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 having to charge customers more than pg&e, we have to discuss that with lafco. there are people that are unhappy with it. that is the proposal we have. they are not aware of the 19 million appropriation because we

have negotiating that and this is the first time we're talking about that. that would be a new item to them at the joint meeting. >> president vietor: we need to have that conversation to really give them a bigger picture with cca as a piece of it. it could have a significant impact on the fund. at least on ratepayers. >> outside the range of the budget discussions, in a year to. president vietor: i would take it a step further. i do not know if the commissioners would agree. maybe that get calendar or addressed via the legislative affairs folks to figure out the appropriate time and if we need to take some prior action to that in order to maybe not make a recommendation but urged a

conversation happens in the spirit of transparency and getting the policymakers on board. >> two things will happen. if you have that joint meeting there will be that kind of discussion. based on the retreat and conversations we have had, we are looking at how we bring the rate package to the rate fairness board and start their process. should you choose to, you could have that repackage go to the board of supervisors. we're starting that to make sure that is available for anybody if you want to use it and if the board wants to use it. commissioner moran: none of this includes the performance bond. >> accept -- we posted a $100,000 bond. it is not faughclear what it --

it is not clear what might be happit might be. president vietor:commissioner >w this piece is out. >> i think whatever you choose to do as a commission, if you go forward with an authorization to negotiate or a month or two with the contract, you would have certain triggers and if they do not happen, we would not be authorized to find a contract. that would be the bond is in the affordable range. there is not rates to cover the

preparation. >> we do not know when that is going to happen. >> we assume it is going to happen. before we go into business next summer. and again, that may be one of the contingencies you may or may not want to put into de- authorization if you pass one. it has to happen and be affordable. maybe part of the contingency to sign anything. >> that is a big number. their initial asking was $80 million? >> from shall? ? -- shell? this has been required by the

enabling legislation. it is a perspective look, it is a bond amount. should you terminate a certain point in the future enough to cover the cost at the future time, it is a calculation being litigated. if it were by all proposals before the commission, if any of those were put into place, the bond amount would be limited to the administrative costs. the dollar per account return on the order of hundreds of thousands of dollars. if you take what the utilities have proposed now, there is a decision pending on the direct access side. you look at how the mechanism if you look at past prices could affect what our bond amount could be for our size of program. it could approach annual revenues come in the $30 million

range. half of that. $15 or more. if there is no bond -- a market out there, -- yioou are talking about gas. we may have the ability to self insured. or is this something we have required to be captured in rates? it could be more akin to the appropriation for the 15 minutes -- $50 million. where it earns interest and does not get called upon. it may not be a direct cost in the same extent. president vietor: t>> the gove'd ask for a letter to them on this performance bond issue and how they could help.

it strikes me that maybe we put this on as a resolution agenda item for our joint meeting. to say this is an area of concern. and we get those to move those -- move the resolution forward urging the governor to work with the cpuc to resolve this in a friendly manner. >> we can prepare them for you. >> how are we doing? >> we are awaiting public comment or any direction or additional questions. >> could in advance to slide 11 again? >> absolutely. >> in effect, we are asking

these entities for an increase and we are doing that so 75,000 people could enjoy having 100% clean power -- green power. i don't see h ow th how the impt benefits the ratepayers as a whole. it is going to benefit the 75,000. >>is that correct? >> saying a rate increase could satisfy two things. it could make hetch hetchy sustainable just as it is without cca. with cca, we would have to do higher rate increases to provide a choice for folks to be able to choose a more expensive product.

albeit 100% green. you are correct. it would be increasing rates on the general fund on the hospital, on the mta, on the school district, on the community college. that would be one way to fund the cca which would give 75,000 customers a choice to pay an extra $7 or $13 or $20 on average per month for 100% green option which they do not have for pg&e. that is a societal policy choice. it is unfortunate that cca is coming as we are running out of money anyway. if we had not done go solar for four years, that would have been $20 million. there are other things we have chosen to do and this is in the folk history at a time that speeds up what is a problem for

us anyway. >> thank you. commissioner moran: i was calculating if it was $7 for 75,000 people. and it does that the question, if you are taking $6.3 million a year from power ratepayers, what is the most effective expenditure of that money? that is a different way of looking at it. i would like to hear some public comment. that would and help the dutc-- t would help my decision in the end. >> this is a very convoluted subject and i am requesting you to take public comment because we have something else going at the board of supervisors.

i i think now said to have discussed it and you are also little bit confused in the sense that you want more information, could you take public comment, please? go ahead. we have been talking about cca. we also started talking from the year 2000 as stakeholders, looking at our energy consumption regionwide. so what is missing in this dialogue is, what is the consumption of the city? 960 megawatts, 980 megawatts, we need to find that out. sfpu