50,011 191,552 294,780 536,343 Operating income 5,542 13,751 55,076 74,369 2,686 12,451 31,997 47,134 Non-operating revenues (expenses):
Federal and state grants — 26 — 26 1,627 937 1,173 3,737 Interest and investment income 3,255 13,744 5,904 22,903 457 3,741 405 4,603 Interest expenses (3) (14,472) — (14,475) (4) (9,486) (1) (9,491) Amortization of premium, discount, and issuance costs — 1,008 — 1,008 — 1,584 — 1,584 Net gain from sale of assets 2 2 — 4 4 3 — 7
Other non-operating revenues 336 8,500 386 9,222 230 12,665 325 13,220 Other non-operating expenses (45) (99) (877) (1,021) (54) (227) (218) (499) Net non-operating revenues 3,545 8,709 5,413 17,667 2,260 9,217 1,684 13,161 Change in net position before transfers and contributions 9,087 22,460 60,489 92,036 4,946 21,668 33,681 60,295 Capital contributions — 29,200 — 29,200 — 2,535 — 2,535 Transfers from the City and County of San Francisco 42 — — 42 20,000 — — 20,000 Transfers to the City and County of San Francisco — (108) — (108) — (32) — (32) Capital contributions and net transfers 42 29,092 — 29,134 20,000 2,503 — 22,503 Change in net position 9,129 51,552 60,489 121,170 24,946 24,171 33,681 82,798 Net position at beginning of year 274,128 518,350 118,001 910,479 249,182 494,179 84,320 827,681 Net position at end of year $ 283,257 569,902 178,490 1,031,649 274,128 518,350 118,001 910,479
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Revenues, Expenses, and Changes in Net Position Years ended June 30, 2024 and 2023
(In thousands)
CleanPowerSF CleanPowerSF
37 (Continued)
Hetchy Hetchy 2024 Hetchy Hetchy 2023
Water Power Total Water Power Total
Cash flows from operating activities:
Cash received from customers, including cash deposits $ 49,264 211,012 357,825 618,101 52,640 201,707 324,730 579,077 Cash received from tenants for rent 153 188 — 341 129 158 — 287 Cash received from miscellaneous revenues 36 4,886 3 4,925 30 8,689 6 8,725 Cash paid to employees for services (23,234) (45,847) (9,517) (78,598) (21,537) (42,804) (8,063) (72,404) Cash paid to suppliers for goods and services (13,563) (146,934) (291,457) (451,954) (31,864) (113,682) (275,322) (420,868) Cash paid for judgments and claims (357) (3,625) (874) (4,856) (331) (5,548) (1,725) (7,604) Net cash provided by (used in) operating activities 12,299 19,680 55,980 87,959 (933) 48,520 39,626 87,213 Cash flows from non-capital and related financing activities:
Cash received from grants 59 98 — 157 389 546 1,173 2,108 Cash received for license fees — 1,997 — 1,997 — 3,713 — 3,713 Cash received from settlements 300 — — 300 200 244 — 444 Cash received from Public Purpose Funds — — 1,624 1,624 — — 2,394 2,394 Cash paid for rebates, program incentives, and other (34) (78) (864) (976) (54) (227) (218) (499) Transfers from the City and County of San Francisco 42 — — 42 20,000 — — 20,000 Transfers to the City and County of San Francisco — (108) — (108) — (32) — (32) Net cash provided by non-capital financing activities 367 1,909 760 3,036 20,535 4,244 3,349 28,128 Cash flows from capital and related financing activities:
Acquisition and construction of capital assets (25,692) (94,130) — (119,822) (25,856) (72,541) — (98,397) Proceeds from sale of capital assets 2 2 — 4 4 3 — 7 Lease payments (18) (22) — (40) (18) (22) (233) (273) Subscription payments (82) (66) (18) (166) (172) (139) (39) (350) Proceeds from bond issuance, net of premium and discount — 131,230 — 131,230 — — — — Principal paid on long-term debt — (2,035) — (2,035) — (2,397) — (2,397) Proceeds from commercial paper borrowings — 91,635 — 91,635 — 76,333 — 76,333 Principal paid on commercial paper — (117,333) — (117,333) — — — — Interest paid on long-term debt — (11,221) — (11,221) — (7,886) — (7,886) Interest paid on commercial paper borrowings — (1,969) — (1,969) — (1,327) — (1,327) Issuance costs paid on long-term debt — (765) — (765) — — — — Federal interest income subsidy — 332 — 332 — 502 — 502 Net cash used in capital and related financing activities (25,790) (4,342) (18) (30,150) (26,042) (7,474) (272) (33,788) Cash flows from investing activities:
Interest income 1,083 8,568 3,838 13,489 914 3,663 1,207 5,784 Proceeds from sale of investments outside City Treasury — 155,462 — 155,462 — 10,224 — 10,224 Purchases of investments outside City Treasury — (165,218) — (165,218) — (10,224) — (10,224) Net cash provided by (used in) investing activities 1,083 (1,188) 3,838 3,733 914 3,663 1,207 5,784 Increase (decrease) in cash and cash equivalents (12,041) 16,059 60,560 64,578 (5,526) 48,953 43,910 87,337 Cash and cash equivalents:
Beginning of year 91,857 257,810 101,797 451,464 97,383 208,857 57,887 364,127 End of year $ 79,816 273,869 162,357 516,042 91,857 257,810 101,797 451,464 Reconciliation of cash and cash equivalents to the statements of net position:
Cash and investments with City Treasury:
Unrestricted $ 46,471 215,370 159,811 421,652 76,973 224,234 98,657 399,864 Restricted 31,330 50,732 — 82,062 10,980 17,606 — 28,586 Add: Unrealized loss on investments with City Treasury 2,015 3,465 2,546 8,026 3,904 6,605 3,140 13,649 Cash and investments outside City Treasury:
Unrestricted — 41 — 41 — 154 — 154
Restricted — 14,051 — 14,051 — 9,211 — 9,211 Less: Unrealized gain on investments outside City Treasury — (34) — (34) — — — — Less: Restricted (with maturity more than 90 days - see table in Note 3) — (9,756) — (9,756) — — — — Cash and cash equivalents at end of year on statements of cash flows $ 79,816 273,869 162,357 516,042 91,857 257,810 101,797 451,464 CleanPowerSF CleanPowerSF
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash Flows
Years ended June 30, 2024 and 2023
(In thousands)
38 * Includes related deferred inflows and outflows of resources.
See accompanying notes to financial statements.
Hetchy Hetchy 2024 Hetchy Hetchy 2023
Water Power Total Water Power Total
Reconciliation of operating income to net cash provided by (used in) operating activities:
Operating income $ 5,542 13,751 55,076 74,369 2,686 12,451 31,997 47,134 Adjustments to reconcile operating income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,522 18,460 17 24,999 6,524 17,877 270 24,671 Miscellaneous revenues 36 4,886 3 4,925 30 8,689 6 8,725 Provision for uncollectible accounts — (2,224) 1,303 (921) — 2,626 1,593 4,219 Write-off of capital assets — 217 — 217 192 211 — 403 Changes in operating assets and liabilities:
Receivables:
Charges for services (66) (1,855) (10,671) (12,592) 70 (4,714) 5,485 841 Prepaid charges, advances, and other (659) (372) 5,200 4,169 129 115 5,908 6,152 Due from other City departments — 187 — 187 — 345 — 345 Inventory 22 (71) — (49) (22) 59 — 37
Accounts payable (75) (11,486) 4,661 (6,900) (7,421) 8,302 818 1,699 Accrued payroll 176 251 96 523 154 357 170 681
Other postemployment benefits obligations* 1,232 1,505 (481) 2,256 1,041 1,272 2,906 5,219 Pension liabilities* (287) (351) 173 (465) (4,480) (5,476) (601) (10,557) Accrued vacation and sick leave 214 261 17 492 97 119 197 413 Accrued workers’ compensation 78 98 — 176 (9) (12) — (21) Damage claims liability (432) (2,376) (13) (2,821) 73 5,127 2 5,202 Due to other City departments — (1,946) — (1,946) — 1,566 — 1,566 Unearned revenues, refunds, and other liabilities (4) 745 599 1,340 3 (394) (9,125) (9,516) Total adjustments 6,757 5,929 904 13,590 (3,619) 36,069 7,629 40,079 Net cash provided by (used in) operating activities $ 12,299 19,680 55,980 87,959 (933) 48,520 39,626 87,213 Noncash transactions:
Accrued capital asset costs $ 4,027 28,867 — 32,894 5,747 23,119 — 28,866 Receivables from Wastewater — 405 — 405 — 518 — 518 Payable to SFMTA — — — — — 1,946 — 1,946
Unrealized loss on investments 2,015 3,431 2,546 7,992 3,904 6,605 3,140 13,649 Capital contributions — 29,200 — 29,200 — 2,535 — 2,535 CleanPowerSF CleanPowerSF
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash Flows
Years ended June 30, 2024 and 2023
(In thousands)
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(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 fisc al 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 res ource, as well as the City Power services including energy efficiency and renewable.
Approximately 55% 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 Water and Wastewater Enterprises). The majority of the remaining 45 % balance of electricity is sold to Clea nPowerSF 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, a nd 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.
The City Charter was amended in 2008 by 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. Under the amended Charter, the Mayor continues to nominate candidates to the SF PUC, 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 experience 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, 2024 and 2023
(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 th e Annual Comprehensive 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, 2024 and 2023, and the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).
(2) Significant Accounting Policies
(a) Basis of Accounting and Measurement Focus
The accounts of Hetch Hetchy are organized on the basis of proprietary fund types and are included as enterprise funds of the City. The activities of Hetch Hetchy and each fund are accounted for with a separate set of self -balancing accounts that comprise Hetch Hetchy’s and each fund’s assets, deferred outflows, 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. Non-operating revenues include grants, interest and investment income, and other non- operating income.
Hetch Hetchy applies all applicable Governmental Acco unting 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 Ci ty 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.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
41 (Continued)
(d) Inventory
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed. (e) Capital Assets
Capital assets are define d 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 have 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 d epreciation 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, subscription-based information technology arrangements (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 provide a benefit that is not constrained by legal or contractual limitations or any other external factor and, therefore, are not amortized (see Note 4).
(g) Construction Work in Progress
The cost of acquisi tion and construction of major plant and equipment is recorded as construction work in progress. Costs of construction projects that are discontinued are recorded as expenses in the year in which the decision is made to discontinue such projects.
(h) 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 a re 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 estimat ed cost of incurred but not reported claims (see Note 14(b)).
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
42 (Continued)
(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 claims 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 wit h regulations issued by the U.S. Treasury Department. The requirements of the Clean Renewable Energy Bonds (CREBs), the Qualified Energy Conservation Bonds (QECBs), the New Clean Renewable Energy Bonds (NCREBs) , and Power Revenue Bonds stipulate that the f irst 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 or date of issuance. Hetchy Power arbitrage liability as of June 30, 2024 and 2023 were $184 and $0, respectively , related to 2021 Series AB and 2023 Series A revenue bonds.
(m) Refunding of Debt
Gains or losses occurring from refunding of debt prior to maturity are reported as deferred outflows and deferred inflows of resources from refunding of debt. Deferred outflows and deferred inflows of resources are recognized as a component of interest expense using the effective interest method over the remaining life of the old debt or the life of the new debt, whichever is shorter.
(n) Income Taxes
As a department of a government agency, the Enterprise is exempt from both federal income taxes and California State franchise taxes.
(o) Revenue Recognition
Water and power revenues are based on water and power consumption and billing ra tes.
Generally, customers are billed monthly. Revenues earned but unbilled are accrued as charges for services receivables on the Statements of Net Position. The unbilled amounts as of June 30, 2024 and 2023 are as follows:
(p) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows, liabilities, deferred inflows, 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.
Hetchy Hetchy
Water Power CleanPowerSF Total
2024 $ — 3,624 25,591 29,215
2023 — 3,470 19,694 23,164
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
43 (Continued)
(q) Eliminations
Eliminations for internal activities between the Hetchy Power and CleanPowerSF are made in the Statements of Net Position. There were no activities requiring eliminations for fiscal year s ended June 30, 2024 and 2023.
(r) Accounting and Financial Reporting for Pollution Remediation Obligations According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations , a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted and any of the following recognition triggers occur:
• Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
• A government has violated a pollution prevention-related permit or license; • A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
• A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
• A government begins or legally obligates itself to begin cleanup or post -cleanup activities (limited to amounts the government is legally required to complete).
As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the De sign 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.
(s) 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 lessee for various noncancellable leases of building and radio tower.
Short-term Leases – For leases wit h 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 ot her 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.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
44 (Continued)
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 underlying 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 reasonably 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 the principal portion of lease paymen ts 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 Judgments – Key estimates and judgments 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 e stimated 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 index 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 b y 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) and are excluded from lease capitalization.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
45 (Continued)
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 non-current assets, lease liabilities are reported with current and long -term liabilities, and both capital-related lease assets and liabilities are report ed under net investment in capital assets in the Statements of Net Position.
(t) 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 und erlying asset into service, less any subscription incentives received at or before the subscription commencement date. For SBITAs, subscription assets also include qualified 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 Judgments – Key estimates and judgments 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 based on City’s Aa/AA, COP, Tax -exempt to generate the yield curve and discount rate table.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
46 (Continued)
• The subscription term includes the noncancellable period of the subscr iption, 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 th e 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.
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 non -current assets, subscription liabilities are reported with current and long -term liabilities and both capital-related subscription assets and liabilities are reported under net investment in capital assets in the Statements of Net Position.
(u) Other Postemployment Benefits (OPEB)
Net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB expense are actuarially determined on a citywide basis. Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Trust Fund investments measured at fair value (see Note 12(b)).
(v) New Accounting Standard s Adopted in Fiscal Year 2024 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 were adopted by the City for the year ended June 30, 2022. 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 . The Enterprise adopted the provisions of Statement No. 99 in fiscal year 2024 which did not have a significant effect on its financial statements.
2) In June 2022, the GASB issued Statement No. 100, Accoun ting 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 d ecisions or assessing accountability. The new standard is effective for periods beginning after June 15, 2023. The
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
47 (Continued)
Enterprise adopted the provisions of Statement No. 100 in fiscal year 2024 which did not have a significant effect on its financial statements.
(w) GASB Statements Implemented in Fiscal Year 2023
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the comparability and consistency of conduit debt obligation reporting and reporting of related transactions by state and local government issuers. The 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 Availability Payment Arrangements . The primary objective of this statement is to improve financial reporting by addressing issues re lated to public -private and public-public partnership arrangements (PPPs) and availability payment arrangements .
The standard is effective for periods beginning after June 15, 2022. The Enterprise adopted the provisions of Statement No. 94 in fiscal year 2 023 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 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).
(x) Future Implementation of New Accounting Standards
1) 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 En terprise will implement the provisions of Statement No. 101 in fiscal year 2025.
2) In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures . This statement establishes financial reporting requirements for risk related to vulnerabilities due to certain concentrations or constraints within governments. The new standard is effective for periods beginning after June 15, 2024. The Enterprise will implement the provisions of Statement No. 102 in fiscal year 2025.
3) In April 2024, the GASB issued Statement No. 103, Financial Reporting Model Improvements. This statement is to improve key components of the financial reporting model to enhance its effectiveness in providing informat ion that is essential for decision making and assessing a government’s accountability. Th e new standard is effective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 103 in fiscal year 2026.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
48 (Continued)
4) In September 2024, the GASB issued Statement No. 104, Disclosure of Certain Capital Assets. This statement requires certain types of capital assets, such as l ease assets recognized in accordance with Statement No. 87, Leases , and intangible right-to-use assets recognized in accordance with Statement No. 94, Public-Private and Public -Public Partnerships and Availability Payment Arrangements to be disclosed separately by major classes of underlying assets in the capital assets note disclosures. Subscription assets recognized in accordance with Statement No. 96, Subscription -Based Information Technology Arrangements are also required to be disclosed separately. Furthermore, the statement requires intangible assets other than those three types to be disclosed separately by major class. Finally, the statement requires additional disclosures for capital assets held for sale. The new standard is ef fective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 104 in fiscal year 2026.
(y) Reclassifications
The Hetch Hetchy Enterprise has reclassified certain amounts relating to the prior period to conform to its current period presentation. Lease receivable, lease related interest receivable, lease related interest payable, and subscription related interest payable were reclassified from net investment in capital assets to unrestricted in the statement s of net position for fiscal year 2023. Furthermore, capital related liabilities were reclassified from restricted for capital projects and/or unrestricted to net investment in capital ass ets in the statements of net position for fiscal year 2023 . These recla ssifications had no effect on previously reported changes in 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 wil l deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio, which may be invested in certain instruments with longer terms to maturity. The City Treasurer allocates income from the i nvestment 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.
Some r estricted cash and investments are held by an indepe ndent 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, 2024 and 2023 were $14,051 and $9,211, respectively. The Enterprise held all investments in treasury and government obligations, commercial paper, as well as money market mutual funds consisting of treasury and government obligations. See Note 5 for additional information on restricted assets.
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 ide ntical 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 thos e securities.
Certain investments such as money market investments, and cash and cash equivalents are not subject to the fair value hierarchy.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
49 (Continued)
The following is a summary of the Hetch Hetchy restricted and unrestricted cash and investments outside City Treasury, including commercial paper issuers, credit ratings, and the fair value hierarchy as of June 30, 2024 and 2023.
As of June 30, 2024, a total of $4,138 in restricted cash and investments outside City Treasury were invested in U.S. Treasury Money Market Funds with maturity date less than 90 days . Of this, $4,095 were proceeds from 2023 Series A, 2021 Series AB , and 2015 Series AB bonds and $ 43 were proceeds from c ertificates of p articipation. As of June 30, 202 3, a total of $9.190 in restricted cash and investments outside City Treasury were invested in U.S. Treasury Money Market Funds with maturity date less than 90 days . Of this, $8,175 were proceeds from 2021 Series AB and 2015 Series AB bonds and $1,015 were proceeds from certificates of participation.
Credit Ratings
Investments (S&P/Moody's) Maturities
Value
Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 4,138 4,138 — — — Commercial Paper-Toyota Motor Corp A-1+/P-1 October 11, 2024 957 — 957 — — Commercial Paper-Toronto-Dominion Bank A-1+/P-1 October 28, 2024 2,946 — 2,946 — — U.S. Agency Securities AA+/Aaa April 17, 2025 2,881 — 2,881 — — U.S. Treasury Bonds & Notes A-1+/P-1 October 15, 2025 2,972 — 2,972 — — Cash and Cash Equivalents N/A 157 157 — — —
Total Restricted Cash and Investments outside City Treasury $ 14,051 4,295 9,756 — — Cash and Cash Equivalents N/A $ 41 41 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 41 41 — — —
Investments
exempt from
fair value
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, 2024
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 — — — Cash 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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
50 (Continued)
Hetch Hetchy’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as of June 30, 2024 and 2023:
The following table shows the percentage distribution of the City’s pooled investments by maturity:
As of June 30, 2024, Hetchy Power has the following commercial paper investments that represent
5.0% or more of the total investments outside City Treasury:
Hetchy Hetchy
Water Power CleanPowerSF Total 2024
Current assets:
Cash and investments with City Treasury $ 46,471 215,370 159,811 421,652 Cash and investments outside City Treasury — 41 — 41 Restricted cash and investments outside City Treasury — 6,849 — 6,849 Non-current assets:
Restricted cash and investments with City Treasury 31,330 50,732 — 82,062 Restricted cash and investments outside City Treasury — 7,202 — 7,202 Total cash, cash equivalents, and investments $ 77,801 280,194 159,811 517,806 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 Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2024 22.2% 19.5% 16.3% 42.0%
2023 21.5% 18.0% 14.5% 46.0%
Investment maturities (in months)
Fair Value
% of
Investments
Toronto-Dominion Bank $ 2,946 21.2 % Toyota Motor Corp 957 6.9
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
51 (Continued)
(4) Capital Assets
a) Hetch Hetchy capital assets as of June 30, 2024 and 2023 consist of the following:
* Decrease in construction work in progress included $ 217 in capital project write -offs, mainly related to Distribution Interface Project. The remaining difference of $ 31,721 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.
* Decrease in construction work in progress included $403 in capital project write -offs, mainly related to 2018 Moccasin Storm Project. The remaining difference of $4,353 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.
2023 Increases Decreases 2024
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 370,470 121,442 (61,775) * 430,137 Total capital assets not being depreciated and amortized 377,088 121,442 (61,775) 436,755 Capital assets being depreciated and amortized:
Facilities and improvements 855,790 89,163 — 944,953
Intangible assets 45,855 — — 45,855
Machinery and equipment 152,225 4,116 — 156,341
Right-to-use lease assets 442 — — 442
Right-to-use subscription assets 998 — (651) 347
Total capital assets being depreciated and amortized 1,055,310 93,279 * (651) 1,147,938 Less accumulated depreciation and amortization for:
Facilities and improvements (442,252) (19,507) — (461,759) Intangible assets (23,140) (488) — (23,628)
Machinery and equipment (98,866) (4,811) — (103,677)
Right-to-use lease assets (119) (37) — (156)
Right-to-use subscription assets (717) (156) 651 (222)
Total accumulated depreciation and amortization (565,094) (24,999) 651 (589,442) Total capital assets being depreciated and amortized, net 490,216 68,280 — 558,496 Total capital assets, net $ 867,304 189,722 (61,775) 995,251 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
Right-to-use lease assets 1,068 236 (862) 442
Right-to-use subscription assets 998 — — 998
Total capital assets being depreciated and amortized 1,005,967 50,390 * (1,047) 1,055,310 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)
Right-to-use lease assets (704) (277) 862 (119)
Right-to-use subscription assets (357) (360) — (717)
Total accumulated depreciation and amortization (541,467) (24,672) 1,045 (565,094) Total capital assets being depreciated and amortized, net 464,500 25,718 (2) 490,216 Total capital assets, net $ 787,648 126,098 (46,442) 867,304
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
52 (Continued)
b) Hetchy Water capital assets as of June 30, 2024 and 2023 consist of the following:
* The difference between decrease in construction work in progress and increase in capital assets being depreciated due to direct additions to facilities, improvements, machinery, and equipment.
* Decrease in construction work 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 $ 339 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.
2023 Increases Decreases 2024
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 3,232 — — 3,232
Intangible assets 6 — — 6
Construction work in progress 72,450 23,029 (9,595) * 85,884 Total capital assets not being depreciated and amortized 75,688 23,029 (9,595) 89,122 Capital assets being depreciated and amortized:
Facilities and improvements 311,312 9,228 — 320,540
Intangible assets 20,522 — — 20,522
Machinery and equipment 29,891 1,310 — 31,201
Right-to-use lease assets 198 — — 198
Right-to-use subscription assets 490 — (320) 170
Total capital assets being depreciated and amortized 362,413 10,538 * (320) 372,631 Less accumulated depreciation and amortization for:
Facilities and improvements (185,066) (5,353) — (190,419) Intangible assets (10,361) (207) — (10,568)
Machinery and equipment (22,232) (870) — (23,102)
Right-to-use lease assets (53) (16) — (69)
Right-to-use subscription assets (353) (76) 320 (109)
Total accumulated depreciation and amortization (218,065) (6,522) 320 (224,267) Total capital assets being depreciated and amortized, net 144,348 4,016 — 148,364 Total capital assets, net $ 220,036 27,045 (9,595) 237,486 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
Right-to-use lease assets 67 105 26 198
Right-to-use subscription assets 490 — — 490
Total capital assets being depreciated and amortized 355,578 6,867 * (32) 362,413 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) (892) 57 (22,232)
Right-to-use lease assets (6) (21) (26) (53)
Right-to-use subscription assets (176) (177) — (353)
Total accumulated depreciation and amortization (211,572) (6,524) 31 (218,065) Total capital assets being depreciated and amortized, net 144,006 343 (1) 144,348 Total capital assets, net $ 201,382 25,375 (6,721) 220,036
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
53 (Continued)
c) Hetchy Power capital assets as of June 30, 2024 and 2023 consist of the following:
* Decrease in construction work in progress included $ 217 in capital project write -offs, mainly related to Distribution Interface Project. The remaining difference of $ 30,778 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.
* Decrease in construction work 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 $ 4,014 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.
2023 Increases Decreases 2024
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 298,020 98,413 (52,180) * 344,253 Total capital assets not being depreciated and amortized 301,400 98,413 (52,180) 347,633 Capital assets being depreciated and amortized:
Facilities and improvements 544,478 79,935 — 624,413
Intangible assets 25,333 — — 25,333
Machinery and equipment 122,334 2,806 — 125,140
Right-to-use lease assets 244 — — 244
Right-to-use subscription assets 397 — (257) 140
Total capital assets being depreciated and amortized 692,786 82,741 * (257) 775,270 Less accumulated depreciation and amortization for:
Facilities and improvements (257,186) (14,154) — (271,340) Intangible assets (12,779) (281) — (13,060)
Machinery and equipment (76,634) (3,941) — (80,575)
Right-to-use lease assets (66) (21) — (87)
Right-to-use subscription assets (283) (63) 257 (89)
Total accumulated depreciation and amortization (346,948) (18,460) 257 (365,151) Total capital assets being depreciated and amortized, net 345,838 64,281 — 410,119 Total capital assets, net $ 647,238 162,694 (52,180) 757,752 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
Right-to-use lease assets 81 131 32 244
Right-to-use subscription assets 397 — — 397
Total capital assets being depreciated and amortized 649,358 43,523 * (95) 692,786 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) (4,162) 126 (76,634)
Right-to-use lease assets (8) (26) (32) (66)
Right-to-use subscription assets (141) (142) — (283)
Total accumulated depreciation and amortization (329,165) (17,877) 94 (346,948) Total capital assets being depreciated and amortized, net 320,193 25,646 (1) 345,838 Total capital assets, net $ 585,965 100,994 (39,721) 647,238
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
54 (Continued)
d) CleanPowerSF capital assets as of June 30, 2024 and 2023 consist of the following:
See Notes 9 and 10 for additional information about right-to-use assets for leases and SBITAs.
(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 , 2021 Series AB Bonds, and 2023 Series A Bonds, and have a priority lien on the pledge of net revenues to the outstanding 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 , 2021 Series AB Bonds, and 2023 Series A Bonds (the “Bonds” or “Bond”).
In the Indenture, the SFPUC covenants and agrees that it will pay into the Revenue Fund as received all Revenues of Hetchy Power
and shall be used and applied, as provided by the Indenture, solely for the purposes of operating and maintaining Hetchy Power and paying all costs, charges, and expenses in connection therewith and for the purpose of making repairs, renewals, and replacem ents to Hetchy Power and constructing additions, betterments, and extensions thereto.
The Indenture provides that Revenues deposited in the Revenue Fund shall be disbursed in the following order of priority:
1. The payment of operation and maintenance expenses;
2. Any priority reconstruction and replacement fund deposits;
3. Deposit in the interest account of each Bond Fund;
4. Deposit in the bond retirement account of each Bond Fund;
5. Deposit in the reserve fund;
6. (i) Payment of principal and premium, if any, and interest on any Subordinate Obligations; (ii) deposit into a reserve fund securing any Subordinate Obligations; (iii) Swap Agreement payments pursuant to Swap Agreements entered into by the SFPUC with respect to any Subordinate Obligations; an d (iv) payment to any financial institution or insurance company 2023 Increases Decreases 2024
Capital assets being depreciated and amortized:
Right-to-use subscription assets $ 111 — (74) 37
Total capital assets being depreciated and amortized 111 — (74) 37 Less accumulated depreciation and amortization for:
Right-to-use subscription assets (81) (17) 74 (24)
Total accumulated depreciation and amortization (81) (17) 74 (24) Total capital assets being depreciated and amortized, net 30 (17) — 13 Total capital assets, net $ 30 (17) — 13
2022 Increases Decreases 2023
Capital assets being depreciated and amortized:
Right-to-use lease assets $ 920 — (920) —
Right-to-use subscription assets 111 — — 111
Total capital assets being depreciated and amortized 1,031 — (920) 111 Less accumulated depreciation and amortization for:
Right-to-use lease assets (690) (230) 920 —
Right-to-use subscription assets (40) (41) — (81)
Total accumulated depreciation and amortization (730) (271) 920 (81) Total capital assets being depreciated and amortized, net 301 (271) — 30 Total capital assets, net $ 301 (271) — 30
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
55 (Continued)
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 reconstruction and replacement fund;
8. Any necessary or desirable capital additions or improvements to the Hetchy Power;
9. Any payment under a Take -or-Pay Power Purchase Agreement that does not constitute an operation and maintenance expense;
10. Any payment under a Swap Agreement that does not constitute a Swap Agreement payment; and
11. Any other lawful purpose of the SFPUC.
In the Indenture, the SFPUC covenants and agrees to transfer to the Trustee for deposit in the Interest Account of each applicable Bond Fund all Refundable Credits received by the SFPUC.
In accordance with the Agreements, Hetch Hetchy maintains certain restricted cash and investment balances in trust.
(a) Hetchy Water has the following restricted assets held in trust as of June 30, 2024 and 2023:
(b) Hetchy Power has the following restricted assets held in trust as of June 30, 2024 and 2023:
Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Hetch Hetchy Revenue Fund.
(6) Short-Term Debt
Effective March 2019, under Charter Sections 9.107(6) and 9.107(8), and 2018 Proposition A, the Commission and Board of Supervisors authorized the issuance of up to $250,000 in commercial paper notes for the purpose of reconstructing, replacing, expanding, repairing or improving power facilities of Hetchy Power. Interest rates for the commercial paper ra nged from 2.8% to 3.7% and
1.1% to 3.2 % in fiscal year s 2024 and 2023, respectively . The Enterprise had $ 90,654 and 2024 2023
Cash and investments with City Treasury:
Hetch Hetchy bond construction fund $ 31,330 10,980
Total restricted assets $ 31,330 10,980
2024 2023
Cash and investments with City Treasury:
Hetch Hetchy bond construction fund $ 50,732 17,606
Cash and investments outside City Treasury:
2009 Series C Certificates of participation - 525 Golden Gate 131 231 2009 Series D Certificates of participation - 525 Golden Gate 1,000 784 2015 Series A Revenue Bonds 2,205 2,261
2015 Series B Revenue Bonds 518 532
2021 Series AB Revenue Bonds 442 5,382
2023 Series A Revenue Bonds 9,730 —
Commercial Paper 25 21
Total restricted cash and investments outside City Treasury 14,051 9,211 Interest and other receivables:
Hetch Hetchy bond construction fund 169 4,151
Total restricted assets $ 64,952 30,968
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
56 (Continued)
$116,352 commercial paper outstanding as of June 30, 202 4 and 2023, respectively. The Enterprise had $159,346 and $133,648 in unused authorization as of June 30, 2024 and 2023, respectively.
$117,333 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.
The commercial paper notes can be issued in the aggregate principal amounts of up to $250,000, and m ay be marketed and re -marketed with maturities up to 270 days and are secured by two separate bank credit facilities, as set forth below. The commercial paper notes are payable from revenues, and are secured on a parity lien basis with each other and with the outstanding 2011 QECBs and 2015 NCREBs, collectively the “Subordinate Obligations.” The Subordinate Obligations are secured on a subordinate basis to the payment of debt service on the Power Revenue Bonds.
As of June 30, 2024, the Commercial Paper No tes are secured by the following series: Series A -1 is secured by a $125,000 letter of credit from Bank of America N.A. which expires on March 6, 2026.
The agreement for the Series A- 1 facility stipulates a quarterly commitment fee of 0 .31%, on the maintenance of ratings of at least “AA -” by S&P and “AA -” by Fitch Ratings. Series A- 2 is secured by a $125,000 letter of credit from Bank of America N.A . which expires on March 6, 2026. The agreement for the Series A-2 credit facility stipulates a quarterly commitment fee of 0.29%, on the maintenance of ratings of at least “AA-” by S&P and “AA-” by Fitch Ratings.
Barclays Capital Inc ., Goldman Sachs & Co. LLC, and RBC Capital Markets, LLC serve as dealers for the comm ercial paper notes. The annual fee is 0.05% paid to Barclays Capital LLC and Goldman Sachs & Co. LLC and 0 .045% paid to RBC Capital markets, LLC on the average outstanding principal amount of the commercial paper notes managed by the respective dealer.
The commercial paper reimbursement agreements for the Enterprise contain a provision that in the event advances (or drawings) remain unpaid, such advances (or drawings) will convert into term loans and will be subject to the repayment provisions relating thereto.
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , significant events of default include 1) payment defaults , 2) material breach of warranty, representation, or other non-remedied breach of covenants as specified in the respective agreements (not cured within applicable grace periods), and 3) bankruptcy and insolvency events, 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 termina tion of the respective agreement. As of June 30, 2024 and 2023, there were no such events described herein.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
57 (Continued)
(7) Changes in Long-Term Liabilities
a) Hetch Hetchy’s long -term liability activities for the years ended June 30, 2024 and 2023 are as follows:
* Commercial paper is short-term in fiscal year 2024.
Interest Maturity Due within
rate (Calendar Year) 2023 Additions Reductions 2024 one year Bonds:
Qualified Energy Conservation Bonds 4.74 % 2027 $ 2,583 — (562) 2,021 569 New Clean Renewable Energy Bonds 2015 4.62 2032 1,491 — (148) 1,343 150 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 — — 32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 2,885 — (880) 2,005 910 2021 Series A Revenue Bonds 4.00 - 5.00 2051 74,280 — — 74,280 1,385 2021 Series B Revenue Bonds 4.00 - 5.00 2051 49,720 — — 49,720 585 2023 Series A Revenue Bonds 5.00 2053 — 123,905 — 123,905 — Add issuance premiums 27,948 7,325 (1,773) 33,500 — Total bonds payable 190,932 131,230 (3,363) 318,799 3,599 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 — (445) 12,148 463 Commercial paper* 2.80 - 3.69 2024 116,352 — (116,352) — — Net other postemployment benefits liability 37,180 8,514 (5,353) 40,341 — Net pension liability 33,468 23,988 (11,471) 45,985 — Accrued vacation and sick leave 6,725 3,303 (2,811) 7,217 3,723 Accrued workers’ compensation 3,457 1,000 (824) 3,633 645 Arbitrage rebate payable — 184 — 184 —
Damage claims liability 6,884 10,284 (13,105) 4,063 2,010 Due to other City departments 1,946 — (1,946) — — Lease liability 307 — (35) 272 35 Liabilities payable from restricted assets — 28,867 — 28,867 25,513 Subscription liability 286 — (163) 123 61 Unearned revenues, refunds, and other 12,716 26,358 (23,798) 15,276 14,696 Total $ 422,846 233,728 (179,666) 476,908 50,745
Interest Maturity 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 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 2051 74,280 — — 74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2051 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 2023 — 116,352 — 116,352 — Net other postemployment benefits liability 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
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
58 (Continued)
b) Hetchy Water’s long-term liability activities for the years ended June 30, 2024 and 2023 are as follows:
c) Hetchy Power’s long-term liability activities for the years ended June 30, 2024 and 2023 are as follows:
* Commercial paper is short-term in fiscal year 2024.
Due within
2023 Additions Reductions 2024 one year
Net other postemployment benefits liability $ 14,907 3,469 (2,107) 16,269 — Net pension liability 14,105 9,809 (4,824) 19,090 — Accrued vacation and sick leave 2,266 927 (713) 2,480 1,272 Accrued workers’ compensation 1,219 337 (259) 1,297 228 Damage claims liability 700 96 (528) 268 121 Lease liability 138 — (16) 122 16 Subscription liability 139 — (80) 59 30 Unearned revenues, refunds, and other 110 10 (14) 106 106 Total $ 33,584 14,648 (8,541) 39,691 1,773
Due within
2022 Additions Reductions 2023 one year
Net other postemployment benefits liability $ 14,240 667 — 14,907 — Net 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 Interest Maturity Due within
rate (Calendar Year) 2023 Additions Reductions 2024 one year Bonds:
Qualified Energy Conservation Bonds 4.74 % 2027 $ 2,583 — (562) 2,021 569 New Clean Renewable Energy Bonds 2015 4.62 2032 1,491 — (148) 1,343 150 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 — — 32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 2,885 — (880) 2,005 910 2021 Series A Revenue Bonds 4.00 - 5.00 2051 74,280 — — 74,280 1,385 2021 Series B Revenue Bonds 4.00 - 5.00 2051 49,720 — — 49,720 585 2023 Series A Revenue Bonds 5.00 2053 — 123,905 — 123,905 — Add issuance premiums 27,948 7,325 (1,773) 33,500 — Total bonds payable 190,932 131,230 (3,363) 318,799 3,599 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 — (445) 12,148 463 Commercial paper* 2.80 - 3.69 2024 116,352 — (116,352) — — Net other postemployment benefits liability 18,220 4,239 (2,576) 19,883 — Net pension liability 17,239 11,989 (5,896) 23,332 — Accrued vacation and sick leave 3,716 2,123 (1,862) 3,977 2,038 Accrued workers’ compensation 2,238 663 (565) 2,336 417 Arbitrage rebate payable — 184 — 184 —
Damage claims liability 6,150 9,273 (11,649) 3,774 1,872 Due to other City departments 1,946 — (1,946) — — Lease liability 169 — (19) 150 19 Liabilities payable from restricted assets — 28,867 — 28,867 25,513 Subscription liability 116 — (65) 51 25 Unearned revenues, refunds, and other 6,460 7,465 (6,741) 7,184 6,604 Total $ 376,131 196,033 (151,479) 420,685 40,550
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
59 (Continued)
d) CleanPowerSF’s long-term liability activities for the years ended June 30, 2024 and 2023 are as follows:
(a) 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 fiscal year 2028.
Interest Maturity 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 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 2051 74,280 — — 74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2051 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 2023 — 116,352 — 116,352 — Net other postemployment benefits liability 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 Due within
2023 Additions Reductions 2024 one year
Net other postemployment benefits liability $ 4,053 806 (670) 4,189 — Net pension liability 2,124 2,190 (751) 3,563 — Accrued vacation and sick leave 743 253 (236) 760 413 Damage claims liability 34 915 (928) 21 17 Subscription liability 31 — (18) 13 6 Unearned revenues, refunds, and other 6,146 18,883 (17,043) 7,986 7,986 Total $ 13,131 23,047 (19,646) 16,532 8,422 Due within
2022 Additions Reductions 2023 one year
Net other postemployment benefits liability $ 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
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
60 (Continued)
The future annual debt service relating to the QECBs outstanding as of June 30, 202 4 is as follows:
* The SFPUC received an IRS notic e dated April 17, 2024 that the federal interest subsidy is reduced by 5. 7% or a total reduction of $8 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.
(b) New Clean Renewable Energy Bonds 2015
In October 2015, Hetchy Power issued $4,100 of taxable 2015 NCREBs. The 2015 NCREBs were issued to fund certain qualified clean, renewable energy solar generation facilities at the Marina Middle School and the San Francisco Police Academy. The 2015 NCREBs were non- rated and privately placed with 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.
The future annual debt service relating to the 2015 NCREBs outstanding as of June 30, 202 4 is as follows:
* The SFPUC received an IRS notice dated April 17, 2024 that the federal interest subsidy is reduced by 5. 7% or a total reduction of $ 11 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.
(c) 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, 2024 and 2023, the outstanding principal amounts were $34,030 and $34,910, respectively.
Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2025 $ 569 89 (63) 26
2026 576 62 (44) 18
2027 582 35 (24) 11
2028 294 7 (4) 3
2,021 193 (135) 58
Less: Current portion (569)
Long-term portion as of June 30, 2024 $ 1,452
Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2025 $ 150 60 (40) 20
2026 152 53 (35) 18
2027 154 47 (31) 16
2028 156 39 (26) 13
2029 159 32 (21) 11
2030-2033 572 53 (35) 18
1,343 284 (188) 96
Less: Current portion (150)
Long-term portion as of June 30, 2024 $ 1,193
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
61 (Continued)
The future annual debt service relating to the 2015 Series AB Bonds outstanding as of June 30, 2024 is as follows:
(d) 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 2.6 4%. As of June 30, 202 4 and 2023, the outstanding principal amount was $124,000.
Fiscal years ending June 30: Principal Interest Total
2025 $ — 1,593 1,593
2026 — 1,593 1,593
2027 830 1,576 2,406
2028 1,020 1,534 2,554
2029 1,075 1,482 2,557
2030-2034 6,225 6,528 12,753
2035-2039 7,940 4,765 12,705
2040-2044 10,135 2,516 12,651
2045-2046 4,800 243 5,043
32,025 21,830 53,855
Add: Unamortized bond premium 2,794
Long-term portion as of June 30, 2024 $ 34,819
Hetchy Power - Power Revenue Bonds 2015 Series A (Green) Fiscal years ending June 30: Principal Interest Total
2025 $ 910 62 972
2026 945 25 970
2027 150 3 153
2,005 90 2,095
Less: Current portion (910)
Add: Unamortized bond premium 28
Long-term portion as of June 30, 2024 $ 1,123
Hetchy Power - Power Revenue Bonds 2015 Series B
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
62 (Continued)
The future annual debt service relating to the 2021 Series AB Bonds outstanding as of June 30, 2024 is as follows:
(e) Power Revenue Bonds 2023 Series A
In October 2023, Hetchy Power issued tax -exempt power revenue bonds, 2023 Series A in the amount of $123,905 with coupon interest rates of 5.0%. Proceeds from the bonds were used to finance or refinance Power Enterprise projects through the retirement of commercial paper issued as interim financing for such projects in furtherance of the Power Capital Improvement Program, to fund capitalized interest, and to pay costs of issuance. The bonds were rated “AA” and “AA-” by S&P and Fitch, respectively. Final maturity for 202 3 Series A is November 1, 2053.
The true interest cost is 4 .56%. As of June 30, 2024, the outstanding principal amount was $123,905.
Fiscal years ending June 30: Principal Interest Total
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 1,690 2,744 4,434
2030-2034 9,730 12,442 22,172
2035-2039 11,940 10,221 22,161
2040-2044 14,590 7,577 22,167
2045-2049 17,825 4,346 22,171
2050-2052 12,530 765 13,295
74,280 49,855 124,135
Less: Current portion (1,385)
Add: Unamortized bond premium 14,095
Long-term portion as of June 30, 2024 $ 86,990
Hetchy Power - Power Revenue Bonds 2021 Series A (Green) Fiscal years ending June 30: Principal Interest Total
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 715 1,900 2,615
2030-2034 4,130 8,932 13,062
2035-2039 5,220 7,964 13,184
2040-2044 6,465 6,798 13,263
2045-2049 15,985 4,887 20,872
2050-2052 14,665 896 15,561
49,720 39,311 89,031
Less: Current portion (585)
Add: Unamortized bond premium 9,422
Long-term portion as of June 30, 2024 $ 58,557
Hetchy Power - Power Revenue Bonds 2021 Series B
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
63 (Continued)
The future annual debt service relating to the 202 3 Series A Bonds outstanding as of June 30, 2024 is as follows:
(f) Certificates of Participation Issued for the 525 Golden Gate Headquarters Building In October 2009, the City issued $167,670 in certificates of participation to fund construction of the headquarters of the SFPUC at 525 Golden Gate Avenue. The 2009 Series C certificates were issued for $38,120 and 2009 Series D for $129,550 as “Build America Bonds” (BABs) on a taxable basis under the 2009 American Recovery and Reinvestment Act. The 2009 Series C certificates carry interest rates ranging from 2.0% to 5.0% and matured on November 1, 2022.
The 2009 Series D c ertificates carry interest rates ranging from 6.4% to 6.5% and mature on November 1, 2041. After adjusting Series D for the federal interest subsidy, the true interest cost averages 3.4% and 4.3% for Series C and Series D certificates, respectively.
Under the terms of a Memorandum of Understanding between the City and the SFPUC dated October 1, 2009, the City conveyed the real 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 pro perty lease in exchange for the proceeds of the sale of the certificates. The Trustee has leased the property back to the City for the City’s use under a project lease. The City is obligated under the project lease to pay base rental payments and other pay ments 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 Ente rprises have ownership interest in the building equal to their projected usage of space as follows: Water (73%), Wastewater (15%), and Power (12%).
Similarly, each Enterprise is responsible for a portion of the annual base rental payment based on their own ership 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.
Fiscal years ending June 30: Principal Interest Total
2025 $ — 6,195 6,195
2026 — 6,195 6,195
2027 1,075 6,168 7,243
2028 1,445 6,105 7,550
2029 1,820 6,024 7,844
2030-2034 10,915 28,603 39,518
2035-2039 14,640 25,403 40,043
2040-2044 18,760 21,251 40,011
2045-2049 24,090 15,922 40,012
2050-2054 51,160 8,080 59,240
123,905 129,946 253,851
Add: Unamortized bond premium 7,161
Long-term portion as of June 30, 2024 $ 131,066
Hetchy Power - Power Revenue Bonds 2023 Series A
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
64 (Continued)
The future annual debt service relating to the certificates of participation 2009 Series D outstanding as of June 30, 2024 is as follows:
* The SFPUC received an IRS notice dated April 17, 2024 that the federal interest subsidy is reduced by 5.7% or a total reduction of $159 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.
(g) Events of Default and Remedies
In accordance with GASB Statement No. 88, Ce rtain 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 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, 202 4 and 2023, there were no such events described herein. See Note 15(a) for information about CleanPowerSF guarantee.
(8) Revenue Pledge
Hetchy Power has pledged future power revenues to repay the 2011 QECBs and the 2015 NCREBs.
Additionally, Hetchy Power has pledged future power revenues for 2015 Series AB , 2021 Series AB , and 2023 Series A power revenue bonds . Proceeds from the bonds provided financing for various capital construction and facility energy efficiency projects. 2015 Series AB, 2021 Series AB, and 2023 Series A power revenue bonds are payable through fiscal year s 2046, 2052, and 2054, respectively, and are solely payable from net revenues of Hetchy Power on a senior lien basis to the 2011 QECBs and the 2015 NCREBs.
Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2025 $ 463 769 (254) 515
2026 483 739 (244) 495
2027 503 709 (234) 475
2028 524 675 (223) 452
2029 546 641 (212) 429
2030-2034 3,099 2,637 (870) 1,767
2035-2039 3,822 1,519 (501) 1,018
2040-2042 2,708 269 (89) 180
12,148 7,958 (2,627) 5,331
Less: Current portion (463)
Long-term portion as of June 30, 2024 $ 11,685
Hetchy Power - Certificates of Participation 2009 Series D (Taxable BABs)
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
65 (Continued)
Outstanding bonds issued with revenue pledge, total principal and interest remaining, principal and interest paid during fiscal years 202 4 and 2023, 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, 2021 Series AB, and 2023 Series A power revenue bonds net of capitalized interest, if any, which have a senior lien on Power Enterprise revenues; principal and interest paid during the year for the 2015 Series AB , 2021 Series AB , and 2023 Series A power revenue bonds was $2,565, net of capitalized interest.
(9) Leases
Hetch Hetchy has entered into long-term leases for office space and other equipment. The terms and conditions for these leases vary, which ranges between 1 to 75 years.
A summary of intangible right -to-use leases during the year s ended June 30, 202 4 and 2023 are as follows:
Hetchy Power 2024 2023
Bonds issued with revenue pledge $ 285,299 162,984
Principal and interest remaining due at the end of the year 526,808 281,546 Principal and interest paid during the year* 3,458 3,905 Net revenues for the year ended June 30 50,471 52,195 Funds available for debt service 166,641 162,399
2023 Increases Decreases Remeasurements 2024
Hetch Hetchy
Right-to-use assets: Building/facility $ 442 — — — 442 Total lease assets 442 — — — 442
Less accumulated amortization for:
Building/facility (119) (37) — — (156)
Total accumulated amortization (119) (37) — — (156) Total lease assets, net $ 323 (37) — — 286
Hetch Water
Right-to-use assets: Building/facility $ 198 — — — 198 Total lease assets 198 — — — 198
Less accumulated amortization for:
Building/facility (53) (16) — (69)
Total accumulated amortization (53) (16) — — (69) Total lease assets, net $ 145 (16) — — 129
Hetch Power 2023 Increases Decreases Remeasurements 2023 Right-to-use assets: Building/facility $ 244 — — — 244 Total lease assets 244 — — — 244
Less accumulated amortization for:
Building/facility (66) (21) — — (87)
Total accumulated amortization (66) (21) — — (87) Total lease assets, net $ 178 (21) — — 157
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
66 (Continued)
A summary of changes in the related lease liabilities during the years ended June 30, 2024 and 2023 are as follows:
2022 Increases Decreases Remeasurements 2023
Hetch Hetchy
Right-to-use assets: Building/facility $ 1,068 — (862) 236 442 Total 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 Total 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 Total 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) — — Total 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) — — —
Beginning End of Due within
Fiscal years of year Additions Remeasurements Deductions year one year Hetch Hetchy
$ 307 — — (35) 272 35 369 — 236 (298) 307 35 Hetchy Water
$ 138 — — (16) 122 16 62 — 105 (29) 138 16 Hetchy Power
$ 169 — — (19) 150 19 75 — 131 (37) 169 19 CleanPowerSF
$ — — — — — —
232 — — (232) — —
2023
2024
2023
2024
2023
2024
2023
2024
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
67 (Continued)
Future annual lease payments as of the years ended June 30, 2024 and 2023 are as follows:
Hetchy Water
Fiscal years ending June 30: Principal Interest Total
2025 $ 16 2 18
2026 16 2 18
2027 16 2 18
2028 17 1 18
2029 17 1 18
2030-2034 17 4 21
2035-2039 19 1 20
2040-2042 4 — 4
122 13 135
Less: Current portion (16)
Long-term portion as of June 30, 2024 $ 106
Hetchy Power
Fiscal years ending June 30: Principal Interest Total
2025 $ 19 3 22
2026 20 2 22
2027 20 2 22
2028 20 2 22
2029 21 1 22
2030-2034 21 4 25
2035-2039 24 2 26
2040-2042 5 — 5
150 16 166
Less: Current portion (19)
Long-term portion as of June 30, 2024 $ 131
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
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
68 (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 f or 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 amou nts are generally determined annually. During the year ended June 30, 2024, there was no amount recognized as expense for variable lease payments not included in the measurement of the lease liability. 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.
(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 var y, which ranges between 1 to 5 years.
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2024 and 2023 are as follows:
2023 Increases Decreases Remeasurements 2024
Hetch Hetchy
Subscription assets $ 998 — (651) — 347
Less accumulated amortization (717) (156) 651 — (222) Total subscription assets, net $ 281 (156) — — 125 Hetch Water
Subscription assets $ 490 — (320) — 170
Less accumulated amortization (353) (76) 320 — (109) Total subscription assets, net $ 137 (76) — — 61 Hetch Power 2023 Increases Decreases Remeasurements 2023 Subscription assets $ 397 — (257) — 140
Less accumulated amortization (283) (63) 257 — (89) Total subscription assets, net $ 114 (63) — — 51 CleanPowerSF
Subscription assets $ 111 — (74) — 37
Less accumulated amortization (81) (17) 74 — (24) Total subscription assets, net $ 30 (17) — — 13
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
69 (Continued)
A summary of changes in the related subscription liabilities during the years ended June 30, 2024 and 2023 are as follows:
Future annual subscription payments as of the years ended June 30, 2024 and 2023 are as follows:
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
Beginning End of Due within
Fiscal years of year Additions Remeasurements Deductions year one year Hetch Hetchy
286$ — — (163) 123 61
632 — — (346) 286 163
Hetchy Water
139$ — — (80) 59 30 309 — — (170) 139 80
Hetchy Power
116$ — — (65) 51 25 253 — — (137) 116 65
CleanPowerSF
31$ — — (18) 13 6 70 — — (39) 31 18 2024
2023
2024
2023
2024
2023
2024
2023
Hetchy Water
Fiscal years ending June 30: Principal Interest Total
2025 $ 30 2 32
2026 29 1 30
59 3 62
Less: Current portion (30)
Long-term portion as of June 30, 2024 $ 29
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
70 (Continued)
As of June 30, 202 4 and 202 3, 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 Trans bay Cable Project. The Licensee proposed to install, operate, and maintain approximately 53 miles of high-voltage direct current transmission cable running from the City of Pittsburg to the City. The first license 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.
Hetchy Power
Fiscal years ending June 30: Principal Interest Total
2025 $ 25 1 26
2026 26 — 26
51 1 52
Less: Current portion (25)
Long-term portion as of June 30, 2024 $ 26
Clean Power
Fiscal years ending June 30: Principal Interest Total
2025 $ 6 — 6
2026 7 — 7
13 — 13
Less: Current portion (6)
Long-term portion as of June 30, 2024 $ 7
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
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
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
71 (Continued)
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 Reliabil ity 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 4, cumulative expenses of $14,577 have been incurred, with $2,090 and $1,351 in fiscal years 2024 and 2023, 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 sam e 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 94.85% as of June 30, 202 3 (measurement date), 0.02% decreased from prior year, and 94.87% as of June 30, 2022 (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 2023 and 2022. 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 s hare was 1.33%, of which 0.5 5% for Hetchy Water, 0.6 8% for Hetchy Power, and 0. 10% for CleanPowerSF as of June 30, 2023 (measurement date). Hetch Hetchy’s allocation of the City’s proportionate share was 1.31%, of which 0.55% for Hetchy Water, 0.68% for Hetchy Power, and 0.08% for CleanPowerSF as of June 30, 2022 (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 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 Fiscal Year 2024 Fiscal Year 2023
Valuation Date (VD) July 1, 2022 updated to June 30, 2023 July 1, 2021 updated to June 30, 2022 Measurement Date (MD) June 30, 2023 June 30, 2022
Measurement Period (MP) July 1, 2022 to June 30, 2023 July 1, 2021 to June 30, 2022
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
72 (Continued)
on the Retirement System’s website http s://mysfers.org or by writing to the San Francisco Employees’ Retirement System, 1145 Market Str eet, 5th 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 dutie s are in fire prevention and suppression work or who occupy positions designated by law as firefighter member positions.
d) Police Members – police officers and other employees whose principal duties are in active law enforcement or who occupy positions designated by law as police member positions.
The membership groups and the related service retirement benefits are included in the Notes to the 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 r etirement 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. Proposition A passed on November 8, 2022 making members who retired before November 6, 1996 (Pre96 Retirees) eligible for a Supplemental COLA, even if SFERS is not fully funded based on the market value of assets. Also, Pre9 6 Retirees’ base retirement allowances were adjusted to account for Supplemental COLAs not received in 2013, 2014, 2017, 2018, and 2019 due to the full funding requirement. Effective with Proposition A, Pre96 Retirees receive the same Supplemental COLAs as the members who retired on or after November 6, 1996 , and were hired before January 7, 2012. For all members hired before January 7, 2012, all Supplemental COLAs paid to them in retirement benefits will continue into the future even where an additional Supplemental COLA is not payable in any given year. For members hired on and after January 7, 2012, a Supplemental COLA will only be paid to retirees when the Plan is fully funded on a market value of asset basis and in addition for these members, Supplemental COLAs will not be permanent adjustments to retirement benefits. That is, in years when a Supplemental COLA is not paid, all previously paid Supplemental COLAs will expire.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
73 (Continued)
Funding and Contribution Policy
SFERS Plan – Contributions are made by both t he City and the participating employees.
Employee contributions are mandatory as required by the Charter. Employee contribution rates varied from 7.5% to 11.5% and 7.5% to 12.0% as a percentage of gross covered salary in fiscal years 2024 and 2023 . Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The City is required to contribute at an actuarially determined rate . Based on the July 1, 2022 actuarial report, the required employer contribution rates for fiscal year 2024 range d from
15.24% to 18.24%. Based on the July 1, 2021 actuarial report, the required employer contribution rates for fiscal year 2023 ranged from 17.85% to 21.35%.
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 proporti onate share of employer contributions recognized by the Retirement System in fiscal years ended June 30, 202 3 and 2022 (measurement years) was $638,003 and $729,578, respectively. Hetch Hetchy’s allocation of employer contributions was $8,364, of which $ 3,525 for Hetchy Water, $ 4,308 for Hetchy Power, and $531 for CleanPowerSF for fiscal year 202 3 (measurement period). Hetch Hetchy’s allocation of employer contributions was $9,766, of which $4,149 for Hetchy Water, $5,071 for Hetchy Power, and $546 for CleanPowerSF for fiscal year 2022 (measurement period).
Pension Liabilities, Pension Expenses, and Deferred Outflows and Inflows of Resources Related to Pensions
Fiscal Year 2024
As of June 30, 202 4, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $ 3,456,687. The City’s NPL for each of its cost - sharing plans is measured as a proportionate share of the plans’ NPL. The net pension liability of the SFERS Plan is measured as of June 30, 202 3 (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 July 1 , 2022 rolled forward to June 30, 202 3 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, 2024 was $ 45,985, of which $ 19,090 was for Hetchy Water, $ 23,332 for Hetchy Power, and $3,563 for CleanPowerSF.
For the year ended June 30, 202 4, the City’s recognized pension expense was $ 659,719 including amortization of deferred outflows/inflows related pension items. Hetch Hetchy’s allocation of pension expense including amortization of deferred outflows/inflows related pension items was $8,008, of which $3,230 for Hetchy Water, $ 3,948 for Hetchy Power, and $830 for CleanPowerSF. Pension expense increased from the prior year, largely due to the amortization of deferrals.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
74 (Continued)
At June 30, 202 4, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions 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 pension expense/(benefit) as follows:
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 for each of its cost - sharing plans is measured as a proportionate share of the plans’ NPL. 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 July 1 , 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, o f 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 benefit was $13,196 including amortization of deferred outflows/inflows related pension items. Hetch Hetchy’s allocation of pension benefit including amortization of deferred outflows/inflows related pension items was $2,192, of which $955 for Hetchy Water, $1,168 for Hetchy Power, and $69 for CleanPowerSF.
Pension benefit increased from the prior year, largely due to the amortization of deferrals.
Hetchy Hetchy Hetchy Hetchy
Fiscal Year 2024 Water Power CleanPowerSF Total Water Power CleanPowerSF Total Pension contributions subsequent to the $ 3,518 4,299 657 8,474 — — — — measurement date
Differences between expected and actual
experience 2,051 2,507 383 4,941 — — — — Changes in assumptions 2,470 3,021 461 5,952 1,127 1,378 210 2,715 Net difference between projected and actual
earnings on pension plan investments 3,613 4,415 674 8,702 — — — — Change in employer's proportion 277 338 12 627 814 994 715 2,523 Total $ 11,929 14,580 2,187 28,696 1,941 2,372 925 5,238 Resources Resources
Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2025 $ (336) (410) (330) (1,076) 2026 (1,374) (1,680) (422) (3,476) 2027 7,151 8,740 1,225 17,116
2028 1,029 1,259 132 2,420
$ 6,470 7,909 605 14,984
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
75 (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, exc lusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in pension expense/(benefit) as follows:
Hetchy Hetchy Hetchy Hetchy
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 Hetchy
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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
76 (Continued)
Actuarial Assumptions
Fiscal Year 2024
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for SFERS Plan as of June 30, 202 3 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 202 2 actuarial valuation. Refer to the July 1, 202 2 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website https://mysfers.org.
Changes of Assumptions SFERS plan – There were no changes in the discount rate for the measurement period ended June 30, 2023. The municipal bond yield increased from 3.54% to
3.65%.
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 3 measurement date were 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, 2022.
Key Actuarial Assumptions
Valuation Date July 1, 2022 updated to June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 3.65% as of June 30, 2023
3.54% as of June 30, 2022
Bond Buyer 20-Bond GO Index, June 30, 2022 and June 29, 2023 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 7.20% as of June 30, 2023
7.20% as of June 30, 2022
Administrative Expenses 0.60% of payroll as of June 30, 2023
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, 2023 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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
77 (Continued)
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 https://mysfers.org.
Mortality rates for health Miscellaneous members were based up on 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, 2022 measurement date were 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.
Discount Rate
Fiscal Year 2024
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 7.20% as of June 30, 2023 and June 30, 2022 (measurement date).
The discount rate used to measure the Total Pension Liability as of June 30, 2023 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, 2022 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 July 1, 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, 2022 2.00% 1.90% 2.50% 3.60%
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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
78 (Continued)
The amortization payment is based on closed periods that vary in length depending on the source. Charter amendments prior t o 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.
However, the change due to Proposition A was amortized over 10 years. In the July 1, 2016 valuation, the increase in the unfunded actuarial liability attributable to the Supplemental COLAs granted effective July 1, 2013 was amortized over 17 years. For the July 1, 2021 valuation, all amortization periods for actuarial gains and losses and prior assumption changes were reduced to 5 years. The assumption change effective July 1, 2021 is amortized over 20 years. Future experience gains and losses and assumption or method changes on or after July 1, 2021 are amortized over 20 years. If the plan becomes 100% funded based on the actuarial value of assets, any new net surpluses are amortized over a rolling 20 -year period. 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.
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 anticipat ed future amortization payments on future Supplemental COLAs for current members when they are expected to be granted. For members who were hired before Proposition C passed, 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 were hired after Proposition C passed, the market value of assets must also exceed the actuarial liability 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. Most members receive a 1.50% Supplemental COLA when a full Supplemental COLA is granted.
No Supplemental COLA was payable as of July 1, 2023 due to the unfavorable investment return for fiscal year 2023. 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 mem bers through 2104.
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 .65% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2023 is 7.20%.
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 Assumed Supplemental COLA for Members with a 2.00% Basic COLA Fiscal years
2025+ 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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
79 (Continued)
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 2023
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 7.20% 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.
The amortization payment is based on closed periods that vary in length depending on th e 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 amortiz ed 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.
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 Asset Class
Target
Allocation
Long-Term Expected Real
Rate of Return
Global Equity 37.0 % 4.6 % Private Equity 23.0 7.8
Private Credit 10.0 5.8
Real Assets 10.0 5.3
Absolute Return 10.0 4.4
Treasuries 8.0 1.7
Liquid Credit 5.0 3.5
Leverage (3.0) 1.4
Total 100.0
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
80 (Continued)
COLAs for current members when they are ex pected 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 actuar ial value of assets. For members who did not work after November 6, 1996 and before Proposition C passed, the market value of assets must also exceed the actuarial liability at the beginning of the year for a Supplemental COLA to be granted.
When a Supplemental COLA is granted, the 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 de pends 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 m embers, 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 a re not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2022 is 7.20%.
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 eac h 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.
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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
81 (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 usi ng the discount rate, as well as what Hetch Hetchy’s allocation of the employer’s proportionate share of the total pension liability/(asset) would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.
(b) Other Postemployment Benefits
Hetch Hetchy participates in a single-employer defined benefit other postemployment benefits plan (the Plan). The Plan is maintained by the City and is administered through the City’s Health Service System. It provides postem ployment 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 postemployment benefits (OPEB) plan.
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
Hetchy Hetchy
Fiscal Year 2024 Water Power CleanPowerSF Total
$ 44,775 54,725 8,357 107,857
19,090 23,332 3,563 45,985
(2,088) (2,552) (390) (5,030)
Hetchy Hetchy
Fiscal Year 2023 Water Power 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) 1% Increase Share of NPA @ 8.20% 1% Decrease Share of NPL @ 6.20%
Share of NPL @ 7.20%
1% Increase Share of NPA @ 8.20%
1% Decrease Share of NPL @ 6.20%
Share of NPL @ 7.20%
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
82 (Continued)
GASB Statement No. 75 requires that reported results must pertain to liability and asset information within certain defined timeframes. F or 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, 2023 and June 30, 2022. 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 1.03%, of which 0.41% for Hetchy Water, 0.51% for Hetchy Power, and 0.11% for CleanPowerSF as of June 30, 2023 (measurement date). Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.9 8%, of which 0.40 % for Hetchy Water, 0.4 7% for Hetchy Power, and 0.11% for CleanPowerSF as of June 30, 2022 (measurement date).
Benefits
Permanent full- time and elected employees are eligible to retire and receive post employment 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 industria l 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 related costs are based on an established pat tern of practice.
Fiscal Year 2024 Fiscal Year 2023
Valuation Date (VD) June 30, 2022 updated to June 30, 2023 June 30, 2022 Measurement Date (MD) June 30, 2023 June 30, 2022
Measurement Period (MP) July 1, 2022 to June 30, 2023 July 1, 2021 to June 30, 2022 San Francisco Health Service System Retiree Plan - Single-Employer
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
83 (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 Actua ry 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 1st 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 2024
For the fiscal year ended June 30, 2024, the City’s funding was based on “pay as you go” plus a contribution of $48,779 to the Retiree Healthcare Trust Fund. The “pay as you go” portion paid by the City was $229,922 for a total contribution of $278,701 for the fiscal year ended June 30, 2024. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 202 4 were $2,864: $1,155 for Hetchy Water, $1,412 for Hetchy Power, and $297 for CleanPowerSF and will be recognized as a reduction of the net OPEB liability in the reporting year ending June 30, 2025.
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 202 3 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.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
84 (Continued)
OPEB Liability, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB
Fiscal Year 2024
As of June 30, 2024, the City reported net OPEB liabilit y related to the Plan of $3,924,832.
Hetch Hetchy’s proportionate share of the City’s net OPEB liability as of June 30, 2024 was $40,341: $16,269 for Hetchy Water, $19,883 for Hetchy Power, and $4,189 for CleanPowerSF.
For the year ended June 30, 2024, the City’s recognized OPEB expense was $261,158.
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 /(income) was $5,204:
$2,390 for Hetchy Water and $2,922 for Hetchy Power, and $(108) for CleanPowerSF.
As of June 30, 202 4, 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 th e measurement date, and deferred inflows of resources will be amortized annually and recognized in OPEB expense as follows:
Fiscal Year 2023
As of June 30, 2023, the City reported net OPEB liabilit y 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.
For the year ended June 30, 202 3, 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.
Hetchy Hetchy Hetchy Hetchy
Water Power CleanPowerSF Total Water Power CleanPowerSF Total Contributions subsequent to measurement date $ 1,155 1,412 297 2,864 — — — — Differences between expected and actual
experience 699 854 180 1,733 1,886 2,305 486 4,677 Changes in assumptions 473 578 122 1,173 — — — — Net difference between projected and actual
earnings on plan investments
125 152 32 309 — — — —
Change in proportion 739 903 365 2,007 1,011 1,236 1,806 4,053 Total $ 3,191 3,899 996 8,086 2,897 3,541 2,292 8,730 Schedules of Deferred Outflows and Inflows of Resources Deferred Outflows of Deferred Inflows of
Resources Resources
Fiscal Hetchy Hetchy
years Water Power CleanPowerSF Total
2025 $ (238) (292) (571) (1,101) 2026 (79) (96) (456) (631) 2027 (170) (209) (355) (734) 2028 (362) (443) (244) (1,049) 2029 (12) (14) 33 7 Total $ (861) (1,054) (1,593) (3,508) Deferred Outflows/(Inflows) of Resources
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
85 (Continued)
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 th e measurement date, and deferred inflows 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 $ 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) 2028 (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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
86 (Continued)
Actuarial Assumptions
Fiscal Year 2024
A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2023 (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 updated to June 30, 2023
Measurement Date June 30, 2023
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 7.24% trending down to ultimate rate of 3.94% in 2075 Medicare trend starts at 7.24% trending down to ultimate rate of 3.94% in 2075 10-County average trend starts at 5.00% trending down to ultimate rate of 3.94% 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
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ended June 30, 2019.
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
Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
87 (Continued)
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 Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ended June 30, 2019.
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
Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
88 (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, 2024 and June 30, 2023:
Discount Rate
Fiscal Year 2024
The discount rate used to measure the Total OPEB Liability as of June 30, 2023 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 per iod. 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 expec ted 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 2024
1% Decrease $ 13,835 16,909 3,562 34,306
Healthcare Cost Trend Rate 16,269 19,883 4,189 40,341 1% Increase 19,288 23,574 4,966 47,828
Hetchy Hetchy
Water Power CleanPowerSF 2023
1% Decrease $ 12,753 15,586 3,467 31,806
Healthcare Cost Trend Rate 14,907 18,220 4,053 37,180 1% Increase 17,579 21,486 4,779 43,844
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(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 be if it were calculated using a discou nt rate that is 1% lower or 1% higher than the current 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 investment s 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 Fun d. 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 25.0 % 6.1 %
U.S. Small Cap 2.0 6.7
Developed Market Equity (non-U.S.) 13.0 7.2
Emerging Market Equity 10.0 7.4
Credit
Bank Loans 3.0 4.4
High Yield Bonds 3.0 4.7
Rate Securities
Investment Grade Corporate Bonds 7.0 2.8
Short-term Treasury Inflation-Protected Securities (TIPS) 5.0 1.0 Private Markets
Private Equity 10.0 8.4
Private Debt 5.0 6.4
Core Private Real Estate 5.0 3.9
Infrastructure (Core Private) 2.0 5.2
Risk Mitigating Strategies
Global Macro 10.0 3.1
Total 100.0 %
Hetchy Hetchy
Water Power CleanPowerSF Total
1% Decrease 6.00% $ 19,040 23,272 4,903 47,215
Discount Rate 7.00% 16,269 19,883 4,189 40,341
1% Increase 8.00% 13,995 17,105 3,604 34,704
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
90 (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 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 postemployment health care obligations. The report may be obtained on the City’s website https://www.sf.gov/annual- comprehensive-financial-reports-acfr, 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 activ ities incurred by each Enterprise and the information available. For the year s ended June 30, 202 4 and 2023, the SFPUC allocated $28,789 or 23.1% and $26,362 or 23.1%, 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 % 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 CleanPowerSF 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, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
91 (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 $ 15,121 and $16,368 for the years ended June 30, 2024 and 2023, 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 w as 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, 202 4, Hetch Hetchy’s allocable shares of expenses and prepayment were $ 16 and $871 , respectively , an d as of June 30, 20 23 were $17 and $887, respectively.
(b) Hetchy Water
For the years ended June 30, 2024 and 2023, the SFPUC allocated $12,805 or 10.3% , and $11,778 or 10.3 %, 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 $ 46,266 and $49,636 for the years ended June 30, 2024 and 2023, 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 $ 42 and $20,000 for the years ended June 30, 2024 and 2023, respectively, from the Water Enterprise to fund upcountry projects.
(c) Hetchy Power
For the years ended June 30, 202 4 and 2023, the SFPUC allocated $ 10,297 or 8.3 %, and $9,452 or 8.3 % respectively, in administrative costs including COVID -19 Project expense to Hetchy Power.
For the years ended June 30, 2024 and 2023 , operating revenues in sales of power to departments within the City were $125,197 and $121,046, respectively.
The Water Enterprise also purchases electricity and gas from Hetchy Power. This amount totaled $10,256 and $11,398 for the years ended June 30, 2024 and 2023, respectively.
The Wastewater Enterprise purchases electricity and gas from Hetchy Power. This amount totaled $12,377 and $14,876 for the years ended June 30, 2024 and 2023, 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. Tran sportation
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
92 (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 (SFMT A) 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 f rom the credit sales . The Ordinance also allowed Hetchy Power to sell LCFS credits on behalf of other City agencies which includes Port of San Francisco (Port) and San Francisco International Airport (SFO). Revenue allocations and fees are based on agreeme nts with the departments. LC FS revenue is reported as other non- operating revenues on the Statements of Revenues, Expenses, and Change in Net Position.
During the fiscal year ended June 30, 2024, Hetchy Power received total payments of LCFS credits of $1,838, of which $1,154 was trans ferred to other City departments ($684 for SFMTA, $372 for Port, and $98 for SFO ). The remaining portion was reported as other non -operating revenues on the Statements of Revenues, Expenses, and Change in Net Position.
During the fiscal year ended June 30, 2023, Hetchy Power received total payments of LCFS credits attributable to SFMTA of $1,123 , of which $561 was transferred to SFMTA and the remaining portion was reported as other non -operating revenues on the Statement s 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 started earning its own LCFS credits 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 de partments was $ 11,421 and $11,486 as of June 30, 2024 and 2023 , 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, 2024 and 2023 , projects completed throughout the City amounted to $ 3,037 and $3,544, respectively and are r ecorded 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 $7,041 and $7,177 for the years ended June 30, 2024 and 2023, respectively.
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
93 (Continued)
As of June 30, 2024 and 2023 , Hetchy Power recorded receivables of $405 and $518, respectively, due from Wastewater Enterprise for its share of costs relating to SFPUC Headquarters Living Machine System . As of June 30, 2024, Hetchy Power recorded receivable of $754 from General Fund related to utility user taxes refund . Details of due from other City departments are as follows:
As of June 30, 2023 , Hetchy Power had payables in the amount of $1,946 for claim settlement reimbursement to SFMTA. The amount was fully paid and Hetchy Power had no payable balance as of June 30, 2024.
(d) CleanPowerSF
For the years ended June 30, 2024 and 2023 , the SFPUC allocated $ 5,687 or 4.5%, and $5,132 or 4.5%, respectively, in administrative costs to CleanPowerSF.
As of June 30, 202 4, and 202 3, operating revenue in sales of power to Hetchy Power were $1,421 and $1.549, respectively. Operating expenses in purchase of power from Hetchy Power were $13,521 and $5,846, respectively. Wholesale sales of energy, capacity and/or other electric power relat ed products may be made between the CleanPowerSF and Hetchy Power, when available. CleanPowerSF and Hetchy Power transact for such products at prevailing market prices.
CleanPowerSF received program support services from Hetchy Power. This amount totaled $2,841 and $2,850 for the years ended June 30, 2024 and 2023, 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 economical , 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’ c ompensation 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 were no settlements that exceeded insurance coverage. 2024 2023
Treasure Island Development Authority $ 7,041 7,177
SEA-related project: Moscone Center 3,037 3,544
General Fund 754 —
Wastewater - 525 Golden Gate Headquarters Project 405 518 San Francisco Recreation and Park 105 209
Department of Public Works 79 38
Total due from other City departments 11,421 11,486
Less: current portion (1,558) (1,134)
Long-term portion as of June 30, net $ 9,863 10,352
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
94 (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, 2024, 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 si ze of the Enterprise’s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent years. The City 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
Beginning Claims paid and Claims End of
Fiscal years of year changes in estimates paid year
Hetch Hetchy
6,884$ 10,284 (13,105) 4,063
1,682 12,497 (7,295) 6,884 1,639 3,840 (3,797) 1,682 Hetchy Water
700$ 96 (528) 268
627 320 (247) 700
525 253 (151) 627
Hetchy Power
6,150$ 9,273 (11,649) 3,774
1,023 10,439 (5,312) 6,150 1,108 2,005 (2,090) 1,023 CleanPowerSF
34$ 915 (928) 21
32 1,738 (1,736) 34 6 1,582 (1,556) 32 2022
2022
2024
2023
2023
2024
2023
2024
2023
2024
2022
2022
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
95 (Continued)
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 modifica tion for injured employees with medical restrictions so return to work can occur as soon as possible.
The changes for the workers’ compensation liabilities for the years ended June 30, 2024, 2023, and 2022 are as follows:
*CleanPowerSF had no workers’ compensation liabilities as of June 30, 2024 and 2023.
(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 p erforms 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.
Beginning Claims and changes End of
Fiscal years of year Claims in estimates year
Hetch Hetchy
3,457$ 1,000 (824) 3,633 3,478 300 (321) 3,457
3,238 555 (315) 3,478
Hetchy Water
1,219$ 337 (259) 1,297
1,228 76 (85) 1,219
1,120 233 (125) 1,228
Hetchy Power
2,238$ 663 (565) 2,336
2,250 224 (236) 2,238
2,118 322 (190) 2,250
2022
2022
2022
2024
2023
2024
2023
2024
2023
HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
96 (Continued)
(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.
(i) Surety Bonds
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.
(j) Errors and Omissions
Errors and omissions, also known as 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 ge neration, Hetch Hetchy is exposed to risks that could impact its ability to generate net revenues to fund operating and capital investment activities. Hydroelectric generation facilities in the Sierra Nevada are the primary source of electricity for Hetch Hetchy. For this reason, the Hetch Hetchy revenues can vary with watershed hydrology, unexpected generator outages, and market prices for energy.
Given the inherent risk for all hydroelectric generation, several risk management interventions have been developed to mitigate exposure.
(m) Enterprise Risk Management
The Power Enterprise adopted the ISO 31000 standard for Hetchy Power and the CleanPowerSF program as the framework for implementing Enterprise Risk Management (ERM). The Enterprise utilizes this framework to systematically and proactively identify and mitigate risks that threaten its business objectives. Since not all risks are insurable or tr ansferable contractually, the ERM program provides an additional method to manage risks and protect the Enterprise’s current and expanding business allowing for increased operational resiliency and the ability to capitalize on opportunities.
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June 30, 2024 and 2023
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(15) Commitments and Litigation
(a) Commitments
As of June 30, 2024 and 2023, Hetch Hetchy had outstanding commitments with third parties of $154,97 5 and $136,322, respectively, for various purchase agreements. Of this, Hetch Hetchy had capital commitments of $6 5,261 and $ 99,568 as of June 30, 2024 and 2023, respectively.
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 Dis trict (TID) in which the Districts would be responsible for an increase in water flow releases from the reservoir in exchange for annual payments from the City, which are included in Hetchy Water’s operating expenses. The payment amounts were $5,714 and $5,329 for fiscal years 2024 and 2023, 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 dur ation 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 2024 and 2023 , Hetchy Power purchased distribution services for $ 27,932 and $29,008, 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
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June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
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different market entities through the Western System Power Pool (WSPP) and the CAISO. During fiscal years 2024 and 2023, Hetchy Power purchased $11,945 and $3,676 of power and other related products, respectively. Sales of excess power, after meeting Hetch Hetchy’s obligations, were $6,532 or 149,000 MWh for fiscal year 2024 and $1,157 or 155,000 MWh for fiscal year 2023, 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 2 010, the facility commenced commercial operation and began to provide Hetchy Power energy generated by the facility.
The PPA sets the starting purchase price of generated energy at $ 235/MWh, increasing by 3% each year throughout the term of the agreement, and it is expected that the facility will generate 6,560 MWh per year on average. Rates for fiscal year s ended June 30, 2024 and 2023 were $354/MWh and $344/MWh, respectively . In the event that the facility generates more energy than expected due to better than normal meteorological conditions, the PPA requires the Buyer to purchase all the excess energy but generation in excess of 120% of expected is purchased at no cost. The PPA also requires the Seller to generate a minimum amount of energy fr om 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 2024 and 2023 , purchases of energy under the Agreement were $2,184, or 6,269 MWh, and $2,037, or 6,006 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 exceed $134,743 to fulfill thi s 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 $ 456 and $471 as of June 30, 2024 and 2023 , respectively. CleanPowerSF’s share was $264 and $226 as of June 30, 2024 and 2023 , respectively.
On January 6, 2023, Amendment No. 1 was requested and approved to increase this cont ract 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 $895,743, with no change to the agreement duration. The drivers for these Amendments were higher than anticipated power prices, due to extreme weather, drought 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
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June 30, 2024 and 2023
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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 or mo re years. Citywide enrollment was completed in 2020 . Since it began serving customers in 2016 , CleanPowerSF’s cumulative opt -out rate is 4. 6% of all enrolled accounts. The total power purchase cost, net of wholesale sales, were $270,340 and $259,532 in fiscal years 2024 and 2023, respectively.
CleanPowerSF contracts with Calpine Energy Solutions to provide meter data management, billing and 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 electricity transmission, distribution , and CleanPowerSF generation services. PG&E remits payments received from customers for CleanPowerSF charges to the City. During fiscal years 2024 and 2023, amounts paid were $4,742 and $4,679, respectively.
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 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 effect ed 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 quarters) 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 unavail able. 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 eliminated 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). In March 2024 CleanPowerSF executed a fourth amendment to the Credit Agreement increasing the available amount from $20,000 to $75,000 and extended the agreement end date from March 2024 to March 2027. The Credit Agreement is secured by CleanPowerSF’s net revenues; there is no pledge of, or lien on net revenues that ranks senior to the obligations under the Credit Agreement. The Bank issued letters of credit in the face amounts totaling $ 6,183 for fiscal years ended June 30, 2024 and 2023 , respectively. CleanPowerSF did not draw on the Credit Agreement during fiscal years 2024 and 2023 . Accordingly, the uncommitted credit capacity under the Credit Agreement was $68,817 and $13,817 during fiscal years 2024 and 2023 , 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 qua rter.
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June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
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CleanPowerSF was in compliance with all covenants and requirements of the Credit Agreement as amended for fiscal years ended June 30, 2024 and 2023.
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 Credit Agreement to be imme diately 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) program 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% bill 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) Office of Environmental Health Hazard Assessment (OEHHA). Similar to DAC- GT, the CSGT program provided a 20% bill discount to qualifying customers in DACs to benefit from the development of solar generation projects located in their own or nearby DACs.
The CPUC approved 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 was expected to start serving customers during fiscal year 2026, but the CPUC discontinued the program. As of June 30, 2024 and 2023, CleanPowerSF received $98 and $868, 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.
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June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)
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(16) Subsequent Event
Power Enterprise, Issuance of Commercial Paper Notes
On October 10, 2024, the SFPUC issued $45,000 in Power Enterprise commercial paper notes to finance a portion of the design, acquisition, and construction of various capital projects in furtherance of the SFPUC’s Power Enterprise capital improvement program. The commercial paper notes are expected to be refinanced with proceeds of Power’s revenue bonds in fiscal year 2026, which is preliminary and subject to change.
w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
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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, 2024, and the related notes to the financial statements, and have iss ued our report thereon dated November 12, 2024.
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 the Hetch Hetchy’s internal control.
Accordingly, we do not express an opinion on the effectiveness of the Hetch Hetchy’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility 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 the Hetch Hetchy’s financial statements are free from material misstatement, we performed tests of its complianc e with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that a re 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
November 12, 2024
Cover photo: Moccasin Powerhouse
Generator Rehabilitation
Back cover photo: Paulsell Solar
Energy Center
Photos by: Robin Scheswohl
Date of Publication:
November 2024
SFPUC Financial Services
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