there are terms written into the contract where we do have the ability to substitute resources that we procured directly or own directly. and to the extent that there are benefits, hopefully we can use those to our advantage. one thing to amplify what the general manager was nothing, because of the doldrums of the economy, the prices for energy both renewable and otherwise are lower. in the time we have been negotiating, the price has fallen of little bit. by the time we signed, it might be a little bit higher, but we are not seeing skyrocketing prices. >> i am not sure i quite fully understand that either. if we were able to identify additional resources and take advantage of the substitution

caused and it was at a lower rate, we would still be on the puck? >> it depends on where the market is. >> what we are discussing, if they can unload that other power and to make money, there is a way to capture that. if that is an expensive thing, we might be facing that. but we're talking about fading customers in overtime, so one way of clearing in the new resources is timing it with future phases. i am now on slide 6. as a general manager was noting, the renewable standard is currently being litigated in

terms of what is going to count and what isn't. even after all the approvals would go through this body, and go to the board of supervisors, get an a or a signature. there are final factor is that we will have in the contract that will need to be determined before the general manager with a sign the contract. one is the issue of the performance bond and what that method is, how to calculate what we would need to post to make sure that is something we can handle financially. the staff decision has been moving very slowly. we are lobbying and working with commissioner offices to set up meetings on a very senior level. the last point i already

foreshadowed of that, i get that the market prices are within a certain band, and we have a recent refresher on indicative pricing for show. that allows the average rate of customers, it has declined from 11.3 cents. it to go back to 5 cents by the time we are striking a contract. their questions there. in terms of the questions specifically the commissioner moran had, the 30 megawatt basce basis, it would be a 50,000 accounts. it makes a difference of 25,000

that would be likely to participate. there would be a number of opt out notices, and to expect another 25,000 additional likely customers. the difference of going between 20 and 30 megawatts, about 3.5% higher. we also spent some time since the last time we met before this body talking with the counterparty about how it might affect the type of collateral they are wanting. it reduced its a bit, but not by direct percentage. 19.5 million to 18 million. it is not a major driver in terms of that issue, i would say. it is important to note that we

did discuss how small a program that would be willing to contemplate. it is less than 20 megawatts. >> the good news, as you might imagine, the prices should be pretty variable. we had a certain amount of fixed costs for marketing. it would make a big difference in the price because you really are saying that virtually all of the costs are variable. it is more of a policy called that a financial one. it is not a rate one. on slide 8, to break that down, for a typical bilhah, it is the

difference between $6.70 at $6.90. we talked about $7 a month, i think that as a lot more accurate for a particular customer. really, the interesting thing here is that the bottom in terms of comparing the program size and the effect on customers is and comparing to what we expect customers would otherwise be paying. the 30 megawatt program as far as their total bill, would go up by 17.5% and 8 20 megawatt program would be about 18%. >> when you say the total bill, is that the total pg&e bill?

>> we have jurisdictions for getting a ballpark estimate on that. >> of the savings would be $6.70 for 30 what? -- 30-watt? >> a majority of our customers are low energy usage. the bulk of the customers would see their bill by about $7. >> up from the current pg&e rating? >> correct. >> what is it costing us to increase their rates? >> this is what it costs. our costs -- >> how much total money would we have expended to ensure that a ratepayer will get a second dollar increase? >> we will have spent the $3 million we have spent so far.

and the additional $19 million to appropriate. >> what is the total? >> $25 million. >> plenty of that is security. >> don't fall in love with appropriations. i am just trying to get a handle about whether this is the right thing to do for the ratepayers. we don't know -- that we know that is not the case. at the minimum, it could be an increase of seven or maybe more. when does this program start? ok, thanks. >> you are basing this on the

minimum. >> the typical customer falls in various usage bands. we are using the majority of customers falling within this band and using them out of kilowatt hours per month. -- the amount of kilowatt hours per month. the vast majority are in that 40%. >> this does not assume by energy prices going down. >> no. >> it does not assume substitutions. >> this assumes we're not substituting anything. all the unknowns are not in this. president vietorcommissioner caw

studies about people who participate in this program. was based on the fact it would be the same order of less than pg&e? or the fact there would be paying more? >> they steadies' you saw earlier this year, those were based on asking, if the program asks -- costs more, how likely would they be to stay with the program? we tied the questions we were asking to actual usage. how much energy you used versus a different member of the community. we had that pretty well stratified.

that is why we have some confidence the would-be customers participating. we also assume an opt out rate. there is a fair number of customers and the majority are price sensitive. some people may not want to put their money where their mouth is. >>if there are no other questio. >> good afternoon. you had task us to come back and update with the hetch hetchy fund. this is what we discussed.

overlaid to that the decision if we were to go forward such the hetch hetchy or on the hook to pay for the $19.5 million of additional costs, here is how those additions would look. if i could walk you through slide 10. the dark black line is the resulting or projected fund balances and showing in a single measure the health of the state of the hetch hetchy fund. as we discussed, given the current capital needs and given the current level of subsidized rates, selling power for less than cost, we would be slated to run out of money in the fund around june 2014. that is quickly approaching.

if we make the assumption that hetch hetchy has to fund the additional $19.5 million that mr. campbell walked to through, the decision to move forward on ccna, which would be one of the funding choices, we could afford to do that. we would run out of money even sooner. one of the questions you ask me specifically -- asked me specifically, how can we have all long-term sustainable hetch hetchy fund. we have provided some of the difficult choices that will have to be made in the event that a funding source to pay for ccna or stabilize the hetch hetchy funny to be made. the first is rate increases.

i would like to walk you through the politically tough decision, what that means. the first column would show if we were to raise rates one penny for those rates were not paying their full cost, the total value of that based on our load is $4.6 million. raise rates one penny and go from 3.7 5 cents to three. -- that would mean revenue of $6 million. that is a quarter of the cost that was mentioned before. what that would mean i an extra burden to meet new railway at the top, they would have to pay an additional $1.30 million and their power bill. we would -- it would mean sending higher power bills to fine arts museum were a student thousand dollars, sending a unified school district $400,000.

all these decisions would generate $4.6 million for additional revenue for one- fourth of the funding needed to cover a cca decision or make better the shortfall we project in 2014. if we raise two pennies, the burden is twice as much. it would take if we wanted to hypothetically recover about $20 million about the same numbers that were mentioned before, a 4 cent rate increase would generate $18.5 million. i am not proposing that at this time. to give you one order of context on the difficult decision. that is one option to look at. the first we discussed was digging the fund balance and spend down the checking account balance faster. that made us go off the cliff faster.

not a good long-term decision. second, to increase rates and bring in more revenue. that is this slide here. another idea would be to make further cuts above and beyond the difficult ones you have already had to make in capital investment. and to help refresh the collective memory and also for the audience what i have summarized for you on slide 12. a summary of all the additional power-related investments. ion hetch hetchy. in fiscal year 2013, we are slated to invest an additional $4.2 million in grenoble's. that includes $2 million to go solar sf. put another $2.60 million into

energy efficiency. you can see that none of those numbers, added altogether or taken individually, get anywhere close to cover a $20 million amount to cover cca. the fiscal year 2014 and beyond, the big numbers are the redevelopment of treasure island. to the degree that we provide power there, we would need to invest $30 million of additional electricity related infrastructure. or to the degree we need to upgrade our facilities up country, that would be $19.3 million in fiscal year 14. 16 million in the out years would be a decision to not do those facilities. that would help generate additional savings and or costs we did not encourage and help make hetch hetchy co back into the black.

the choices, if hetch hetchy will pay for it, you have to look at the revenue side or the fund balances. those are the sources or the expenditure side, cutting staff, cutting programs, or cutting additional capital investment. while slide 12 shows -- those are oftentimes people that are funded by those positions. the people that are helping develop a small grenoble's. in the entire hetch hetchy power enterprise, this has 75 to 80 employees that are funded and on average hired during the year. that equates to $1 million, about seven peoples costs of salaries and benefits. it might be a combination of difficult choices of revenue side, expenditure side, if the

assumption is hetch hetchy pays for it. there is also polic other policy choices you can consider. if the general fund were to pay for the additional costs. that is a matter for policymakers to make, not me to suppose. there is the mix and match, if there were a decision to raise rates for those who don't pay over time. we could bond on some of our capital projects. if for example you thought you would have 1 cent the first year and 2 cents the second and you were willing to bonn that, that could stretch out the payment for those facilities or the bus on van ness. that would make you more

comfortable. it is almost impossible to think of any way out of it that does not include something from the general fund. either as a rate increase. i do not want to lay that too much on cca. that was always going to be the conversation. all of our things unless we stripped everything out were always going to run out of money. this is speeding up the conversation. it is not making the difference in terms of the general fund. >> we do not have been here a picture of what we have to do just to keep the hetchy fund balance sustainable. one of the things we did in the budget process, we took some big capital programs like the transmission system and put it out beyond 10 years. it does not show up here at all. that is what 100 million plus.

if we want to make that sustainable, we need to do some of that stuff anyway. do you have a sense of how much we have to do, even without cca, to make ourselves sustainable? >> it depends on how much we do have some. in the order of magnitude, a 2 cent or 3 cent increase would be on the order of magnitude to order, to satisfy the capital plan. whether or not we can issue our own bond, i am making the assumption we would be able to, which would help bonds. that would be assuming a cca, 3 cents assuming and 2 cents without.

the big decision is how much transmission investment, how much of that would be over and above what you have in your capital plan. that is in your 11 and 12. that is not in the current plan. as good as it gets, it is 2 cents or 3 cents. if you look at the revenue side. >> we're looking at bonding. >> you're looking at both. increasing their rates to enable you to bond. >> that is without cca. with or without. >> you can do a 2 cent or 3 cent increase. you'd have to go higher than that to meet the demand. >> can i ask a question on the cca piece?

one of the things that comes out through the governor's conversations is private financing. if there is a city bank -- citibank approach where they are waiting for these grenoble's to drop. and maybe that is not relevant for other aspects of hetch hetchy because of our public status and maybe we keep that conversation to cca. is that an option, could there be something in there for other aspects of the hetch hetchy operation? >> we are exploring is financing options for transmission facilities in particular. the tax and manage as far as being a provider, transmission provider. that is part of the $100 million

plus deferred capital discussion. as far as having commodity futures for energy, i am not recommending that. we are not proposing that in any shape. what we're doing instead with the proposal is entering into a 4.5 yr predetermined fixed-price purchase. basically a call as opposed to put on the option. >> there was an entity that was assuming too -- that could assume the risk? >> it is possible. what we are all unhappy with is having their rates higher than pg&e. any time we look at something else that might have a hedge risk, and might be beneficial. we know it will be more costly. we tend to shy away.

even though three years from now that might be helpful. we can think about it some more but that has been our concern. everything you do ends up [unintelligible] commissioner torres: the two cent was to make the balance unfold. does that include -- it does not. ok. do we have an idea as to what that increment is? >> we do not yet at this time. we will be coming back to the general manager and the commissioner. it is a long-term thing that we are spending a good deal of staff time on.

and the deputy general manager already meeting with folks to study that. and not to be too quick on that. it depends. if you look on slide 11, we're saying that to point -- that would bring in $9 million a year. you're looking at a 10-year capital program, that was short $60 million and had 80 fund balance. if you had $5 million a year for 10 years you could pay for what is in the current capital program. you could get a fund balance back to $30 million. that would be a cash payment. if you are doing it in cash, you have money to start paying off that $100 million. it would stretch out when you could bond. i think many of view would be unpleasantly surprised even though we keep pointing it out. when we have our discussion of

the budget, we're putting in $2 million to go solar and we're putting in $10 million for all efficiency programs and that is, you would prefer to spend more money on that, too. commissioner moran: is that another 2 cents roughly to just do with that issue? >> if you wanted to collect $100 million in cash, yes, if you would not have to do it that way. >> probably 2 cents at some point. >> that is the order of magnitude. we need to perfect that assumption. that number will change depending on what year it is. >> thank you. >> the last slide is a repeat of a timeline serving customers slide.

this is the same as it was before. the big item would be three lines down, just to refresh finalizing contract language and finalizing rates from shell in quarter one. we would go through the financial update then. when we adopted rates for the redevelopment areas. the numbers would go up $7 a month for tier when customers. that is 40% of our residential customers here. in the city. >president vietor: how familiar is lafco and/or the board of

supervisors with this scenario that the puc is currently in and it relates to cca and the big picture? >> at the committee meetings we have talked about the need to recover more of our costs for hetchy. on the tenure plan looking out, we have to be cutting things substantially and still not breaking even. in fairness, in budget hearings, it is the first year anybody looks at. a conversation about what happens in years three to ten, -- i would say it is not on the top of anyone's list. the discussion of cca