single-digits. >> i asked him to keep it to 10 minutes. this was an experiment to see how we could compress this. what i am trying to do is preserve as much time for the commission to provide input as possible. if you can conclude as quickly as you can. >> we had a lot of deliberations on the power -- with the joint meeting, so you know about the need to increase rates there, in particular. it always seems to come back to rates and affordability. what we have done here, is put together all of the sections of the charter requiring us to look at the rates, and put this into a document for your consideration, because you wanted to direct staff to consider the rate policy, and what kinds of constraints we should consider in the support ability, or otherwise as we come

to you with the proposed budgets. we go through this process, this is what the scope may be. and this is for your deliberation. we're happy to provide any answers, and elaborate any further if you would like. >> thank you. on the numbers themselves, and i would like to get to the policies -- it looks as if the way you lay this out, the water sales are down. this means we will have to increase rates, -- for the next block of rates that we approved. we have the opportunity to reduce the impact of that on clean water, so this comes out

about neutrally. unfortunately, this is not the case for the wholesale customers. but this is the case for the san francisco customers. in order to make that happen, did you have to do violence to anything to get that? >> in the case -- case of water and wastewater, we did not do further violence but we had to assume all that finding with all the local repair and replacement programs, which we would want to cash fund if we had the money. but we have here -- we do not have this because of the shortfall in water revenue sales. >> we are talking about that funding through 2018. and we could live within the five-year adopted rate package if we did that and made that difficult decision, and the reality within the general

manager's budget hearing -- all of the department heads understand the revenue weakness means that this would have to be a flat budget, with some contingency cuts if necessary. it will feel like a very different year for us for the water department, particularly. >> the five-year rate ordinance is a wonderful thing in many ways. this is the down side. it may be difficult to stay within that constraint, and i think it provides some decent discipline, to stay within that. but what you cannot do, is significantly damage yourself. the looks like we have been able to avoid that. >> legally we could go back and reopen the s -- but i would hate to damage this if we did not have to. >> it is also likely, that

projection may show that we need to maintain the rate increase for more time. keeping faith with this -- this is important getting to the next one. are there any thoughts or comments or guidance -- to the staff before we move on to the rate policy? >> i guess i have one sort of question, and i don't know, maybe this is my environmental idealism coming through. there are additional numbers -- and it may be a bit for you and the team, but there are a lot of numbers coming out, ideas that we have been talking about on the great potential from economic perspective, that this could reduce some of the water

that is going into the treatment facilities, reducing the cost to treat the water. we are talking a little bit farther out, but i am just wondering if that information has been done, and can be factored in with the new data coming on the market. because they are closely connected. >> this is a good thing to talk about and have thus present this to you during the capital plan proposals. and that is where we have some flexibility with the long-term nature of the plan, with what technologies are cutting edge in what may save money over the long run and you could see this for your consideration. >> you will have a chance to talk about this in the january discussion, but we're hoping for the scoping issues next june. the idea is that we would have the consultants working with the

staff, and saying, what are the different options for these programs. when do we have to do this and how does this interact, how is this working? and what is the impact on the rates, and then we say to change this again. this is the discussion we hope to have in late spring -- to say, is this a 10-year program and what is the total price tag? this is also where the bottom line discussion will be of great interest and hopeful up -- hopefully useful as we go through. this is scheduled for the long- term look that is part of the january discussions. it is very big on everyone's minds that is working on this. >> and i think the question is the right one, that the reduction in water sales affects things, physically.

this may present some opportunities to rethink portions of the operation. >> moving under the right policy, -- to leave those four elements undefined. he does have a presentation on that. and what we have been talking about, how we could -- in a meaningful way judge whether the race we were proposing made sense. and this is an outline that i think got us part with their. well i would like to do -- if we could have some discussions on that, if it seems to be something that makes sense to the commission, i would like to bring that back in january, with the policy guidance over how to

proceed with the budget. those four things, if you could spend some time defining what's really include in there. >> the first item is affordability. they spent a great deal of time on the affordability and the charter requires we look at this. if we come back to you with the budget proposal. the affordability and the rates would be considered for the 10- year rate plan, and how that this would change. and as we structure and finance things to keep this affordable for the customers and the family budgets. we have increased the rate reserves, with the consideration so that this is not necessarily higher or lower. and tidies the capital costs. the specific programs -- and if

we do $10 million more on the water-improvement, what would this mean for the average rate payer in san francisco. this is one item as we talk about capital. >> it is important not only for our own decision process but when we go to ask for increased rates, we would like to demonstrate this quickly, so taking this out of the realm of, this is just a lot of money and putting this in the realm of how approaches these things to leave -- that we value. >> the last one is the life- cycle, i think that some things are more expensive of fraud, and if there was more cutting-edge technology, this would come to you with the whole -- the entire life-cycle cost. >> let me interject there as

well. and one thing that is not in here, we have said the rate increases should not exceed -- and this policy does not have anything to discuss this. and in the life cycle cost of the world, it may make sense to make more money now so in the long term we will spend less. the single-digits and may interfere with sensible financial planning. and on the other hand there is another element to this and i just wanted to raise this as an issue that is not explicitly in here, if you wanted to put something here we would consider this, but the plan at the moment is to try to do the smartest thing, without that kind of constraint. >> the next definition item is compliance, and we have worked

with the city attorney and others, to make certain that the proposal -- that we are following everything that is local -- with the contract you have already signed. this is an example of the rate structures we would have to satisfy. >> and this does include a waste water permits, not to let the system just fall to ruin, so that this is a legal requirement, that keeps us worthy of the permit. >> and then there is the concept -- being sufficient. this is to carry out your mission as stewards of the public utility, to achieve the levels of service -- for this program, and that some time, for power as well as the sustainability.

the repair and replacement was mentioned as well and you also have a policy directive. if there is funding in the budget to provide the meaningful achievement of your environmental justice policy, the environmental stewardship, and the local resource plan, asset management policy and the developing land-use policy and the adoption of the technology policy. whenever directives you think are important, is the rate inclusive of those priorities? >> lite light is a couple of things. this is the way the triple- bottom line will feed into the rate policy, and the job is not just to move around water but we said we wanted to affect things. those policies have costs and we should recognize this, because

this is an important part of the mission. this tied together the non- utility aspects of our world. >> one thing that is always important is transparency. we have a good deal of that and that is one of the strings with customers. this transparency includes the plan and that is open, making the information understandable. we continue to be the only utility i am aware of that shows customers -- the next 10-year's worth of projected rate changes. i would like to congratulate you as a commission for doing this. the oversight includes the mayor's office and the board, the vice chair -- with the revenue bond oversight, and the citizens' advisory committees

are just a few of the important oversight bodies. >> when we talk about the rate increases, -- we can use this as an example of what the rate policy really means, is this affordable and transparent, and we look at how the various offers stack up. are there any thoughts or comments, about any of this? >> what happens with the rate policy? it just seems that there is a laundry list here, do we need to find some way to prioritize, or will we be adopting the old policy -- i don't even remember the old policy, with the directives in there. what kind of policy adoption process?

>> the current policy that you governed under -- that we are responsible to present to you -- will specify exactly what the voters should consider. this is to the degree that you want to direct the staff for the additional consideration with the environmental justice policy, or the new community benefits policy. that comes after 2002. this would be the opportunity to have a living document. you have the important policies that we include in your budget, as well as the comprehensive financial report, and we show these policies. these policies, i know the rating agencies see the strength of the commission because you have deliberated on these and have been reviewing these, and have not placed something that

says to the general manager, or myself, to present this to you as the commission rate plan, to make certain that you are in good financial, sustainable keeping. and we will come back with those projections that show that we need those reserves by the end of 10 years. >> i think that the idea is based on these conversations, to codify what is here. and as you bring back the changes in the future, we took this off. are we really going to need all those things. so this is a nice list as we talk about the rates in the future to say, this works. and we would codify this into the policy. >> and there would be a dollar figure attached in the budget hearings, to inform what the

rates should be? >> this would be very difficult, to go to the budget and say how much the budget is allocated -- local hiring may be easier to do. but it will be very difficult to do that kind of accounting. the staff would probably tell us, you asked us to do this but we cannot. as an example of that, i don't know -- is as part of any policy that we ever adopted? >> it is the policy of the board of supervisors that we have funded. i don't know -- we probably at one time agreed with the policy. >> and if this was a policy that was part of this, and the rate proposal would basically say -- we cannot, under this proposal, comply with that part of the policy.

this is nice feedback on that, if you are not meeting our policy objectives, you can do several things about this, and you can say that we should change the policy, but if this is not a sustainable policy -- you can say that this is something we do care about, let's look at the increase. this drives the thought process that i think could be very healthy in the absence of the precise cost. >> it does not drive the answer, but it will drive the discussion. >> some policies have financial implications, and some will state their purpose. thank you. >> are there any other thoughts or comments or questions for the commission?

we will see all of this -- as part of the thursday meeting. and is there any public comment on this item? >> let me work in reverse here with a couple of thoughts on the rate policy, going back to general. i appreciate this approach and think that this is good. i am particularly supportive of the reserves item, i think the operating reserves of 25% on the current basis is an important goal that we are normally at, succeeding those. this, for me, is very important. life -- i feel lonely doing these things but this is how we defend against emergencies, and let the bondholders know that we are doing the right thing. at least, the three outside bodies -- if this proposed

policy could be brought to those three entities, in the next month or two, it would be good prior to the commission adopting a policy, often those entities see something after this has been passed. it would be good to consult with them beforehand. this was about everything on the policy. let me go back to the overall budget. i think this squares well -- i was thinking about the costs -- that are fixed and what is variable or discretionary, within the budget. it seems a lot of the staffing is fixed, and you kind of need the. it is not like you will not staff a treatment plant at three in the morning. but in terms of what is a choice, things like chemicals. i was focused on chemicals

recently. we spend a lot of time on chemicals, but some of these are for -- what if we had a program to relate a lot of different things here, on the grease removal devices, and if we got more grease removal devices in the field and were able to take more food waste out of the sewage stream, so there is last suspended solids that tend to create odor problems and require treatment chemicals, if we invested $10,000 in something like that, if this is not a capital project. this is more of an operating project and there is a cost avoidance implication. the extent to which the staff can do some work on that chemical world, for the budget

hearing and see where there are opportunities for avoidance, we certainly are going to continue to convey water, if this is clean water -- with less less solids in the waste water world. we are getting less water usage and less water returned through sewage -- and the infrastructure and things like that, so the waste water treatment numbers continue to climb. but i don't know where we are on solid. i am sorry to focus on that today. but thank you. >> i have the same instincts around chemicals, but the whole treatment -- i know that there can be savings, if this is at the top of the pipeline or

downstream, the number running on that would be interesting. the technology changes so quickly. and maybe this is a combination of the infrastructure, i don't even know how much of that that there is. and then the chemical application, and the staffing needed for those kinds of numbers, there may be some savings generated. >> and all other any other public comments? that will conclude that item. mr. secretary it -- >> call item no. 11. >> the public hearing before the san francisco utilities commission for the new rate fees and charges for the electrical services, for the city and county of san francisco, and those currently paying for those services, -- for each kilowatt

hour, to be applied to the meter readings -- through june 30, 2016. the city attorney has a notice that she would like to make to follow up. >> commissioners -- he is referring to the request for the motion, the we have elected to suspend the rules, but we will look for -- we will wait -- >> i have a brief presentation for you, many of these are from previous presentations you have had in the liberation. as well as the commission -- the new slides are slide #7 and no. 8, 9 and 14. if i can spend one moment going over the other slide, this gives

you the history -- historically of what we have done, with the various policies that the board and commission have adopted. we have gone about 12 years without doing a rate increase, for those entities that are provided, the general fund at subsidized rates. what is before you is the consideration to move those closer to the cost consideration. previously we have looked to the cost of service, and we have about $23 million under recover costs. we provided at the rate fairness board, we presented those options, fourpenny over four years. subsequent to that, we also met with a number of the customer departments as well as the

mayor's office. we sharpen the pencil and a third option. this option is also two pennies. this is spread over four years. what is before you today is a summary of the impacts to the fund, to make certain that the water power fund can maintain financial sustainability and chief, by the end of the 10 years, the reserves required by the reserve policy. and what this does -- this takes into consideration the very large shortfall that we were slated to run out of money in 2014, and instead, this increased over four years and brings the new projections up to the red line, keeping us above zero in all years.

and the reserve policy -- you can see there, there are few years where we are close to the zero line, but we are technically above this. and technically, this does comply with your reserve policy. what this does not do is it does not give back any of the very difficult cuts you had to do with the solar programs, reducing this to $2 million next year and the energy efficiency programs, or the city-own three nobles. those were very difficult cuts that you can see on the slide. this is on slide #5. you have reviewed those at a previous meeting so i will not go into too much detail on those. the municipal rate package before you today, with the entities previously received in the principal -- the principal

fund must -- funded rate, 9.1 million in 2014. and $13.60 million total revenue -- with the incremental revenue -- and so, the incremental revenue would increase the revenue so the two pennies would total -- 9.1 million additional dollars. and this would take four years. for what is before you is consideration of that, and it does not go as far as giving additional money to give back, but it does solve the financial -- a financial problem that you have been grappling with. over the last number of years. >> to give you the flavor of the discussions we have had, we had

a budget hearing, last week. we spoke to the mayor and the budget while i think that everyone was understanding that you have to make enough money to keep the place going, they hoped for less of an increase as far off as possible. and that is why what you have before you today is that half cent per year for four years, when the minimum we were saying was a penny per two years. this is the package that the mayor is familiar with and is in agreement to. >> i thought that we were also