would be projected to grow significantly. again, everything would double in 23 years. we have reflected on the rate change slide a moment ago. while we have been able to project that we would be able to keep the rate changes to 10% or lower, there would be some things you would be able to do as policy-makers, and during that time, to help insure if your will was to keep it in the single digits, keep it lower, you could ask us to look at these options. these options are levers that we control, some that we do not. just to put that in perspective, in order to go from maintain --

and% increase down to a 9% increase, you could temporarily shave off the cash-funded program by $4 million. if you look by 2017, just going from a cash-funded program from $43 million a year down to $39 million. the other way that you could go is you could ask us with operating budgets as well to say, hold the budget flat. we have held the operating budget last because of our extreme success, water conservation efforts and lower usage. that would be another alternative. all the models, we have always assumed, grow at that inflation rate. so we are not going to do than

one year and take a holiday on the increase. the other things we do not control would be the marketplace. while we have been successful in our borrowing as of late, that is a record in our generation's time. the market, when we issue debt, maybe it decides that we are good again and the cycle will repeat itself. the other thing we do not have control over is consumption growth. because folks have done a poor job of conservation, at some point, we are only using 51

gallons per household per day. that is incredible. one-third of what the rest of the state uses. we cannot go to zero, but we know we are being efficient users. if consumption does begin to grow, because population grows about half a percentage every year. if a consumption starts to grow with population growth, that would be about a half percent a year. so we would have to come back to you every year, as we do now, to give you an update on what that would mean for the average consumer. so with that, i am happy to answer any questions. >> some other levels, at least

in theory, that we can control, that would have an impact on the rate of service -- and even with stretching out the implementation plan, that could change the rate and structure as well. >> what is before you today, which karen showed, she made the assumption that we wanted to minimize the rate shock as much as possible. not asking for the whole multimillion dollar appropriation of the front but phased over a couple of years. you could say, start one year later, pass one through 3 and

break give up into five tasks. that is something else that we could do. >> if the levers we do not control do not manifest, we would be able to use the money that we can control, just to stay in single digits? >> we would have some flexibility because we are cash- funding $40 million. that does give you a lot of flexibility. however, we would see borrowing rate spikes. many of us recall the 1980's. borrowing rates were extraordinarily high. if that were to occur, we would be having frequent concert rate -- conversations with the commission. we would look at every factor

that we could. of course, you asked about each budget hearing. the other part of that, other than adjusting the pay-as-you-go projects, we are looking at these projects come in many cases, as a stand-alone. to the extent that things went truly crazy, like in the 1980's, you could defer a project for awhile. it is simply too expensive. just a couple of other things as you think about sizing and timing. 100 to $2 billion, if we borrow

at 5%, that $100 million affects the average monthly bill about $1.82. to put that in perspective, if you want to add or subtract $1 million from any single year, that would change the average monthly bill about $1.80. >> $100 million? >> $100 million a project. that is because we are spreading it out over 30 years. >> are you looking for the commission to give your feedback with respect to the rate increases, is this just informational? >> it is an informational

today, but it is meant to help us, as you start talking about services this afternoon, when you think we need to pursue more aggressively or not. as you give us that feedback, the level of feedback is more difficult to say. i think a real impact is as we start to bring back the actual projects in the capital plan. then you will see the real rate impact. it is much easier to make those decisions. for example, if you all said 10% seems unreasonable, that would make us look at how we bring something back to you later on. >> are we going to have that discussion later on today or now? >> you may have it whenever you would like to. this is certainly not your only

chance to have a discussion. we can certainly talk about the capital program and what is affordable, but i am happy to answer anything now. >> i am less concerned with the actual percentage than i am that actual decisions -- whether the story be straightforward. whether we have ta clear explanation. what i fear it is a series of rate increases that have an erosive effect on people's confidence. after a few years, it becomes harder to explain that. i like what we did with the

water and sewer rates a couple of years ago that said, here are the jobs that need to get done, i this is the cost. it was a clear set of projects. and the implementation of that stretch out over several years, but the story is straight forward. so i would be looking for that kind of structure. the decisions we ask, make ourselves, ask the ratepayers to sign off on, be clear in their intent. we did not want to hear five years from now, what are you four times the rate of inflation? if that record is clear and it happens not to go above 10%, that does not bother me. >> what you will find is, this one big program, we are going to do it straight away.

there are components of the sewer system program that people are worried about if we do not get done quickly. you will notice, at least -- you will notice two blips. we wanted to get the first priority done. then you will see lowering and the second blip of phase two. how we are already trying to be as aware as possible of the affordability. besides that, you can only tear up so much.

we can work on how that rules out. these are the most critical projects. this is the cost, this is phase one. here are the separate projects that we think are in phase two. >> the r&r piece of that, we have not been doing the level of sewer replacement that we have been doing, getting ourselves on the right track -- is that something that you can talk about? that is why i wonder about the rate flow. if there is a decision or explanation that says we're going to do it right, you do not want to say that twice. you have to make sure the

program makes sense. >> and there is only a small blip there. it is meant to be pay as you go. we should not be borrowing for that. >> that will take an increment to the rates so that we can afford it. >> right, a substantial amount of that is in the structure that we have set up. maybe a better philosophy would not be to jump to 10% but to a gradual increase. rate payers never believe that we are going to lower their rates. that brings up the question, with water rates, are we not going to lower them at some point? >> the percentage growth slows

down. the idea of growth, probably not. >> if we raise rates at 10%, 12%, we expect to drop down to 5, 6% lower, but to have negative rates probably is not going to happen. >> the way that we have been issuing the debt, as you have directed us to do, we will have locked in place the average bill. we have locked in place with a 0% growth that fixed-rate portion. we all have inflation working in our favor, so to speak. you can see on the one slide

here, the affordability. they will decline as a percentage of the total budget. in absolute terms, they will stay relatively flat.

break. there was one item we were going to discuss before lunch and go after that for the rest. but if you'd like to take a break now and start back up before 1:30, we can do that. what is your preference? >> let's take a break now. [laughter]

>> take a break now. >> ok. thank you. so see you after the break. >> perhaps we could come back, you know, a little bit earlier? folks in the room?

>> the next item a closed session. are there any public comment on any of the closed session items? >> mr. president, could you entertain a motion to a movement to closed session? >> are we going to do this before we go? >> ok. colleagues, i'll entertain a motion on whether to assert the attorney-client privilege regarding matters listed below. >> i move. >> i second. >> moved and seconded. all of those in fafeyoor?

-- favor? michael? >> and i'll read the item. >> all of those in favor please signify by stating aye. closed. now michael. >> public services and utilities, chief of security, conference legal counsel, claim number 1002195. conference of legal counsel, unlitigated claim, claim number 1002196. conference of legal counsel anticipated lilt gas station is defendant. the commission will now then retire into a closed session.