years. and we don't plan on changing that. so, what we're going to do, though, we are going to shift or change around some of the improvements that are being planned under the ten-year $1.5 billion water enterprise cip to allow these wsip improvements to proceed first because, again, the top priority is to fund projects that contribute directly to the level of service [speaker not understood]. >> have you identified all of those changes that need to be made? >> we are in the process of doing that. so, what we did is the 54.9 million is not a one-shot thing. you need to look at your cash flow and from this cash flow basically our finance group is going to tell us exactly what here we need to make these reductions. and i know dave briggs and his team are now starting to look at what exactly that means. i know he's identified some good candidates already, but we

haven't finalized those adjustments yet. >> so that's pretty much still a work in progress. >> yes. >> mr. president, we received correspondence from bawsca raising a series of issues. and the first of those issues was about wsip scope. i think what we heard today is that there is no abandonment of any project that's in wsip. there is no change of scope to any project in wsip that would impact the level of service provided by that project. >> yes. >> and that the only impact to levels of service is that some of them -- because the project is delayed, some of them are are available to us later than previously planned. >> yes. >> the process is the same, but the plan is a unavoidable some of the benefit will be delayed. the last piece of that logic is that we are not in the reprogramming of things proposing that any of those

level of service projects be delayed more than is physically necessary. >> absolutely. >> okay. >> so, there is no change to the level of service ultimately to be derived. there is some delay in some elements of the level of service . >> right. >> do you have any quantification of that? >> we started quantifying those. specifically, there were two memos sent to the commission. one on the calaveras dam and one on the [speaker not understood] creek recapture that quantify those. based on modeling of our water supply. as part of our change noted, we will have to provide the state of california, i think we will look into doing further assessments of what those delays mean. and in general, whenever you delay achieving full benefits of those level of service goals, you are dealing with an

increased risk to not have the full reliability that you're looking for. now, trying to quantify those risks is not an easy task, but one that we have attempted to take on in the past. and i will look into how best to do that as part of the change notice to the state. >> i think that -- the first point is our objective has not changed at all, and our commitment to meeting those levels of service has not changed at all. to the extent that you can describe the effect of the delay, i think that's useful. it doesn't change a single decision we would make because we're going to try to get everything done as quickly as we can. but i think in terms of just full disclosure, i think that's useful. second area that was raised was budget by bawsca. and i think as was discussed, that is a work in progress. what we know is that we have enough tools at our disposal to

come up with the plan that funds this [speaker not understood]. we don't know the particulars of that yet. i think that is the area where some of the choices the letter talked about, having -- in front of the commission, this is the way we think we should reprogram funds with minimum impact to our customers. i think that's something that should come back to the commission for our review before the 10 year capital program is changed, before the funds are obligated, to make sure that the level of impact is something that we think is acceptable. >> yes, commissioner. and also again, we believe we have prudently put forward a budget which includes a contingency for potentially future unforeseen conditions of $30 million. if we, in fact, do not run into problems and do not spend that 30 million, then the 54.9 million comes down by that much. so, when we are working with the water enterprise and identifying potential projects

for deferral, then we would also show them in priority and you would know that it, depending on the impacts that we have to our current contingency, the impact is [speaker not understood] will be minimized accordingly. >> the only other thing i'd like to put out on the budget side, this is just a marker, it's not a suggestion. if in the attempt to reprogram funds to make necessary money available, if we find ourselves considering something that we think is harmful, we should not take as ironclad that we would not adjust rates to cover that. if there is harm to be done, we need to know that and know that we have the option. we're about at the end of the five-year rate commitment. as we set up the next five years, we can consider changes. again, that's not a suggestion. i just want to make sure that we don't feel burdened to do something that we shouldn't do

because of that. and the last thing is a question of timing on some issues. i think that gets back into the level of service issue, that the timing issues are ones of when level of service will be provided. so, i think that's something that would be hepful. >> any other questions? we'll proceed to public comment. [speaker not understood]. item number 11. you defer to others? if you do, you lose your space. that's all i have to tell you right now. all right. [speaker not understood] rosencrans, welcome to the commission. you're with restore hetch hetchy? that's right, president torres. thank you for allowing me to speak today. >> thank you. president torres and commissioners, i'm going to say three quick things. first of all, i want to congratulate the commission and the staff for its work these past 10 or so years on the

water system improvement plan. i'll leave some of the calaveras issues aside because i know there are some environmental [speaker not understood] from -- jeff miller might want to talk about. my understanding of the discovery of the previous land slide is valid and i think that's something that you need to accept. but more over, increased reliability from rebuilding all those pipes around the bay, under the bay and so forth, the water treatment, that's all important stuff and it's good that you're providing increased reliability to your customers. secondly, i want to thank mr. jensen for his earlier offer to withdraw a proposal to rejiger the funding for the wbip and i appreciate he's willing to listen to the conservation community in doing that. and i would suggest maybe this commission might want to reconsider its intended -- any

intention to accept mr. jensen'ses are [-eug/] resignation. -- resignation. thirdly, i did not get a chance earlier to make comments on the letter ~ that your attorney and consultant sent to the state board. i was at that hearing, and i will make some detailed communications in writing and some suggestions and concerns about the way you presented the potential impacts to the state board that i hope you'll pay attention to. thank you very much. >> thank you very much. mr. peter widmeier, drt. good afternoon, mr. president and commissioners. peter dutmeier of the [speaker not understood]. i, too, have concerns about the proposal of bawsca to transfer funds from the watershed environmental improvement program into capital programs. i, too, thank mr. jensen for

pulling back on that. it does give me a chance to comment on the annual report for the wiip that was presented last december, i wasn't able to come, but i thought it was a great report. really exciting things happening throughout the watershed. we personally appreciated the puc's contribution tox acquisition of dos rios at tuolumne and san joaquin. that will be a [speaker not understood] to the san joaquin river wildlife refuge. i want to congratulate staff, especially tim ramirez who is here for the good work they've been doing. we had a good meeting up in moccasin on friday, [speaker not understood]. progress is made on the upper tuolumne river [speaker not understood] system. it is a little behind schedule. every three years, or 20-year. progress is being made, and

this is really all helping the puc meet the obligations of the environmental stewardship policy. so, we really appreciate you taking that seriously and let's keep moving on these. ~ wiip projects. thank you. >> thank you, peter. mr. jeff millerv, alameda creek alliance. ~ welcome. this one, is this one on? good afternoon, commissioners. thank you for the opportunity. jeff miller, alameda creek alliance. i want to echo [speaker not understood]. it's doing good things in the alameda creek watershed. i'm glad mr. jensen withdrew that suggestion. i certainly hope the commission doesn't view the improvement program as a slush fund to be looted, to cover other overruns. in fact, i believe wiip is one of the wisest improvement program elements that is not over budget.

so, i hope that it won't be looted. and it also is less than 1% of the funding for the wsip, a pretty modest amount. so, please keep that intact. then i also wanted to address the project that was -- the alameda creek recapture project which was called out as probably the last wsip project to be completed on alameda creek. we've been interacting with that project for about 10 years or no longer than that, probably about 13 years. i've come here a couple times before you. we've been in pretty constant communication with your staff. we see some good things industry wise, project particularly the new design. there will be no infrastructure in the creek. it's passive infiltration to a quarry pit and simply requires a pump. we like that element of it. we also see some potential problems with the goal of the project recapturing bypass [speaker not understood]. we absolutely support recapture of the flows that are released from calaveras reservoir for fishery restoration.

those are summer flows, the very low flow. it's cold water that would not make it all the way down alameda creek anyhow. and there's no environmental benefit to be gained if that water were not recap toured. so, recapture that water makes sense. the water that's bypassed from alameda diversion dam due to the new operations, that's water that's intended to assist fish migration all the way down alameda creek to the mount. and we see some problems if there is an intent to capture that much water. that water bypassed is -- we believe some of it is mitigation for the calaveras dam and some of it is required for federal permits to comply with the federal fish species act for fish passage. we have to work out what water is going to be recap toured and how much, but we like the new design. thank you. >> what kind of fish? [speaker not understood] trout and [speaker not understood] salmon and pacific lampre, steel head being federally protected. >> when is the best time to go fishing?

probably if we do things right, probably 20 50 maybe. [laughter] when we have a sustainable run back in the creek, then maybe we can talk about some catch and release. >> i gotcha. thank you very much, mr. miller. thank you. ~ >> i'm going to put that in my calendar. [laughter] >> any other public comments? arthur? you heard the call for you to rescind your resignation, i'm sure. yeah, right. so i can come back and -- no, [laughter] >> don't go there. thank you, mr. president. >> you have until 20 50 to go fishing in your retirement. i'll meet you there. >> there you go. we'll come back for that. now that i helped save them by removing my earlier remark. a couple of things i wanted to start with. first of all, the program should and must go forward. calaveras dam is too important. you were good to highlight that in your questions to ms. labonte. it is the flagship reservoir. it's the largest one you have in the bay area.

it's absolutely vital for earthquake protection and drought protection. more on that in a moment. so, we support all the recommendations and the supervisors' appropriation, all of those things if you need us to come and say that to them, we would be glad to do so. we did have concerns about the budget. you are now six years away and counting from completing the entire program. more things could happen. it was impressive to see the risk curve that julie presented to you, and that's very helpful. i'm going to study that more and we'll probably have some more questions for her, your staff. that is in effect your decision making here today. with respect to our recommendations in the letter, the level of service goals was a question. commissioner moran spoke to that. i think the squab quantification, the timing is important to us. that information is going to be coming back to you, as ms. labonte said. ~ with respect to the budget

impacts, we did suggest that alternatives might be considered. commissioner moran said the unthinkable. or you can increase rates, too. which is a possibility, and i appreciate the comment because it suggests the spectrum of things that are at your disposal in case you do go above the 88% risk threshold. there will be other things you need to consider. and whereas the economy appears to be out of the great recession, now in capital letters in the media, i know that all of our cities and agencies are holding tight. they don't want to get anywhere near that financial cliff again. and, so, your work controlling this budget is very important to them. i think one of the things that we have collectively fallen into a deli yum about is the fact there are so many zeroes on these numbers. ~ so, $50 million seems like [snap]. that's how much we save by financing, $350 million.

so, it adds up, as they say. so, your continued attention to that will be important. speeding down the celeste -- one of our recommendation is any remaining contingencies be put under the command control of the program manager so that that can be reported to you and be visible and it doesn't really change the nature of your contingency management plan, but we think at this stage of the project it would be an appropriate idea. and then lastly, the impact of these projects and the importance of them. one of the points highlighted was the significance to drought. put thattion in perspective, there is another memo in your packet today that talks about the financial economic impact of drought. 10% reduction being measured in almost $2 billion a 20% reduction system wide, almost $4 billion, that would more -- per year of drought.

obviously more than pays for the $19 million increase due to this project. so we support you moving forward. thank you. >> any questions? mr. bilbow. >> thank you. from what i understand about the program and the specific project level changes, i am satisfied that impacts on rate payers, all of the associated issues here, i'm good with. i'm only stuck on two things. and once again, my theme is c-e-q-a. on page 3, the two resolve clauseses at the top there, i'm not actually sure if this commission makes the finding that there have been no substantial project changes. i thought that was the environmental review officer of the city under chapter 31 since the planning department is designated as their responsible party for the city as the lead agency. and with respect to the second

resolved, i guess i'm not entirely clear on why you would need to re-adopt past findings if there are no changes to the program, including the ssc and mmrp and if in fact you are readopting them, again in the future, i would request that there be a link or some ~ way to access that information because it is pretty material and it is suggested that that's incorporated in the resolution as they are fully set forth. so, i'm just stuck on the c-e-q-a minutiae. otherwise, i'm good with the changes. and thank you. >> city attorney's office. it is the practice for the commission to make the finding that there's no new information if there is -- that is something that your environmental review staff confirmed with the planning

department, that that finding is required to be in there. and i will work with you, david, to make sure that the recitals and the links -- i hear what you're saying about making sure the dates and the reference back to the planning department are available to folks. i will include you to improve our consistency on that point. >> the chair is ready for a motion to approve. >> i'll move. >> moved. >> and seconded. >> seconded. all those in favor signify by saying aye on item number 11. >> aye. >> opposed? seeing none, the motion carries. item number 12, presentation and discussion of the proposed wholesale revenue requirement and rate schedule for fiscal year 2013-14, as applied to meter readings. mr. reid strong. >> good afternoon. mr. reid strom, general manager [speaker not understood]. we present the water rates which are predicated on the 25 year contract that you already approved. while this is largely a

ministerial act, there is some news in here which is rate payer good news. we want to make sure that gets reflected. we have a very short presentation for you, about four minutes. and i'd like to turn it over to deputy cfo charles pearl to walk you through the rate payer savings. >> good afternoon. as mr. reid strom mentioned, ~ we do have an opportunity to share with you the proposed rates for the wholesale water customers for next fiscal year in advance of your action which is scheduled for may 14th. and, so, if we could go to the slides, i just have a few to share with you. >> um-hm. >> as mr. reid strom mentioned, we have some good news. the rates will be going down for the biggest wholesale customers. the biggest reason you are aware of, we received $356 million payment in february from the wholesale customers. as mr. jensen mentioned, that is done primarily for savings. what that means is we've been able to take out that rate

component from our rate setting and i'll show you what that means in terms of numbers in a moment. another reason why the rates are going down for the wholesale customers is that they're buying more water. so, as compared to the current budget year, we had budgeted about 137 million, 137 mgd in terms of volume. and what we're seeing in the current year is that's going to be closer to 143. and, so, what you'll see in the chart here is we're projecting a little better news in the current fiscal year '13 and we're projecting that forward into the budget year for next year. so, again, better news in terms of water delivery, more sales means lower rate. >> is that not increase of the knit customer base or is that an increase of utilization by the current customer base or both? >> it's probably both. i couldn't speak to what's going on on the retail side in terms of the wholesale customers, but i can tell you they're buying more water. so, in terms of the numbers, this is a grid that

just shows the revenue requirement which is what we in finance use to determine rates. and you'll see in that pre-2009 assets row, the $28 million amount is going away. and, so, in fiscal -- beginning in fiscal '14 moving forward, all the zeroes there represent the removal of that prepayment amount from the annual rate setting. so, that's the primary reason the rates are going down for the wholesale customers. you'll also see down in the fiscal '14 column that negative 13 or almost $14 million number, that represents the additional water that they're buying from us in the current year that we're then giving them some rate relief in the budget year fiscal '14. so, those two thingsed to thetion have resulted in the rate reduction. ~ which is here. you'll see this shows some historical perspective. i can appreciate the numbers are a little small if you're looking at the screen. but the negative bar that you

see there for fiscal 14 shows a 16, 16.4% reduction. ~ for the proposed rates for next year. i do want to, though, show you that in the subsequent year fiscal '15, we do have some rate increase that is coming online and that is primarily due to debt service. so, again, a rate reduction proposed for next year, but it will -- we will have a bounce back in the subsequent year fiscal '15. >> where is the debt service reflected? >> debt service is related to the bond issued for wsip. >> where is the reflected in the thaterth? >> sorry, it's the bar chart you see on slide number 5. ~ chart >> got it. thank you. >> sure. >> thanks. >> the good news again, as mr. reid strom mentioned, ~ compared to what we showed you a year ago, the overall rates for the wholesale customers are going down from an sfpuc perspective. however, the wholesale customers will then need to pay for the bonds that bawsca has issued so that we the puc will serve as a collection and paying agent so that with will

then bill the wholesale customers for their portion of those bonds so that overall net-net the customers will have a little bit of savings which is represented by the interest rate savings on the outstanding bonds. so, overall you see a five rate comment, a 10% reduction overtime. the rates that the wholesale customers are being charged. however, what we'll then be doing is taking the information from bawsca and adding back what we'll need to collect from them to pay the bawsca bonds. this is a pennies per gallon slide and, again, it's just showing the costs going from about a third of a penny up to about two-thirds of a penny over time. the drop that you'll see in the fiscal '14 bar is just the rate savings that i just described. but the increases that you'll see over the next few years is primarily due to the debt service coming online. and then our costs will flatten out once all the wsip bonds have been issued and once all

of those costs have been incorporated into the rates. so, we do have a number the next few years a little bit more rate increases before things flatten out. this is just an idea of how the rates are set, but this is how we get to the rate which is $2.45 per unit. and, again, that translates into a little over a 16% rate decrease as compared to the current year. as mentioned, the -- oh, industry water rate discount, this is a discount we give to one of our wholesale customers because they actually take untreated water from our regional system. so, we give them a slight discount for that. >> who is that? >> core side county. ~. i mentioned the rate decrease. the only other change that's going to be coming forward to you on the 14th of may is that

we will be applying late payment charges to wholesale customers. we don't currently assign a late payment penalty to payments that are received after 30 days as we do for our retail customers. so, they're going to be doing that to bring them in line with the rest of our customer base. >> where is core side county? >> core side county is -- >> that's not a county, is it? >> that's the name of the water district. >> core side water district. >> they pull water from -- >> and it's located in monterey county or san mateo county? >> san mateo. >> all right. i thought we added a new county to california. >> no. [laughter] >> we'll come back on the 14th to present this in greater detail. >> [speaker not understood] me 4 minutes. you're beyond that. >> all right, i'm done. >> all right. any other questions? commissioner? >> i have a question. you know, i'm sort of perplexed by this conundrum of the more

you use, the more you conserve more, put it that way, you get less revenue. and, so, while i'm pleased to see an increase in revenue, i just want to follow-up on our president torres' comment about why there is an increase in use. maybe you can answer that now, but it would be great to understand why the wholesale customers are now using more water. >> i can just briefly tell you that the three things that we looked at in terms of why water usage goes up or down has to do with primarily water activity, and conservation. so, i can tell you that general conservation is something you'll see across the country in terms of a general downward turn line of water demands. that is something that is fairly common across the country. what's more regional in nature, though, is what's happening with the economy, some areas of california, perhaps are stronger than the others. and what we have seen here in the bay area is stronger economic activity. another thing that you can also

rely on is how -- oh, whether or not unemployment and that sort of thing is actually having an impact on water demands. and, so, we go through our budgeting process, and budget sort of an average water year in terms of consumption. so, as things change, whether we have a dryer year or wetter year, [speaker not understood], we budget a water demand scenario, we are seeing that water demand has picked up and perhaps that is an indication of a little more demand because it has been a drier period whereas normally it's a wetter, rainy season still. >> thank you. yeah, and drier and less rain. >> referring to law.

item number 12, any public comment? blah, blah, blah c-e-q-a, blah, blah, blah, we'll talk. [laughter] i understand this is not for action today, this is for may 14th. i'm also wondering if this required any special notice under charter section 16.1 13 because of the change in rates. >> i have no idea. >> because it's wholesale it didn't require? >> it didn't require. >> interesting. >> we learn something every day. >> yes, we do. and i appreciate that. >> thank you for being here. we don't need a motion on item 12, right? no. >> [inaudible]. >> it's for consideration at the next meeting. >> make sure you put that in my script. [laughter] >> >> [speaker not understood] call for the vote. mr. chair, members of the commission, one comment