general fund departments if not incentives as far as cost goes. >> in the current year and in the budget year, if you were to look at adopting his rates, you will still be providing the same $54 million worth of lower- cost for the general fund, whether you have these as they are now or not. by looking at this small sliver alone for just the redevelopment, helping or harming the general fund or other rates. >> i think that is the point they're making. do they want to change the methodology so we show this differently and therefore it to increases the interest and possibly changing the subsidy. now, we don't get a chance to talk to the port of supervisors or anyone else.

what you need to do is to pay your fair share. that is on the table. >> my last observation would be the nature of a five-year rate within the power market, which is very volatile. there was an objection that was raised because the rates are expected to go up over the past 15 years and our rates would be at 80% of pg&e. that makes me a little uncomfortable that we are providing a deeper and deeper discount from what the market indicates is the value of our and not just in -- is the value of power and not just he frequently. >> we are going to revisit this annually. pg&e has averaged two rate changes every few years.

staff here, just like we did for water and waste water rates, we revisited the requirements. what you have seen here is an assumption for 2011 and for the last 12-18 months. if you want us to come back -- >> the question goes beyond that because if you came back every month, we would have roughly the same answer. there's nothing in here that talks about the market. there is nothing in here that talks about market value. this is cost-driven. if the market changes, you will come up with the same answer. i note this as a point of discomfort. i don't have a suggestion. >> we were interested in having

our rates below are, the energy mix be greener, and i also thought was useful to save the stability and pricing for people which is a safe thing. one of our intentions is not to change this too often. that does not mean that you get out of sync with the market. we were intentionally trying not to make these changes on a frequent basis.

quarks if there are no more questions -- >> if there are no more questions -- >> how this transmission come into this? >> about 45% will be generation. this is transmission and distribution. >> we have to pay them now. >> we have acted in what our costs are under the agreement and the projections through 2015 as included in the cost of

service. >> thank you. sorry to keep you waiting. >> i sit as chair of the rate fairness board and i see some new faces on the commission since i have been here last. welcome, if you have any questions. i will try not to go over too much has gone through 04. there are a few items in discussion. i will not dwell too much on the staff proposal of the rates. we will talk to the power process and our recommendation and our opinions. the rate fairness aboard was established in november of 2002. we are an advisory board to this commission. this also sets forth rate policy goals, cost of service, etc..

we can hold public hearings, which we do, and we make rate policy recommendations. this is our fifth go round before you. we finally got to talk to about -- rates and this is our first presentation regarding the electric retail rates. who are we, we are a seven- member board. there are four civilians which represent residential and commercial customers and we also have three very able members of the staff who are on our board. we have had about six or 8 meetings and they have been very engaged and may ask the right questions and they are eager to see the new retail program for the redevelopment areas. i don't think any of them are in the oddest of they have been

great. what are the fair rates? people have a different opinion about what is fair and not fair. a lot of different factors that went through our considerations, some of them are from the charter and some are things we bring to the table. you can see that some might be in conflict. we have a certain amount of revenue that we have to get and sometimes that means raising rates. there are many factors to be considered better on this chart. we have added green generation, something we don't have to deal with but we are -- by the green element. the next slide, i did not know

the commissioner would be asking this question, but this gives us a brief introduction about how we look at the revenue requirement. if you take the total cost of service of the power enterprise and used to track that by what we get -- and you subtract that by what we get, the revenue set by the budget process and market sales, that leaves a balance to be connected and the general fund. including the sales to the other entities at pg&e, there is a huge subsidy to the general fund. as was mentioned, this is the elephant in the room. that allows the general fund department to be much lower than the pg&e rates. up until about two years ago, this was at --

this has been one success of the commission. there is some precedent for that. i will not go too much into the staff proposal but we want to talk about the seasonal tears. what are the higher tiers. there was more kilowatt hours in the first tier dent in the second. we might heat the air with my gas-fired furnace, there is a gas-fired -- the moves the air around the home. this provides more energy at a lower cost than at the time when people are using more power. that is a good thing.

with respect to commercial, this just reviews was in the staff proposal and a slightly higher winter rate which would not reflect the market consideration to the price of natural gas tends to rise. the electric power rates are slightly higher. what are the fairness criteria, how does this meet our criteria in general? there is a customer charge, there is revenue regardless of the size of the load. we have the same kind of tears

in water and wastewater. we have the same program which is a technical, waste water and water. in the bottom, we have the common treatment. and support for of the rates generally reflecting cost levels, we think they do. to get to the bottom line for residential and commercial rates in the redevelopment areas, we believe the rate structure is fair and did these include the same kind of tears and customer charges. the level of the rates are fair because they are lower than pg&e's and the seasonal variations are fair because this is common practice on the residential and commercial side. a couple of things to watch as we go forward, we understand

that there might be a building or two in hunters point for. we would like to see that the commission has used potential flexibility to negotiate rates even lower. there might be some flexibility on the commission and staff to negotiate rates. we would be perfectly happy to see that and that is a common element of other rate structures. you talked a lot about&(3 this green power capital investment fund. the only folks paying that charge would be the folks in the redevelopment areas. we would like to see the benefits from those revenues go to those redevelopment areas. reports on that would be useful from the staff.

another item that came up is the continual battle about tiered rates versus families. there is a high tier-three rate. does that discourage large families from moving into these areas, or san francisco in general? that may be based on the size of units being built in hunters point. it is a continuous thing we looked at and struggle with. we are aware it can be an issue with power as well as water and wastewater. the fourth thing we would urge as the commission gets into the retail power business is to keep all the data on the customer load by unit size, by weather, and by type. all the historical data will be very useful when it comes time for the next examination, potentially as we move toward

having more we tell customers. all this data makes forecasting better and easier. a few final thoughts, as was mentioned before. the redevelopment areas are a very small sliver, maybe 1% to 2% of the budget. because of that and because there are no current customers there, our process has been easy. if you look over our minutes, we have not one word of public comment. there are no existing customers being affected by this. it was a very easy process. we have also noted that the redevelopment areas are at or above cost service. these rates do not relate subsidize the general fund rates or the excess sales of power. there are contracts with modesto and rates for the enterprise from the airport. the green is very commendable.

finally, the community choice aggregation is moving down a path. that will be a much more difficult and much more controversial process for you and for the rate fairness board, but we are up to the challenge. we think this is a nice starting point for the process. it will be a much more contentious issue. with that, i will take questions or defer to staff. president vietor: i want to thank you for all your work. express our thanks to the entire rate fairness board. we really appreciate your hard work on this and your recommendations. commissioners, and the questions? -- any questions? vice president moran: i would like to echo that. i think your last two slides were a couple taking us beyond the line-by-lined critique of what has been proposed and to keep up for us some issues we

need to watch for overtime. that is very helpful. >> we are happy to do so. president vietor: any other comments or questions? anything else on the right issue at this time? any public comment? >> good afternoon. my name is wells lawson. i actually worked here for the office of economic and work force development, and have been talking briefly with the rate fairness board about some of the proposals. after today, after talking with todd earlier this week, i have a greater appreciation for the complexity of the policy we have to talk about. as the project manager, i am here with tiffany, who is also a project manager on the shipyard

hunters point redevelopment project. i want to weigh in on a couple of issues and let you know we are interested in being engaged in the conversation. the reason for that is that in august that we approved the candlestick point hunters point shipyard project, a historic win for the city, and a real lift. now we're starting to contemplate what it takes to get those businesses out there that will create 10,000 jobs in the commercial portion of the hunters point shipyard. we have initial studies that have been completed, and the landscape for attracting tenants is a tough world. we have very limited tools right now available to us. we have the enterprise zone credits and deductions. we have potential payroll tax exemptions. otherwise, we are very limited in what we have. we are obviously great

proponents port support for new clean-tech companies. that is 3 million square feet, the next frontier in terms of economic development. to the board process and process with the redevelopment agency, we have weighed in collectively as to the future of hunters point shipyard and what we expect it to do for the city. our thinking around this is effectively that applying a discounted power, as recommended, to the geography of the shipyard instead of a tenant-by-tenant basis would be powerful and helpful for us in attracting tenants to the shipyard. i am not sure how we do that. i appreciate the complexity for the conversation. i think we are looking forward to talking with todd, the rate fairness board, and the commissioners in the future

about how this works. the other point i wanted to make is, generally speaking, the green power capital fund -- i like the idea of that being redirected to the redevelopment agencies. we are trying to attract clean energy and clean businesses out to the hunters part -- the hunters point shipyard. we have a lot of work to do as a city to get there. it is more of an invitation right now to work with folks going forward. i think if you could consider the needs of the project area, i noted it was number of four in your strategic plan objective. you do not want to forget the work force development objective. i am happy to answer any questions that commissioners might have. president vietor: any questions or comments? we appreciate your reminding us

of these issues. we hope you'll come back as opportunities arise to see how we can help. it would be great to develop the work force and provide as many opportunities as we can out there. >> if i may, i did a back of the envelope calculation reminding you that phase one is approximately 1200 homes. the remaining 10,500 homes have yet to be built up. there is a lot of high-density development, ranging from towers 35 stories tall to a very big projects. i did a back of the envelope to regulation of the projected energy to create 10,000 jobs, you are looking at something like the $125 per year subsidy per job to facilitate the attraction of those businesses. that is one ankle and one way to think about it as we move forward. president vietor: thank you very much.

next item, please. >> next item -- discussion of possible action authorizing the general manager to request approval from the board of supervisors to accept and expand congressionally directed project funds from the 2009 omnibus appropriations act, as administered by the department of energy, for the fats, oil and grease to biodiesel project, currently in the process of demonstrated -- of demonstrating technologies to recover greece to be converted into biofuel including biodiesel. president vietor: is there a motion to adopt this item? any public comment? all those in favor? opposed? the motion carries. next item, please. >> item 14, discussion of

possible action to approve the selection of esa+orion jv, a ward of the -- award of the hetch hetcy moccasin facilities upgrade, and authorize the general manager to negotiate and execute the professional services agreement. >> i have a question. that is whether this project is ready. what i am thinking is as we go to the budget process, one of the things i want to talk about is the nature and pace of this program. i am wondering if we have the project will one of defined to put into the environmental review process -- we have the project well enough defined to put into the environmental review process. >> commissioner, i think there are a number of facilities that need to be upgraded.

i am not sure that we have a project totally ready to start right now. the contract would not begin until march. we can explain. >> go ahead. [laughter] >> michael karlin, deputy general manager. we think this whole program is maturing all our facilities. as part of the budget process, we will take you through some of our facility needs outside of san francisco. we are building 525 golden gate. but our staff is currently working out of moccasin. we would like to upgrade those facilities so they have the equivalent of what people in san francisco have. we have been studying it. we have layouts of facilities we

want to of great and what they entail. -- we want to upgrade and what they entail. we want an environmental consultant in place as we take the project forward. we think we are ready. >> i am not going to object to this. i am just putting everybody on notice. >> we have several specific slides just to talk about how much we would be spending on facilities. president vietor: any other comments on item 14? is there a motion to adopt item 14? any motions? item 14? second? hearing none, what do i do? to table it until -- continue it to the next meeting, until we have more information and can

look at the slides? >> is there any time line when the bid runs out, anything like that? president vietor: i don't think so. hearing no objections, i would like to continue -- can we please continue this to the next meeting and get more information at this time? next item, please. >> item 15, discussion and possible action to approve the selection of hdr engineering, harry tracy water treatment plant long-term improvements project construction management services staff augmentation, to authorize the general manager to execute the professional services agreement with hdr engineering not to exceed $16 million with a duration of five years, subject to board of supervisors' approval. >> julie labonte, executive

director. do you have questions on any specific items? president vietor: any questions or comments on this item? is there a motion to adopt item 16? i am sorry -- 15. is there a second? hough -- public comment on this item? all those in favor of adopting item 15? opposed? the motion carries. >> item 16, discussion and possible action to approve the plans and specifications of the water enterprise water system improvement program, crystal springs pipeline number to replacement project to the

lowest qualified responsible bidder, ranger pipelines, to provide improvements that will add seismic reliability to the northern peninsula. >> i want to point out that this item shows we are continuing to benefit from a very favorable bidding environment. in this case, we were able to save $13.80 million with the lowest bid, which represents 30% of savings from our budget. >> and ranger pipeline, as i recall, is a san francisco firm located in bayview. >> they have done very good work for us so far. president vietor: public comment on this item? all those in favor? opposed? next item, please. >> madame president, i believe we are coming to the end of the regular calendar.

>> there are no closed session items today. if you could take those off calendar and move to item 22, if the commissioner has any additional new business items? president vietor: any new business items? >> move to adjourn. >> let me put a nail on the to buy four. we are talking about issuing debt and for the first time ever against our credit. we are talking essentially about giving a rate to one part of the city that would be at the end of five years 20% below market rates. we are also talking about

building facilities. that picture bothers me. we are heading into budget season. that would be the time to talk about that. there are significant bears -- significant issues there we need to look at. president vietor: thank you, commissioner moran. that is helpful. i heard the motion to adjourn. the meeting is adjourned. thank you so much. 4:15.