Hetch Hetchy Power and CleanPowerSF are programs of the San Francisco Public Utilities Commission (SFPUC), an enterprise department of the City and County of San Francisco.
OUR
MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.
525 Golden Gate Ave
San Francisco, CA 94102
(415) 554-3155
s
fpuc.gov/power
Date
:
To
:
May 1, 2026
C
ommissioner Joshua Arce, President
Commissioner Stephen Leveroni, Vice President
Commissioner Avni Jamdar
Commissioner Kate H. Stacy
Commissioner Meghan Thurlow
Through
: Dennis J. Herrera, General Manager
Barbara Hale, Assistant General Manager, Power
Michael Hyams, Deputy AGM, CleanPowerSF and Power Resources Fro
m: Karina Leung, Manager, Risk Management and Business Analysis, Power
Kevane Wong, Risk Management and Business Analysis, Power Subj
ect: Annual Power Risk Management Update – Calendar Year 2025
2 Table of Contents
Table of Contents .......................................................................................................................... 2
1. Executive Summary .................................................................................................................. 3
2. Enterprise Risk Management (ERM) ........................................................................................ 4
3. Risk Management 2025 Highlights ........................................................................................... 5
3.1 Customer Revenue/Growth ................................................................................................ 5
3.1.1 Economic Uncertainty ............................................................................................. 5
3.1.2 Risks and Opportunities of Large Loads ................................................................. 5
3.1.3 Lengthy City Processes Can Slow Customer Service ............................................. 6
3.1.4 Rising Costs Make Affordability a Concern ............................................................. 7
3.2 Reduce and Eliminate Reliance on PG&E ......................................................................... 9
3.2.1 Achieve Fair and Affordable Access to PG&E’s Distribution Grid ........................... 9
3.2.2 Reduce Our Dependence on PG&E Interconnection ............................................ 10
3.2.3 Expand Power Enterprise Service to All Electricity Customers in San Francisco . 11
3.3 Power Supply Risk Management and Compliance .......................................................... 12
3.3.1 Integrated Resource Planning (IRP) ..................................................................... 12
3.3.2 Power Portfolio Management ................................................................................ 14
3.3.3 Resource Adequacy (RA) ...................................................................................... 15
3.3.4 CAISO Grid Interconnection .................................................................................. 17
3.4 CleanPowerSF’s Financial Security Requirement ........................................................... 17
3.5 CleanPowerSF and the Power Charge Indifference Adjustment ..................................... 18
3.6 Hetch Hetchy Power and CleanPowerSF Cost of Service and Rate Studies .................. 20
4. Risk Management Activities – Areas of Emphasis for 2026 ................................................... 21
4.1 Customer Interconnection and Expansion ....................................................................... 21
4.2 Power Supply Portfolio Management and Compliance .................................................... 21
4.3 Hetch Hetchy Power and CleanPowerSF Rate Studies ................................................... 22
3 1. Executive Summary
This report summarizes the Power Enterprise’s key risk management activities over the past calendar year (2025) and covers both the Hetch Hetchy Power and CleanPowerSF programs.
This report is Power Enterprise’s tenth annual update to the Commission.
Hetch Hetchy Power is the City’s full-service electric utility and CleanPowerSF is San Francisco’s Community Choice Aggregation (CCA) program. Together, these retail electric service programs provide approximately 75% of the electricity consumed in San Francisco.
• 1 million MWh annual sales (150 MW)
• Approximately 9,000 customer accounts,
and growing
• Ownership of 385 MW hydro generation,
8.5 MW solar, 2 MW biogas
• Default product 100% Greenhouse Gas-
free (GHGf)
• “Premium” 100% California RPS
renewable
• 185 miles of transmission and distribution
lines (370 circuit miles), 10+ substations
• 215 authorized positions
• 3 million MWh annual sales (500 MW)
• Approximately 390,000 customer
accounts, stable
• Diverse portfolio of short, medium, and
long-term power, energy storage, and
resource adequacy contracts
• Default ”Green” product at least 60% RPS
renewable and nearly 100% Greenhouse
Gas-free
• “SuperGreen” and “SuperGreen Saver”
100% California RPS renewable
• 79 authorized positions
Hetch Hetchy Power and CleanPowerSF services benefit from shared risk management approaches and platforms. The Power Enterprise’s key updates for 2025 include the following:
1. Effectively managing our customer revenue/growth amidst numerous challenges including economic uncertainty, new risks and opportunities presented by large load projects, lengthy city processes, and managing rising costs with a goal of maintaining customer affordability.
2. Reducing and eliminating our reliance on Pacific Gas & Electric Company (PG&E) due to the ongoing issues we’ve encountered. This includes the following:
a. Fighting for fair and affordable access to PG&E’s distribution grid; b. Reducing our dependence on PG&E interconnection to the grid through a range of strategic investments such as the development of city-owned infrastructure and the Bay Corridor Transmission and Distribution (BCTD) project; and c. Continued actions towards the goal of acquiring PG&E’s electric assets in San Francisco.
4 3. Improving supply management tools and processes to ensure reliable, clean, and cost- effective power supply:
a. Completion in November 2023 of Hetch Hetchy Power’s Integrated Resource Plan (IRP) update, which is required every five years. Hetch Hetchy Power’s IRP was certified by the California Energy Commission on December 5, 2025.
CleanPowerSF’s last IRP was completed in 2022, and its next IRP is due in August 2026;
b. Advancing portfolio management tools and procurement processes for both Hetch Hetchy Power and CleanPowerSF so that we can effectively manage our power portfolios amidst a volatile and evolving regulatory and market environment;
c. Compliance with Resource Adequacy regulatory requirements with an eye on upcoming changes in 2026; and
d. Actively managing generator interconnection risks to ensure that we meet our future energy supply needs.
4. Ongoing participation in California Public Utilities Commission (California PUC) proceedings to ensure that the level of the Financial Security Requirement CCAs must post to the investor-owned utilities (IOU) to cover the costs of involuntarily returning customers to IOU generation service is reasonable.
5. Anticipating and planning for changes in the Power Charge Indifference Adjustment (PCIA) rates that CCA customers are required to pay under state law.
6. Completion of Hetch Hetchy Power and CleanPowerSF Cost of Service and Rate Studies to provide financial stability and affordability.
Protecting and growing our customer base and providing reliable and affordable electric service are critical to meet our business plans’ goals and objectives. In 2026, Power is continuing to focus on the efforts mentioned above and on identifying additional risk mitigation strategies for these and related efforts.
2. Enterprise Risk Management (ERM)
Both Hetch Hetchy Power and CleanPowerSF have leveraged the ERM framework to manage risk since 2014 and 2016, respectively. The ERM framework provides a strategic, comprehensive approach to assess, prioritize, monitor, and mitigate business risks. Under this framework, risks are organized by functional area to facilitate operational focus and accountability within Power Enterprise and across the supporting bureaus of the San Francisco Public Utilities Commission (SFPUC).
As discussed in detail below, our focus in 2025 was on mitigating risks posed by PG&E, improving programs to ensure cost-effective supply, and rolling out CleanPowerSF and Hetch Hetchy Power rates based on our own costs of service and financial risks.
5 3. Risk Management 2025 Highlights
In 2025, the Power Enterprise continued to manage risk with a focus on protecting and growing our customer base and continuing to provide reliable and affordable services to our customers.
The following six work areas were of particular note in 2025:
1. Customer Revenue and Growth
2. Reducing and Eliminating Reliance on PG&E
3. Power Supply Risk Management and Compliance
4. CleanPowerSF Financial Security Requirement
5. Power Charge Indifference Adjustment
6. Hetch Hetchy Power and CleanPowerSF Cost of Service and Rate Studies
3.1 Customer Revenue/Growth
3.1.1 Economic Uncertainty
The clean power industry as a whole is operating in a challenging economic environment driven by high tariffs, tax changes, a weakening US dollar, and an Administration that is hostile to renewable energy. Furthermore, there remain high levels of uncertainty and volatility around these challenges with ongoing legal challenges, the Supreme Court ruling against the initial justification for certain tariffs, and other avenues for tariffs being pursued by the Administration.
The war in Iran has further added to market uncertainties and is posing significant inflationary risks to global economies. The net impact of these issues has been higher costs for renewable energy PPAs as providers react to both realized and potential cost that they may incur.
Hetch Hetchy Power has been particularly impacted near-term by pauses and delays in new projects driven at least in part by such increased economic uncertainty. At this time, this seems to be largely an issue of delays rather than cancellations, and we still anticipate most of these projects materializing in our 10 Year Plan. Further project cancellations or delays, especially on large loads, would have an adverse impact on revenues.
CleanPowerSF’s demand and forecasted revenue are stable, and significant growth and reliance on new development is not anticipated in the same manner as Hetch Hetchy. While the CleanPowerSF program does not face the same level of project delay/cancellation risks as the Hetch Hetchy program, we expect the anticipated growth from electrification trends to take longer to develop than originally anticipated as the current Administration eliminates incentive programs and other support that had previously been provided through the Inflation Reduction Act. Further, CleanPowerSF is clearly being impacted by increased costs for PPAs, including renegotiations or price adjustments on contracts that were still in the process of being finalized.
3.1.2 Risks and Opportunities of Large Loads
The rapid growth of Artificial Intelligence (AI) is creating new challenges for power providers across the country, driven by the substantial electricity demands of these technologies.
6 Historically, customer growth has helped utilities reduce costs by spreading fixed expenses across a larger customer base and improving purchasing efficiency. However, this new wave of demand presents distinct risks and comes at a time of increasing cost to procure new sources of clean energy. AI-related customers often require exceptionally large amounts of power, significant upfront infrastructure investments, and may have limited operating histories, making their long-term demand uncertain. As a result, utilities face the risk of investing in grid expansions and energy procurement that may not be fully utilized if projected demand fails to materialize - for example, if companies scale back operations or cease operations altogether.
These underutilized investments, known as “stranded costs,” could otherwise be borne by existing customers if not properly managed.
While large “hyperscale” data centers are unlikely to locate in San Francisco due to the city’s relatively high costs for electricity, construction, and real estate, the city remains a global hub for technology and AI companies, including a growing number of startups. These businesses require office and commercial spaces capable of supporting on-site servers and high- performance computing needs, which can still represent substantial electrical loads.
Accordingly, the Power Enterprise is actively engaging with current and prospective customers seeking large-load electrical service. At the same time, Power Enterprise is continuing to invest in new electrical infrastructure to support the City’s Climate Action Plan goals, including the electrification of buildings and transportation.
To manage the financial risks associated with serving large-load customers, Power Enterprise is implementing carefully structured electric service agreements. These agreements are designed to ensure that the costs of new infrastructure and service delivery are appropriately allocated and that existing customers are protected. Key provisions may include upfront customer contributions toward infrastructure, minimum load or revenue commitments, and contractual payment obligations over a defined term regardless of actual usage. Additional safeguards can include phased service implementation, financial security requirements (such as deposits or letters of credit), and cost-recovery mechanisms in the event of reduced demand or early termination. Together, these measures align utility investments with actual customer demand while eliminating the risk of stranded costs.
3.1.3 Lengthy City Processes Can Slow Customer Service
Over the years, the City has developed processes and procedures intended to ensure fairness and deter corruption. However, the accumulation of these procedures has resulted in a slowing of administrative functions, particularly hiring and procurement.
Lengthy hiring timelines can leave critical positions vacant, making it difficult to attract and retain top candidates. Separately, safeguards within the civil service system appropriately support fairness, transparency, and regulatory compliance, yet contribute to lengthy hiring timelines.
High‑volume approval queues can add up to 4-6 months to overall processing time. There have been attempts to mitigate these issues and streamline processes, such as the Enhancing Employment Opportunities for City Employees (EEOCE) program aimed at
7 exempt‑to‑permanent conversions, but they have not yet delivered the intended efficiencies.
These combined factors continue to impact our ability to fill critical vacancies in a timely manner.
In procurement, complex requirements delay the acquisition of essential goods and services, while the administrative burden on vendors reduces competition and can drive up costs. In addition, vendors are often discouraged from responding when departments repeatedly rely on the same recurring vendors, reinforcing a perception that new or smaller firms have little chance of winning. This lack of competition not only delays project initiation but can also drive up costs when vendors price in added risk and overhead.
Recent efforts, including legislative reforms and citywide efficiency initiatives, have aimed to address these challenges. While progress has been made, further improvements are needed to better balance oversight and operational efficiency.
One such potential improvement is on the
horizon for later this year. In late March 2026, Board President Mandelman introduced legislation that would amend the Administrative Code to authorize the SFPUC to purchase electric utility infrastructure from customers that the SFPUC would otherwise be required to install. This legislation, if passed by the Board of Supervisors, would enable SFPUC to connect new electric loads more efficiently. Customers seeking SFPUC electric service for large projects could install electric facilities as part of the work that is already ongoing at a project site. They could schedule the work so as not to conflict with other construction and ensure completion in the timeframe required to meet project schedules. In some cases, SFPUC could work with customers to install facilities with excess capacity that SFPUC could use to serve other customers, minimizing the cost and disruption of piecemeal construction in the public right of way.
3.1.4 Rising Costs Make Affordability a Concern
The Power Enterprise seeks to deliver clean and reliable power to our customers at affordable rates. However, nationwide, wholesale power costs have been extremely volatile. Power supply and delivery costs represent the largest portion of the Power Enterprise’s expenses. While Hetch Hetchy Power still offers the most affordable retail rates available in San Francisco, it remains dependent on PG&E for delivery service and therefore subject to increases in PG&E’s wholesale transmission and distribution rates. For CleanPowerSF, SFPUC only controls 1/3rd of the bill (for generation supply) while PG&E controls the remaining 2/3rds (for delivery service), representing an additional challenge to keeping our rates affordable.
Electricity rates in California have been increasing rapidly in recent years, outpacing both inflation and rate increases in other states.1 Some of the key factors that have contributed to high and growing rates include significant wildfire-related costs, climate policies and programs,
1 In 2025, across the United State, the average price of electricity among all end-use sectors was the highest in California (with the exception of Hawaii). Further, California’s average electricity price increased the most during 2025. See: Electric Power Monthly - U.S. Energy Information Administration (EIA). [accessed on April 24, 2026]
8 cost shifts between certain customer classes, and utility profits on capital investments. While the California Public Utilities Commission continues to work to deliver some rate relief under its existing authority, many solutions will still require legislative action. During 2025 the Legislature passed a significant affordability package that is currently being implemented among the various state agencies.2 This legislation includes:
• Creation of a public financing and ownership program to reduce the costs of financing electrical transmission projects;
• Prohibition on including the first $6 billion of IOUs’ fire risk mitigation capital expenditures in its equity rate base;
• Streamlines siting of clean energy projects by centralizing some permitting functions at the California Energy Commission; and
• Authorizes participation in a western regional electricity market to access excess renewable energy supply across the West.
Thus far in the 2026 legislative session lawmakers have hesitated to bring forward many incremental actions that address rising electricity rates as last year’s affordability package is being implemented. However, a handful of ideas are currently being deliberated:
• Require a systemwide review of the methodologies used to determine the IOUs’ cost of capital and authorized return on equity;
• Allow for some flexibility in California’s Resource Adequacy program that will reduce compliance costs; and,
• Direct IOUs to reduce ratepayer bills by a flat 25%.
Legislators have until August 31, 2026 to pass bills and send them to the Governor’s desk.
While CleanPowerSF does not have a significant capital program that could put material upwards pressure on rates, higher capital costs and higher interest rates could drive up the cost of energy projects that CleanPowerSF purchases for its power supply. Furthermore, import tariffs, changing federal policy regarding clean energy incentives, and general inflationary pressures are also increasing long-term power purchase costs. These policy and economic factors increasing the cost of new clean energy supplies have the potential to put upward pressure on CleanPowerSF’s generation rates over time.
By comparison, currently Hetch Hetchy Power’s debt service costs are minimal, but over time, additional capital investments in the Hetchy program will be made to modernize the grid, meet
2 The energy legislation in the 2025 affordability package includes AB 825 (Petrie-Norris), AB 1207 (Irwin), and SB 254 (Becker). See: Governor Newsom signs historic package of bipartisan legislation saving billions on electric bills, stabilizing gas market and cutting pollution | Governor of California. [accessed on April, 24, 2026]
9 new demand, and accomplish climate goals. These activities as well as the same inflationary pressures noted above are expected to increase Hetch Hetchy Power’s capital costs and related capital debt service costs.
Power is undertaking mitigation efforts to address rising costs to our customers served by our two electric service business lines. Any capital program will remain within the agency’s Commission-approved, prudent financial policies for levels of debt service to revenue. We have established low-income rates, specially focused programs aimed at supporting low-income customers, and regularly engage in outreach to support this customer group and ease the financial burden of electricity costs.
This past fiscal year, Power Enterprise launched the Power Affordability Project to ultimately refresh and expand our policies and programs to foster affordability, support low-income customers, and undertake arrearage management. We have completed the analysis of our current arrearage management policies, and we have begun surveying customers to better understand barriers to bill payment and preferences for affordability support. This effort will ultimately result in a final plan and recommendations that are informed by research, lessons learned from peer utilities, and customer input to better address affordability challenges. We will continue to be actively engaged in regulatory and legislative venues to advocate for affordability and the best interests of San Francisco residents.
3.2 Reduce and Eliminate Reliance on PG&E
Under the Federal Power Act and PG&E’s Wholesale Distribution Tariff (WDT or Tariff) on file with the Federal Energy Regulatory Commission (FERC), the City has the right to access PG&E’s distribution grid to serve its Hetch Hetchy Power customers. PG&E’s implementation of the WDT terms pose significant challenges to the Power Enterprise in its efforts to affordably and reliably serve, maintain, and grow its customer base. These challenges will result in further loss of benefits to the City, loss of revenues to the Power Enterprise, and impacts to City projects including increased project costs and delays.
3.2.1 Achieve Fair and Affordable Access to PG&E’s Distribution Grid As noted, our Hetch Hetchy Power program obtains distribution services under the federally regulated WDT. PG&E has continuously violated the terms of the Tariff, imposing additional barriers not required under the terms of our Service Agreements or the WDT. PG&E’s implementation of its WDT continues to be a substantial risk for the City’s ability to provide electric service to our customers.
In September 2020, PG&E filed revisions to its WDT (WDT3) with FERC. While parties litigated the revisions at FERC, WDT3 took effect in April 2021. Under the new terms, PG&E changed its rate methodology, raised rates, eliminated service to unmetered loads, and eliminated interconnections at secondary voltages. A settlement agreement was reached for these issues and was approved by FERC in November 2025.
10 Two issues that did not get settled included assignment of costs for Upgrades to PG&E’s system and assignment of costs for Direct Assignment Facilities (DAF). FERC issued a favorable final decision in December 2025 that ruled that PG&E’s treatment of Upgrades and DAF was unjust, unreasonable, and unduly discriminatory and ordered PG&E to file a compliance filing. The City has protested PG&E’s compliance filing as it fails to comply with FERC’s order to embed the cost of Upgrades into the WDT rates. FERC has yet to accept PG&E’s compliance filing.
In November 2024, PG&E filed another revision to its WDT (WDT4), which took effect in May 2025. PG&E was seeking a 15% rate increase and the cost assignment of Upgrades and DAF still remains an issue under WDT4. PG&E and the City were engaged in settlement discussions on these issues and have recently come to an agreement in principle. The settlement will resolve several rate issues and includes a path forward for costs of Upgrades and Direct Assignment Facilities. Finalizing the agreement will result in lower costs than proposed in PG&E’s WDT 4 filing but does not resolve other implementation issues and costly requirements that would be eliminated through the acquisition of PG&E’s electrical assets in the city. Since 2018, 187 projects have been obstructed by PG&E with a cost impact of $74M.
More recently, PG&E has been sending the City project true-up invoices after a project has paid the final service agreement and is energized. These high true-up costs are unsubstantiated as PG&E refuses to provide adequate documentation of these additional costs. These invoices often come months after a project’s funding is closed out with no prior indication or notice from PG&E.
Power Enterprise staff also prepares quarterly reports for the Board of Supervisors describing the on-going disputes with PG&E and the impacts on the City. These reports are required by Board Resolution No. 227-18, and the latest report was issued in March 2026.
3.2.2 Reduce Our Dependence on PG&E Interconnection
Investing in City-owned transmission and distribution infrastructure allows for local City control of the delivery of power to our customers, reducing reliance on PG&E’s grid and the associated challenges and costs described above. Prior initiatives such as the Bay Corridor Transmission and Distribution Project and a Strategic Investment Planning Study established the operational and analytical foundation for Power Enterprise’s current transmission and distribution capital program.
Building on that foundation, the Power Enterprise this year developed and submitted its Two- Year Capital Budget submission for FY27 and FY28 and 10-Year Capital Plan for FY27-FY36.
The submission included refinements to major substation projects already in the 10-Year Capital Plan, notably Carbon Free Steam and Spear Street Substation, as well as significant new investments consistent with and expanding upon the previous study: Large Load Substation One and Westside Substation. Together, these investments mark a significant step forward in
11 Power Enterprise’s long-term strategy to build out a resilient and independent City-controlled transmission and distribution network.
3.2.3 Expand Power Enterprise Service to All Electricity Customers in San Francisco
On January 29, 2019, PG&E filed for bankruptcy and reorganization. PG&E was facing multibillion-dollar claims related to catastrophic wildfires that devastated communities in Northern California over the previous few years. While PG&E emerged from bankruptcy in July 2020, its financial health continues to be precarious. PG&E has continued to propose financial solutions that harm its ratepayers, and many of them have been approved by the California PUC and implemented. Overall, since it filed for bankruptcy in 2019, and through January 1, 2026, PG&E’s electric rates have increased by 75%. Some of these increases are a direct result of PG&E’s “financial solutions,” which include ratepayers funding $10 billion in cash for PG&E.
Ratepayers will be paying for this liquidity infusion over the next 30 years. At the same time, PG&E’s corporate debt remains below investment grade. Unfortunately, since its bankruptcy in 2019, PG&E has continued to ignore cash offers from San Francisco and other public entities to purchase pieces of its service territory, each of which would likely improve PG&E’s financial condition without any adverse impacts on rates for its remaining customers.
At the request of Mayor Breed and the Board of Supervisors 3, the Power Enterprise issued a
report in May 2019 on Electric Service Options.4 The report discussed the long-standing disputes and difficulties interconnecting Hetch Hetchy Power customers under the current WDT and recommended further evaluation of acquiring PG&E’s electric grid in San Francisco.
Consistent with the recommendations in the May 2019 report, the City provided a formal Indication of Interest to purchase PG&E’s electric assets in San Francisco, first in September of 2019 (during PG&E’s bankruptcy) and again in August of 2020 (after PG&E’s emergence from bankruptcy). PG&E declined these offers and refused to discuss them further, stating that the purchase price offered is too low and that its assets are not for sale, in spite of the potential for the asset purchase to strengthen PG&E’s financial position and management focus.
The dependence on the PG&E-controlled distribution grid is the biggest risk to the City’s ability to continue to provide clean, reliable, and affordable electricity to our Hetch Hetchy Power and CleanPowerSF customers. To address this risk, Power Enterprise continues to take active steps towards acquiring PG&E’s electric infrastructure assets to serve San Francisco.
On July 27, 2021, the City submitted a petition to the California PUC requesting a formal determination of the value of PG&E’s electric assets in San Francisco. This petition serves as
3 See San Francisco Board of Supervisors Resolution 174-19, https://sfbos.org/sites/default/files/r0174-
19.pdf (accessed April 24, 2026).
4 Available at https://sfpuc.org/about-us/reports/sfpuc-preliminary-public-power-options-report (accessed April 24, 2026).
12 the initial step in a lengthy and arduous process to acquire PG&E’s local electric infrastructure to complete the City’s transition to full public power. On June 24, 2022, the Assigned Commissioner issued a scoping memo and ruling outlining the scope of issues to be addressed and the proceeding schedule, which has been extended several times with numerous motions filed by PG&E and the City regarding process and procedures. After many attempts from PG&E to delay or suspend the proceeding, the California PUC issued a Methods Decision in October 2025 and a new testimony schedule was issued February 2026. Testimony in the proceeding is expected to be completed by the 1st quarter of 2027, with the remainder of the schedule to be set at a later date. Pending further schedule refinements for briefing, hearing, and development of a decision by the CPUC, the proceeding could be potentially completed by the end of 2027.
The purchase of PG&E’s electric grid would include essentially all of PG&E’s electric transmission and distribution assets needed to provide electric service within the City and County of San Francisco. As part of the transfer of assets, certain PG&E facilities outside of San Francisco’s boundaries will need to be physically separated from the facilities that will be owned by the City. The portion of the project requiring new construction or modifications to existing facilities (whether they be PG&E-owned or City-owned) would primarily be along the San Francisco-San Mateo County border (including the northern portions of Brisbane and Daly City).
The physical changes associated with the project (e.g., physical separation of San Francisco’s purchased assets from PG&E's remaining electric grid) are being identified and studied by the San Francisco Planning Department under the California Environmental Quality Act (CEQA).
Planning is currently preparing responses to public comments received on the Draft Environmental Impact Report and is expected to issue the Final Environmental Impact Report this spring. Following release of the Final EIR, the document typically undergoes a process for the Planning Commission to certify the EIR, followed by review/approval by the SFPUC Commission and Board of Supervisors.
3.3 Power Supply Risk Management and Compliance
The evolving energy market and uncertain regulatory requirements in California present an ongoing challenge for both the Hetch Hetchy Power and CleanPowerSF supply portfolios. This section provides an update on how staff are strategically managing these portfolio risks through iterative long-term planning to meet policy goals, regulatory requirements, resource needs, and procurement and management practices.
3.3.1 Integrated Resource Planning (IRP)
An Integrated Resource Plan (IRP) is a process undertaken by a utility to determine future resource procurement needs for meeting its forecasted annual energy and peak demand requirements, with an adequate reserve to provide for system reliability. IRPs are also used to assess the ability of a utility to meet its environmental and policy goals.
13 The IRP process helps the Power Enterprise make informed and prudent decisions regarding the long-term supply and capital investments needed to serve its customers and meet the City’s policy objectives while addressing risks and uncertainties.
Hetch Hetchy Power
Under California Public Utilities Code (PUC) Section 9621, Hetch Hetchy Power is required to prepare an updated IRP once every five years. The Commission approved Hetch Hetchy Power’s update to its IRP on November 28, 2023 by Resolution 23-0214. The adopted IRP concluded that, due to load growth and hydrological variability, Hetch Hetchy Power will need additional energy supply on a regular basis starting in calendar year 2033 to serve its forecasted retail energy sales through the 2045 planning horizon, to meet all state-required targets, and continue to provide its customers with 100% clean and renewable energy. In addition, the IRP recommends staff continue to evaluate opportunities to procure energy storage for Hetch Hetchy Power to both maximize the value of Hetch Hetchy hydroelectric generation and support compliance with evolving Resource Adequacy requirements.
This IRP was submitted to the California Energy Commission, which reviewed its contents and determined that it was complete on July 18, 2025. Following a detailed review and analysis performed by CEC staff, the Executive Director found that the IRP was consistent with the requirements of PUC Section 9621 and met California’s energy and other policy goals. On December 5, 2025, the CEC Commission adopted staff’s determination. Although state law only requires Hetch Hetchy Power to update an IRP once every five years, Power Enterprise staff are conducting further analysis to support power procurement and financial planning activities as Hetch Hetchy Power’s load growth comes into clearer focus.
CleanPowerSF
The California PUC requires load serving entities under its jurisdiction, including CleanPowerSF, to submit IRPs approximately every two years. The SFPUC Commission adopted CleanPowerSF’s 2022 IRP in October of 2022, and staff submitted the plan to the California PUC on November 1, 2022.5 The IRP process supported the Commission’s approval of a “preferred” resource portfolio that best balanced the Commission’s goals for CleanPowerSF of affordability, cleaner energy, local investment, and financial sustainability. For the 2022 IRP, CleanPowerSF analyzed four theoretical future energy supply portfolios and determined that the 90% Time Coincident Portfolio best balanced the program's various goals while achieving the City’s goal of supplying 100% clean and renewable electricity supply by 2025.6 In the 90% Time
5 The SFPUC Commission approved CleanPowerSF’s IRP on October 24, 2022 by Resolution No. 22- 0184.
6 “Time coincident” means that the renewable power supply is available to meet forecasted customer demand. The 2022 IRP preferred portfolio featured a mix of renewable energy resources that could satisfy forecasted electricity demand on an hourly basis at least 90% of the hours in each year of the planning horizon.
14 Coincident Portfolio, renewable generation coincides with customer usage for at least 90% of all hours during the year.
CleanPowerSF began preparations for its next IRP cycle in 2025. A series of rulings from the California PUC in 2025 and early 2026 delayed the required submission date initially from August 1, 2025 to December 1, 2025, and then June 1, 2026. Due to California PUC delays in issuing final IRP analysis and filing guidelines, the Assigned Administrative Law Judge ruled on March 9, 2026 that CleanPowerSF’s next IRP would now be due on August 10, 2026.
With final guidelines issued and an IRP due date now set, Power Enterprise staff commenced energy portfolio modelling in April. Staff are planning to publish draft analysis results for public review on the CleanPowerSF website in late May. A community engagement process featuring a two-week written comment period, a staff webinar, and open “on-line” office hour meetings will be available to interested community members beginning in late May and running into June.
Staff plan to present a recommended 2026 IRP to the Commission for approval at its meeting on July 14, 2026.7
3.3.2 Power Portfolio Management
Over the past few years, California’s wholesale power market has experienced significant price volatility brought on by a number of factors including extreme weather, power plant retirements, supply chain disruptions, global unrest and armed conflict impacting global energy markets and delays in the construction of new electric generation and storage capacity, due to permit and interconnection delays. These trends have been exacerbated in the past year due to multiple federal policy changes including, new and rapidly shifting import tariffs, the One Big Beautiful Bill’s (OBBA) phase-out of and restrictions to tax credits for constructing new clean energy projects, and federal permitting changes for solar and wind projects.
The OBBA eliminated tax credits for solar and wind projects that are placed into service after December 31, 2027 unless they commence construction by July 4, 2026, in which case they will maintain tax credit eligibility if they are placed in service within four years. Projects not meeting these deadlines are expected to have higher costs due to the loss of tax credits.
Energy project developers have been hindered by the growing interconnection queues as the California Independent System Operator (CAISO) struggles to process a surging number of applications. Many new clean energy projects in California remain stuck in the grid interconnection process and many projects have been delayed due to supply chain challenges and permitting delays. These project delays are creating scarcity in the marketplace and may pose a challenge for the Power Enterprise to meet certain regulatory requirements. California remains in a high price market environment for the construction of new renewable energy
7 CleanPowerSF’s IRP schedule and draft IRP materials will be made available on its website at:
https://cleanpowersf.org/resourceplan. [accessed on April 24, 2026]
15 projects due to the combination of delays to new resource additions and state procurement mandates.
The Power Enterprise has put a particular focus on the risks to our operations posed by the challenging market environment in California today. This has included a greater emphasis on close monitoring and internal reporting of California electricity market trends, acquiring and integrating software to help us manage our growing fleet of dispatchable energy storage assets, and portfolio cost modelling under different future market price scenarios to ensure revenue sufficiency.
Given the uncertainty in the energy market and evolving state regulations, staff will continue to develop our power supply portfolio management and risk analysis tools and procedures to support our continued provision of clean, reliable, and affordable power supply.
3.3.3 Resource Adequacy (RA)
California’s RA compliance programs are intended to ensure there is sufficient electric generating capacity available to CAISO to meet demand at all times. The RA programs require Load Serving Entities (LSEs), such as Hetch Hetchy Power and CleanPowerSF, to secure sufficient RA capacity resources to meet forecasted monthly peak demand plus a planning reserve margin (PRM) to account for unexpected outages, higher than anticipated demand, and other contingencies.
There are currently three RA products that Hetch Hetchy Power and CleanPowerSF must procure to meet the RA program requirements: (1) System RA, ensuring sufficient power generating capacity at the CAISO system-wide level; (2) Local RA, ensuring sufficient capacity within smaller transmission-constrained geographic areas; and (3) Flexible RA, ensuring sufficient capacity that can quickly respond to rapidly changing demand.
Entities serving electric load in CAISO territory must comply with RA program requirements.
However, the California PUC and other Local Regulatory Authorities have the authority to regulate their jurisdictional LSEs with their own RA requirements, as long as they meet CAISO’s minimum standards. CleanPowerSF is a California PUC-jurisdictional LSE, while Hetch Hetchy Power is not. Therefore, CleanPowerSF must comply with the California PUC and CAISO RA compliance requirements, while Hetch Hetchy Power must comply with the CAISO’s RA compliance requirements and any requirements established by the SFPUC.
Unlike other ISO markets (such as ISO-NE, PJM), the CAISO’s RA “market” is transacted bi- laterally among various market participants including LSEs, generators, brokers, and power marketers. As a result, the RA capacity market in California lacks transparency and is challenging due to several other factors including: a) an increasing number of LSEs providing power service to customers in CAISO, b) concentration of RA capacity resources in the control of California’s largest investor-owned utilities, c) retirement of existing capacity, d) increasing regional competition for capacity from out-of-state, and e) a great deal of regulatory uncertainty.
16 RA prices have moderated in 2025 – 2026 from the historically elevated prices of 2022 – 2024.
The main drivers remain the significant increase in new power supply capacity made by California LSEs in recent years and fairly stable customer demand. Looking forward, however, market conditions are cloudy. First, there is an expectation of significant load growth in the coming years, particularly driven by prospective data centers. In addition, the planned closure of the Diablo Canyon Power Plant (currently set to be decommissioned by 2030) may reduce the supply of capacity in the state. However, LSEs are continuing to procure significant amounts of additional capacity to meet the anticipated higher demand, so there is still uncertainty on the balance of demand and supply in the next five to ten years.
The California PUC has implemented major changes to its RA program and we expect there will continue to be further changes in the coming years. For example, the California PUC has been increasing its planning reserve margin (PRM), which was set at 15% above each LSE’s forecasted peak demand since the inception of the program. For compliance years 2026 and 2027, the PRM is now set at 18%. A higher PRM means that CleanPowerSF and other LSEs are required to procure more RA capacity, and therefore incur more costs, to meet the same forecasted demand. However, if the planning reserve margin is set too low then the grid will experience a higher probability of power outages, threatening the reliability of the system.
In addition, the California PUC adopted the Slice-of-Day framework, with 2025 being the first year of implementation. Formerly, the California PUC’s RA program required LSEs to secure sufficient RA capacity to meet their forecasted peak demand for each month, plus the planning reserve margin. In the current Slice-of-Day framework, LSEs must procure sufficient RA capacity to meet the forecasted demand on an hourly basis for the “worst day” of each month, plus a planning reserve margin. The “worst day” definition can change but will initially be set as the day of the month which corresponds to the CAISO system peak gross load. Thus, each resource will have 24-hourly capacity attributes that will be used to meet the LSEs 24-hourly RA compliance obligations. CleanPowerSF procured sufficient capacity under this framework to meet its obligations.
In the near future we expect significant changes to both the California PUC’s and the CAISO’s RA programs. One of the most important issues that is arising in the RA space is how to treat large data center loads. Unlike other types of demand, data center load is uncertain and can materialize quickly. Since an increased load forecast results in higher RA obligations, if these large loads fail to materialize, it could unfairly increase costs for existing ratepayers. Other important issues are continuing to be evaluated by regulators including the appropriate PRM(s) for 2028 – 2029 and how different energy resource types (e.g., wind, solar and energy storage) are valued for reliability.
Given the high degree of uncertainty in the RA compliance space, the Power Enterprise employs a number of mitigation strategies to address these risks, including:
17 • Monitoring and intervening in RA proceedings at the California PUC and relevant CAISO initiatives that affect the structure of the RA program and compliance obligations for CleanPowerSF and Hetch Hetchy Power;
• Coordinating with industry trade associations to ensure that RA regulations support an efficient, cost-effective, and generally well-functioning RA capacity market; and • Addressing the risk of supply availability through long-term forward procurement for RA capacity.
3.3.4 CAISO Grid Interconnection
As noted above, the CAISO generation project interconnection queue backlog has impacted the CAISO’s ability to complete studies in a timely manner and has resulted in delays to the addition of new capacity to the CAISO grid. To address this problem, the CAISO implemented the Interconnection Process Enhancements (IPE) initiative in 2024, which aims to enhance the coordination of resource procurement, interconnection, resource planning, and transmission planning to achieve state reliability and policy needs. The proposed changes are expected to reduce interconnection request volumes and enable rapid deployment of new generation resources.
The 2024 IPE process for the “Cluster 15” group of project applicants included a process for load serving entities like CleanPowerSF and Hetch Hetchy Power to assign Commercial Interest Points to projects they would be interested in having CAISO study for interconnection. Both CleanPowerSF and Hetch Hetchy Power administered a competitive solicitation (PUC.PRO.0322) to identify and award their Commercial Interest Points to candidate projects.
In exchange for the SFPUC’s Commercial Interest Points (Points), selected proposers are required to participate in a future Request for Offers for SFPUC’s consideration before making the capacity available to other potential buyers.
The CAISO is still studying projects that were awarded SFPUC’s Points along with network upgrades that would be triggered by the addition of these facilities to the grid. Roughly 22,000 MW of capacity has already withdrawn from the CAISO’s queue, which indicates that the IPE is successfully filtering out less viable projects.
The Cluster 16 Commercial Interest Points allocation process is set to take place between the third and fourth quarters of 2026. The SFPUC expects to receive and conduct a solicitation to award Points to projects that present the best opportunities to pursue to meet its future needs.
3.4 CleanPowerSF’s Financial Security Requirement
In 2021, the California PUC, as directed by Senate Bill 520 (Hertzberg, 2019), initiated a rulemaking (R.21-03-011) to improve and strengthen the Provider of Last Resort rules and regulations. The Provider of Last Resort is the electricity provider that will provide electricity service to customers if applicable load serving entities are unable to (e.g. due to insolvency or other causes). State law designates the investor-owned utilities to be the default Provider of
18 Last Resort in the event of a mass involuntary return of customers from a CCA or Direct Access provider. PG&E is currently the Provider of Last Resort for CleanPowerSF as well as all other CCAs and electric service providers in PG&E’s service area.
Regulations require CCAs to post a bi-annual Financial Security Requirement to the investor- owned utility Provider of Last Resort in its service territory. With the approval of Decision 24-04- 009 in April of 2024, the California PUC made modifications to the Financial Security Requirement that CCAs must post to the investor-owned utilities to cover the cost of returning and procuring energy for returned CCA customers as well as a “re-entry” fee calculation. This is the fee required to be paid by returning CCA customers if the CCA cannot, or the Financial Security Requirement is insufficient, to cover the incremental administrative and procurement costs in a mass involuntary return. Decision 24-04-009 also added new financial reporting requirements for CCAs to act as an early warning signal in the event a CCA is in financial distress, among other changes to the Provider of Last Resort regulations.
CCAs have been subject to the new Financial Security Requirements since May 2025, where the new minimum is approximately $1.6 million for CleanPowerSF, which is the posting requirement amount CleanPowerSF has been at since May 2025. 8 However, CleanPowerSF is
closely monitoring the next bi-annual Financial Security Requirement posting amount that will be calculated in May 2026 and due for posting by July 1. Fluctuating energy prices and changes to PG&E’s bundled generation rates, combined with increases in the Power Charge Indifference Adjustment (PCIA) for 2026, have the potential to increase CleanPowerSF’s posting requirement by up to tens of millions of dollars.9
In preparation for the possibility of a large increase to the Financial Security Requirement posting, the Commission authorized CleanPowerSF to increase and extend its Credit Agreement with JPMorgan Chase Bank, National Association to $75 million in February 2024.
Working with the Business Services Capital Finance team, CleanPowerSF anticipates it will have the financial instruments in place to meet these potentially higher Financial Security Requirement posting amounts should they arise.
3.5 CleanPowerSF and the Power Charge Indifference Adjustment The Power Charge Indifference Adjustment (PCIA) is a surcharge that customers taking generation supply from CleanPowerSF or any other third-party generation supplier (“unbundled customers”) must pay to PG&E. The fee is intended to recover the unavoidable “above market” costs of the power supply procured by PG&E on behalf of these customers prior to them
8 The new minimum for CCAs is the greater of $147,000 or $4.24 per customer account served, which for CleanPowerSF is approximately $1.6 million.
9 PG&E must file a Tier 2 advice letter by May 10, 2026 updating the Financial Security Requirement with the official amount CleanPowerSF must post by July 1, 2026. Any forecasts CleanPowerSF makes as to the size of the expected Financial Security Requirement are estimates. The official amount will only be known when PG&E files its Tier 2 advice letter by May 10, 2026.
19 switching from PG&E’s generation supply service. CleanPowerSF’s competitiveness with PG&E’s retail service is measured, in part, by comparing CleanPowerSF’s cost of generation supply plus the PCIA rate against PG&E’s retail service generation rates. Given our interest in preserving competitive rates, the higher the PCIA, the less revenue CleanPowerSF has available to procure energy.
The PCIA rate is directly linked to the market prices of energy, resource adequacy, and renewable energy because PCIA rates are calculated based on the difference between the forecasted cost and forecasted market value of PG&E’s generation portfolio in a given year, and then trued up based on the year-end balance in PG&E’s PCIA account. Because PCIA rates are set on a forecast basis and then trued-up, PCIA rates can increase or decrease in a volatile manner as market conditions fluctuate.
CleanPowerSF must anticipate and plan for changes in PCIA rates as part of its on-going risk management activities. This risk management includes monitoring energy prices for their effect on PCIA rates and incorporating forecasted PCIA rates into its planning. CleanPowerSF participates in the California PUC proceedings that impact PCIA rates, including PG&E’s Energy Resource Recovery Account (ERRA) application, which sets PG&E’s PCIA rates and evaluates PG&E’s generation costs on an annual basis.
PCIA rates were relatively low in 2023 through 2025 as compared to CleanPowerSF generation rates. However, in early 2025 in response to energy market trends and pressure from the Investor-Owned Utilities including PG&E, the California PUC initiated a rulemaking proceeding considering modifications to the methodology used to develop PCIA rates. The first phase of this proceeding concluded in mid-2025 and made changes that significantly increased PCIA rates for 2026. When combined with the outcome of PG&E’s ERRA application, CleanPowerSF customer PCIA rates for 2026 increased by an average of $0.03/kWh, from below $0.01/kWh to almost $0.04/kWh for most customers, and up to $0.05/kWh for some.
PCIA rates of this magnitude would have threatened CleanPowerSF’s competitiveness with PG&E generation rates when assuming CleanPowerSF’s previously budgeted rates for 2026. In response, SFPUC adopted an off-cycle rate reduction for all customers in March of 2026, lowering residential and large commercial rates by 25% and all other rates by 20%, to keep customer bills close to what they would pay if they were generation customers of PG&E’s.
The PCIA rulemaking proceeding is ongoing and may result in additional modifications to the PCIA methodology. CleanPowerSF remains actively engaged in this rulemaking along with other members of our CCA trade association, the California Community Choice Association, to prevent the California PUC from inappropriately shifting costs to unbundled customers such as CleanPowerSF ratepayers.
20 3.6 Hetch Hetchy Power and CleanPowerSF Cost of Service and Rate Studies
As required by San Francisco Charter Section 8B.125, cost of service and rate studies were last completed for Hetch Hetchy Power and CleanPowerSF in Spring 2022. A new rate study is almost complete and will be published in Spring 2026 (see Section 4.3 for more details).
The 2022 Rate Study was the first for CleanPowerSF, and only the third for Hetch Hetchy Power. The rate study analyzed the total revenues needed to operate the programs and comply with adopted financial policies, performed a detailed cost allocation to customer classes, and proposed rates that recover these costs. While the rate study itself recommended five years of rates, the Commission adopted rates for Hetch Hetchy Power and CleanPowerSF for only 1-2 years due to the significant uncertainty in power market prices and resulting expenditures. Each year, Hetch Hetchy Power and CleanPowerSF can re-assess what rate modifications are needed with more up-to-date information, allowing adjustments if financial conditions worsen.
The 2022 rate studies successfully addressed major financial risks faced by both programs. For the first time, all Hetch Hetchy Power and CleanPowerSF rates are independent from PG&E rates, instead based on our agency’s own cost of providing service. Our own cost of service rates address our own financial risks – for instance, setting power supply budgets with margins to cover market volatility for CleanPowerSF or reduced hydropower generation and increased energy market exposure for Hetch Hetchy Power. And without the pressure to constantly change rates to follow PG&E up-and-down throughout the year, both customers and the Power Enterprise benefit from predictable rate changes and revenues.
For Hetch Hetchy Power, the rate study also recommended the Commission phase out historic rates that do not cover costs, such as the “GUSE” or “General Fund” subsidized rate. While the phase-out will take time, the end result will be rates that are easier to administer while remaining fair to customers and consistent with legal requirements. Moreover, this change corrects structural imbalances that have limited Hetch Hetchy Power’s ability to adequately fund its capital program and build reserves. With sufficient rate revenue, future Hetch Hetchy Power budget processes will be able to move past the austerity of recent years, and instead support strategic planning for the future of Hetch Hetchy Power.
On April 8, 2025, the Commission adopted rates for FY 2025-26 for Hetch Hetchy Power. All Hetch Hetchy Power retail and Enterprise rates increased by 10%, while GUSE rates increased by the equivalent of $0.03/kWh. CleanPowerSF rates did not increase in 2025; the 8.5% increase that went into effect in July 2024 was held flat for FY 2025-26.
Both programs benefited from strong reserve balances in excess of the minimums and targets set by the SFPUC’s Fund Balance Reserve Policy. By using reserves, Hetch Hetchy Power was able to reduce the required rate increases, while CleanPowerSF was able to cover costs with no rate increases at all. In FY 2024-25, for the first time, CleanPowerSF exceeded its approved reserve policy target of 180 days cash on hand and began FY 2025-26 with 262 days cash on
21 hand. These reserves were built by steady annual rate increases, conservative budgeting practices, excess power generation sold to generate revenue, and reductions in future projected power market supply costs. Taken together, the programs have repeatedly come in under their power purchase budgets, generated more wholesale revenues than projected, and will benefit from lower future power market costs, allowing lower rate increases than planned.
Subsequent rate changes for Hetch Hetchy Power and CleanPowerSF in 2026 are discussed in Section 4.3.
4. Risk Management Activities – Areas of Emphasis for 2026 In 2026, the Power Enterprise will continue its efforts as outlined above with focus on the following major initiatives.
4.1 Customer Interconnection and Expansion
The City’s reliance on PG&E for electric interconnection and distribution services continues to pose the biggest risk to our ability to obtain reliable, safe, timely, and affordable electric service.
PG&E continues to obstruct, delay and impose unwarranted costs on the City for projects that provide critical City services. Additionally, PG&E frustrates the City’s efforts to make progress on important Climate Action goals, such as decarbonization. Meanwhile, PG&E continues to experience outages as a result of its inadequate investment in the SF grid, while raising rates almost continuously, making their grid service both unreliable and unaffordable.
In order to ensure safe, reliable, and affordable service to all of San Francisco, the City’s efforts to acquire PG&E’s distribution and transmission assets in the City and expand public power to all of San Francisco’s residents and businesses, will continue into 2026.
In parallel with the acquisition effort, the Power Enterprise will continue to negotiate with PG&E and litigate at the FERC to ensure fair and open access to PG&E’s distribution grid under the WDT.
Staff will continue to meet regularly with PG&E in order to move individual projects forward. The Power Enterprise will also continue to evaluate opportunities for larger strategic investments in distribution and transmission infrastructure that will allow us to maintain and, possibly, expand our direct customer base while we pursue the acquisition of the electric grid in San Francisco.
4.2 Power Supply Portfolio Management and Compliance
In 2026, Power staff will continue to prioritize the on-going improvement of our power supply risk management practices and the implementation of new portfolio optimization tools. In particular, staff will continue to expand the use of new software acquired in 2025 to support the evaluation and operations of utility scale energy storage projects under contract with CleanPowerSF. The use of this advanced optimization software will allow CleanPowerSF to maximize the energy market value of these new and flexible assets for the benefit of ratepayers. Staff will also
22 conduct an assessment of the CleanPowerSF Energy Risk Management Hedge Policy and evaluate opportunities to further minimize the portfolio’s exposure to wholesale energy market risks.
To serve Hetch Hetchy Power customer load growth anticipated over the next ten years, meet RA compliance requirements, and continue to deliver 100% clean and renewable energy, Power staff will identify and evaluate opportunities to acquire or develop new clean energy resources.
In 2026, the Power Enterprise will seek to identify viable and cost-effective resources by reviewing the CAISO generation resource interconnection queue, engaging with project developers, and issuing competitive solicitations.
In 2026, Power staff expect five newly constructed projects under long-term contracts with CleanPowerSF to reach commercial operations. These projects represent 382 MW of new clean energy generating capacity and 137 MW of new battery energy storage capacity. These new resources will contribute to meeting CleanPowerSF’s forecasted customer demand with 100% clean and renewable energy, provide RA capacity, and support on-going compliance with state and local requirements. Staff will be working with project developers to ensure timely commercial operations of these new resources and will diligently manage CleanPowerSF’s supply portfolio to meet demand and maximize value for ratepayers.
Power staff will also continue to procure new clean energy resources as necessary to serve CleanPowerSF’s forecasted customer demand and meet regulatory obligations, such as the California PUC’s most recent procurement order.10 Following the scheduled completion of CleanPowerSF’s Integrated Resource Plan in August, Power staff plans to issue a competitive solicitation to identify and procure new energy resources to support plan implementation. We will also continue to work with California Community Power (CC Power), the joint powers agency CleanPowerSF is a member of, to leverage the collective buying power of CC Power’s group of CCA members.
4.3 Hetch Hetchy Power and CleanPowerSF Rate Studies
The San Francisco Charter-required independent consultant rate study for both CleanPowerSF and Hetch Hetchy Power is ongoing. This work will form a basis for rates decisions for both programs for the next 4-5 years.
10 On March 5, 2026, the California PUC published Decision 26-02-067, ordering LSEs under its jurisdiction to procure 2,000 megawatts (MW) of net qualifying capacity (NQC) by 2030, another 2,000 MW NQC by 2031, and an additional 2,000 MW NQC by 2032. NQC is the amount of an energy resource’s installed generation capacity that may be counted for grid reliability purposes.
CleanPowerSF’s share of this order is 36 MW of NQC in each of the three compliance years, for a total of 108 MW NQC. A 27 MW subset of the 108 MW NQC must come from a combination of long-duration (8- hour) energy storage and/or firm clean resources, like geothermal. For more information see: D. 26-02- 067. [accessed on April 25, 2026]
23 For CleanPowerSF, the consultant and staff have worked together to complete the draft cost of service allocation. However, based on other financial and competitive pressures, the Commission has elected to move forward with a rate decrease ahead of normal fiscal year change. In January 2026, CleanPowerSF adopted a 20-25% rate reduction to be effective March 2026. This decrease was possible due to strong reserve balances, as discussed in Section 3.6. In addition, power market costs have dropped since their peaks during the last few years and were (at the time) forecasted to remain level, leading to a lower medium-term expense forecast for future years. While reduced revenues do present some financial risk, it is mitigated by the strong financial position the program has built over the last few years, as evidenced by the recent credit rating upgrade of CleanPowerSF by Moody’s Investor Service from A2 to A1.
Finally, this rate decrease aims to reduce the risk of customer opt-out to PG&E due to higher rates than our competitor. In January, PG&E increased power delivery charges, decreased generation charges, and increased the 2018 vintage PCIA, which is charged to most CleanPowerSF customers. The combined impact of these changes was to make CleanPowerSF bills significantly higher than PG&E. With the SFPUC approved March rate decrease, CleanPowerSF average bills for residential customers are still higher than PG&E, but by roughly 12% rather than the 22% they were before the rate decrease. 11 This rate change aims to
balance the competing financial pressures of customer opt-outs with lower revenues and the use of reserves to cover operating costs.
Because of these changes, the program has elected to not make further changes to CleanPowerSF rates for FY 2026-27. Any changes to customer class allocations or other recommendations coming out of the rates study will be addressed in rates for FY 2027-28.
For Hetch Hetchy Power, rate changes based on the 2026 Rate Study results are adopted in April 2026, and to go into effect July 2026. The draft proposed rates continue the standardization of power rates and the transition to class-based cost of service for all customers. Subsidized GUSE rates continue to be set to an annual $0.03/kWh effective rate increase, while retail rates are planned to increase by 6%, though some rate codes increase by more or less than this due to shifts in the cost of service by customer class recommended by of the rates study.
After adoption of FY 2026-27 rates, staff plan to continue work with the rate consultant on other structural and policy goals related to rates, which would then be included in proposed FY 2027- 28 rates to be adopted in Spring 2027. This includes new time-of-use rates and other rate- based demand management programs, as well as the evaluation of new rate proposals to ensure the Power Enterprise continues to offer competitive products and services to our customers.
11 Estimated for a residential customer with CleanPowerSF’s average monthly usage on the E-TOU-C rate.