that lends to the transparency to the rairpt and the confidence by the ratepayers that we are being as efficient as we can and not letting people take advantage and abuse the system in respect to those people that really deserve to -- >> yes. we really want to stretch that dollar as far as we can. thank you for noticing that. in addition to noticing that the gfoa continues to provide us awards for excellence in reporting and transparency. this is our third year for winning that, on the heels of our outstanding achievement for our report that tells our ratepayers as well as other stakeholders what we're providing and what value we provide as well as our third year of our distinguishe distint award. if i can turn the mic over to -- for her independent assessment. >> tiffany ras mussen with pg&e and i have the pleasure of being here, i've been doing this off

and on since the year 2000. working with the puc is a pleasure. todd and his team are fantastic to work with. as he said you have unqualified opinions or clean opinions on water, wastewater and hetch hetchy this year. we also are in the process of working on the cafr, the annual financial report for puc which pulls it together and working on the wholesale requirement audit which will be issued later this year. the team is well organized, and they take financial reporting very seriously. so again it is a very smooth process in working with them. i have a presentation for you which is our required communications but really i would just entertain any questions if you have any, as todd mentioned and i mentioned, there were no significant findings, and working with them did not -- any disagreements or any challenges. >> president torres: was the grant jury's report part of your deliberations as well? >> no. >> president torres: that was not within your jurisdiction. >> no. the audit statements as of june

30. >> president torres: who was responsible for that within our operation? >> so the civil grand jury for the department of technology -- >> president torres: right. >> i worked on that as well as our i.t. director as well as our -- nancy hahn who runs insurance and controls and our vomp was to -- to the independent grand jury to the telecommunications department. >> president torres: which is under the jurisdiction of the puc. >> no it's not but we do use their services like citywide e-mail and citywide data. >> president torres: so you indicated the issues that we had with the department of technology. >> we did and we participated in the hearing that the board of supervisors had, i think it was a week and a half ago. >> president torres: thank you. any questions? >> any questions? okay. thank you very much. >> president torres: thank yo you. >> the next item is the quarterly budget report.

>> it's a pleasure to give you some more good news today, and that good news is that water sales hav up. and the water sales being up has helped both our wastewater as well as our water enterprise. so in your packet today, i have three brief slides to walk through with you on that report. water use and sales are up about 3 1/2% for wholesale customers and nearly 3% for our retail customers -- i'm sorry 3% for our retail customers and also about 3% for our wholesale customers. we noticed in particular that passenger traffic at sfo which uses our water, as well as a lot of the requir irrigation accouno

more outdoor irrigation was included. we seen economic growth in other business sectors as well in the economy. and what that means is oftentimes we have more visitors at our hotels and those hotels use more water as well as the restaurants. this translates to more water water treatment as water goes down the drain and down the toilet and that is good news on the wastewater side as well. where warmer weather doesn't necessarily help us, in weaker power cells because there's less hide generation as the water comes down the hill so we have a slight shortfall in our power enterprise. the next slide here provides for you one of the fund balance reserves, basically at beginning and ending checking account balances and what you have planned. in the water department we're nearly doubling our reserves from the end of last year to

what is prkd projected. the wastewater department is up slightly, very similar to plan. and then in hetch hetchy water and power reserves are projected to go down to 47 million. this was planned because you had invested over 30 million of that into cash funded capital projects. so that's not a surprise. that was an intentional investment. if you look at each one of our operations, water, power, and sewer, all of them in the current year are doing better, either because of better revenues in the case of water and weight water, or more expenditure savings in the case of hetch hetchy. so on very good financial footing. the score card you hold us accountable to for looking at reserves show fund balance reserves are being met either at percent of revenues, percent of expenses and also meeting

everything required under debt service coverage. so we are in good financial shape as is shown for the current year first quarter projections. >> president torres: any questions? any public comments? there being none,. >> the last item is recent update. >> good afternoon, commissioners. joey labonte. i'm glad todd had some good news because mine may not be quite as got unfortunately. this is the quarterly up date for july august and september. the updates include the latest forecast on the significant changes associated with the calaveras project.

and the second half of my presentation will focus on those changes. as of the end of september, the resip was 68% complete over all. and as with the past several quarters, most of our focus has been on construction activities as shown on the chart here. only one of the three projects that still remain in design at this point are seismic reliability projects. the good news here is that all seismic reliability projects are either in construction or have been completed. so the large changes on the calaveras replacement project are reflengd here in the regional program variances reported for this quarter. we -- if we focus on the numbers for the regional program, you'll see that we are now forecasting the cost of regional projects to

be 150.6 million more than the total budget approved for these projects and this will present an increase of 138.7 million over the forecast for the last quarterly. nearly the the entire increase in the cost forecast is associated with the calaveras project. that project is now forecasted complete 25 months beyond the approved completion date for the program which is july 2016. however, to minimize costs what we're planning on doing is to discontinue all program level resources as planned mid-july 2016, unless the implementation of the calaveras project move on on its own, using its own resources. >> i'm sorry, i department quite understand that. you mean you're taking it out of the wsip? >> what happened is we had this

program infrastructure that helped us manage all our projects as a program. -- program-wide. once we arise mid-july -- mid-2016, calaveras is going to be the only project remaining so will this mental all the program structure and have calaveras running on its own using its own project resources. so the large cost increase forecasted this quarter is the largest one reported to date, that's obvious. and you can see it here on the cost tran for the previous year. the good news however is we are still forecasting the program on budget. the reason is we have enough contingency left in the calaveras project as well as funds available in the program management reserve to be able to absorb this large increase. and we are taking steps, as we

speak, to identify and achieve cost efficiencies in all areas of the program to make sure we keep this commitment to deliver the program according to the budget that has been approved by this commission. so that's important to us. the last release of funds approved by the board of supervisors, from the program management reserve was done a couple of weeks ago. and you'll see here on this chart that we are planning to use the remaining balance in the management reserve, which is $117 million, to cover some of the cost increases on the calaveras project. the other thing i'd like to mention is i do have about $40 million worth of savings in various projects that have yet to be moved to the management reserve. and what we'll do is we'll use a good portion of those savings, move them back to calaveras to replenish the construction

contingency that is required to be able to deliver that -- the remainder of that project. >> president torres: these increased costs were as a result of a totally unexpected development, correct? >> correct. >> president torres: that's important to put that in plain understandable english so the ratepayers and people here and the commissioners will realize this was a geologic occurrence that we did not anticipate. >> you're right. in the second half of my presentation i will summarize those but you are absolutely right. before i go into calaveras i wanted to give you a very brief update on the progress being made on all our other projects. so here are some note woaverthwy accomplish jts. we advertised the construction project for the san antonio backup pipeline due by the end of this month. we noticed an -- on the seismic upgrade on the bay division in

early september. this is important because this is the last project that was listed in california assembly bill 1823 to go into construction. the over all reliability of our system was also enhanced in mid-august, when we achieved substantial completion on the bay division pipeline three and four cross-over projects. we also accelerated pipeline installation in the san joaquin pipeline and we were able to complete all pipeline work on that project within a very narrow and environmental window that was mandated by resource agencies. and finally, i wanted to highlight the excellent progress being made on the replacement of the crystal springs pipeline number two project we're on target to reach substantial completion by the end of 2012. as you know, we're doing a lot of work to upgrade both of our

treatment plants at harry tracy work is progressing very well. we're now 31%. and by the end of the year we're pushing to be at 40%. what you see on the left photo there is construction of the five new filters at the plant there. the -- valley water treatment plan is much further along. we're 90% done over there and we anticipate to reach substantial completion in march of 2013. i've also been pleased with progress being achieved on our two ongoing tunnel projects. two-thirds of the half mile tunnel has now been esexcavated. it has dried out allows us to achieve a bigger production rate. we can see more groundwater inflows, but overall i'm very pleased with our moving there. on the bay tunnel, 90% of the

tunnel has been excavated now. the total boring machine did cross all the levies. the last levies under the salt ponds on east bay without impact to the surface so we're pleased with that. what you see on the right side is the receiving shaft in newark. so work there has progressed very well. and if all goes according to plan we could be achieving break through -- hole-through rather early in 2013 and this of course would be a major -- is going to be a major milestone for us. now, the remaining slides deal with calaveras. this is a slide that you've seen before. i've used it several times to explain the unforeseen, unexpected subsurface conditions that were observed at observation hill. about a month ago or so, the commission asked staff to

provide more details on the steps that are being taken in the resources and expertise being brought in to address these challenging commissions. i think commissioner caen had a lot of these questions. what we did to answer your questions is we included in your packet for today's meeting a very extensive memo that address all the questions that you had. but to reach out very briefly here, what we're dealing with -- here's a schematic of the left side slope where the new dam is being built. and keep in mind here this is an 800 feet tall slope. this is about the height of the transamerica building in san francisco. and what happened is, originally, this dam was going to be built where we were going to only excavate along what we call a false or temporary cut, which is shown here in the dash line. the idea here is to move all the material in front of that

temporary slope, to a permanent disposal site, and keep the material between this temporary cut and the permanent cut in place until we're ready to move it to the dam site directly where that material was going to be used to build a dam. now, what happened is the area -- geologic feature shown in green here was discovered some time late in june. and you can see that that feature not only crosses the temporary slope, it also crosses that first permanent slope that -- where we were going to be actually finalizing our construction of the slope. now, we conducted a lot of exploratory work over the summer, and we have a much better understanding of all these features. in that area, geologic area feature was found to be an

actual large landslide. therefore we had to redesign the permanent slope to a much flatter slope as indicated on this drawing. also, that additional work was able to -- we were able to get a lot of a better understanding in the spillway fault zone. its exact location and its nature and width. and finally there's a lighter yell geologic feature, a feature of interest that has yet to be fully characterized. we're going to need to keep moving down the permanent slope to be able to -- have a better feel for the impact of that next feature. it may be that we may have to excavate slightly more material under the foundation of the dam, but that has been taken into account into our risk register for the bram. the program. again, these were all discovered

when the full face of the slope was exposed. doing boring during preconstruction made it very difficult and almost impossible to identify these fishures. now, because we're basically laying back -- now, the fact that we have to fully lay back the slope, we are generating a lot of material that must be disposed of. we're talking about 3 million additional cubic yard of material. this is equivalent of about 1,200 football fields, you know, a yard high. so the project team conducted a very thorough evaluation location where we could dispose of that material. as you can guess a lot of these options did entail some environmental challenges that had to be mitigated. what is shown here is a

schematic of the additional disposal option that we presented to resource agencies, environmental agencies recently. and the agency feedback we got was very positive, and we are confident that we will be able to secure all required approval for the new disposal sites by early 2013. so here's a summary of the scheduling cost impacts that we are forecasting at this time. in mid-october, the contractor provided us with three -- schedule optioned and we evaluated those options with objective of finding a good balance between schedule cost and risk. and we selected a schedule option that will add 25 months to the project schedule. and the full rational for that decision is included in the memo that is in your packet today. you can also see a general

breakdown of the cost increase. note that the hard cost here is based on a rough order magnitude estimate provided by our cmt. i think what's very important to realize too is that these numbers of course are very big. but to only -- well to 15% of these additional costs are actual premium cost that could have been avoided would we have found fees fishures during the design phase. so if we knew about it, 85% of those costs would have actually been in our project budget originally. >> why didn't we know about it? what didn't we do that should have been done? >> i'm not sure there was anything we could have done to actually find it. what happens in these -- during preconstruction is you have a site with -- that is very

difficult to access, and what you do is you drill borings. we drilled i think 18,000 feet worth of borings. so we did very extensive. we brought in a helicopter to lay platforms and rigs to do work on a very steep slope. and the difference is what you do construction, the entire face of the slope is exposed and you have -- the total puzzle is exposed to you as opposed to these fine points in various location. so it's not unusual for dam projects to actually encounter changes like those, i've actually been reading a lot about it recently, because of the difficulty in being able to identify all of these fissures. keep in mind we're in a very active seismic area as well, which makes things even harder. >> -- >> exactly. again your memory includes a full section of what was done and why it was not actually

found so i feel we were very thorough in explanation and i would be happy to answer more questions on that. now, we also have a number of remaining risks. and we will put back, like i said, some money in the project as contingency, and that level of contingency will be proportionate to the risks that remain. actually six of the -- wsip risks are a part of that project. and i've also asked our program cm consultant to validate all the risks that we currently have in our risk register for this project to make sure that we have a strong basis for the level of contingency we'll add back into the project. only a couple more slides. wanted to tell you what are the next steps ahead of us. the contractor is committed to giving us a proposal, a formal cost proposal for the changes i've discussed today by the end

of this month. i assume that it will take at least a month to negotiate these changes with the contractor that will bring us in january. now ab1823 requires that we give 30 days notice to all wholesale customers before this commission considers schedule changes to the program so we have to issue that notice some time in january, and we will seek your approval of those changes to the project schedule and budget some time in early february. and shortly thereafter, we will submit a report to the state, as required by 1823. and i wanted to end on a positive note by letting you know that wsip received 2012 exceptional performance award in safety by the american public works association. we're very proud of our safety

staff. we actually have a safety incidence level that are less than half the industry averages as reported by the bureau of labor statistics. so that concludes my presentation. i'd be happy to answer any more questions. >> i have a question. if and when we ever enlarge the dam, will any of these problems crop up again? >> no. because at this point, you know, the dam is being built with this enlarged foundation. so once that foundation is in place, on competent solid ground, you know, you will have design -- redesigned a slope raising at that point would not be an issue. >> president torres: any other questions? we will be back to this as things evolve. ancient times to present times.

we're onto the consent calendar or you have something else? i didn't see you on the agenda. public comment. >> thank you. pardon me? >> president torres: please. >> art jensen with -- i appreciated julie's report. we've been following this closely, working with her closely. and i also appreciate the commission's questions. right on questions about the cost, what should we have known ahead of time if anything could be done, julie's preparation of the cost that would have incurred even if you had known and commissioner caen your question about if you raised the dam increased the size would those be a problem in the future those are terrific questions to have the commission asked. we are concerned about the cost but from all the reports that i've gotten today it seems that your staff has done and is doing exactly the right things. so we have great confidence in the work that's being done. the one other thing we would note is we would -- i was pleased to hear her say that the

program infrastructure will be suspended on schedule, with the adopted completion date. and this project would go on, on its own. we would hope that all the other commitments i aside from the completion of this project would be done on the current schedule and the extension of this project wouldn't lead to the extension of all the activity. that was a positive thing to observe and i wanted to note that for the record. >> president torres: thank you very much. any other comments? that concludes your report. >> yes, sir. >> president torres: thank you very much, mr. manager. we'll move the consent calendar. any items the members wish to remove from the consent calendar? you want to read the the first item and proceed to a vote. you want to read the first item and we'll proceed to a vote. >> secretary hood: consent calendar, items 8(a) through i constitute the consent calendar are considered to be reteen by the san francisco public utilities commission and will be acted on by a single vote of the

commission. there will be no separate vote unless the commission or public requests in which event the matter will be removed from the calendar and considered as separate. >> president torres: the items are before us. is there a motion? >> so moved pngetsd seconded by commissioner caen. those in favor? >> aye. >> president torres: motion carries. we're off to regular business. item 9 has been removed. we move to item 10. >> secretary hood: item 10 the funding -- wastewater bond of up to 250 million to refinance wastewater revenue bonds and issuance of up to 420 million under proposition a to fund wastewater capital projects. >> it's pretty routine but it's really good news, and in particular for the presentation -- >> president torres: you're giving us such good news all the time. >> i don't always so it's refreshing to get it triple, a

triple play. so the items before you are your usual, your usual binder full of information. but i want to highlight in particular for you, as well as you are already know for the ratepayers, why this really matters. you've had some difficult news today as well that ms. labonte just walked through but this one in particular i wanted to call out to our deputy cfo as well as our debt manager. every day we're looking at the debt market and brond market, trying to figure out how to safe rearps money. we've been monitoring refinancing and fundings and we have an ability now with the continued -- easing by the federal reserve bank and others to be able to refund a lot of water water debt. in particular what is before you today is up to $250 million of refundings. this would save in and is projected to save about 43 million for the ratepayers. >> president torres: 43 million in savings to the

ratepayers. make sure we articulate that. >> and help put that in perspective. it's almost half of what julie just talked about. so we are doing good things. so i want to just call out that our plan sale is in january. the first half will be for refunding, the second half for the new money for the projects you already approved over the last two and a half years. >> president torres: do we need a motion on this? >> you do need a motion on this, yes. >> so moved. all good news. >> president torres: seconded by commissioner caen. all in favor signify by saying aye. >> ayes. >> president torres: motion carries. well done, todd. >> a pleasure. >> president torres: keep up the good work. do you want to comment on this item? no. item no. 11. >> secretary hood: item 11 authorize general manager to execute a grant agreement with the library training retraining fund from -- california estimated cost ofse