impossible for additional debt. it allows us to may pay the mortgage and as well as cash fund some but we run out of reserves at the end of year two >> we don't have any fund balance to speak have to the 14, 15? >> in 14, 15 we do but we end the second year with only about $7 million of recurs is the 4 percent of reserve which is quickly used up as & we transition to 17 but once we trigger into year 3 it's not substantial. >> can we have a reserve policy that states we have a minimum.

>> we do it's predicted upon to establish the reserve and by the end of that 10 year plan we satisfy the 15 percent of operating right side and expenses and the debt coverage ratio. so in year one and two we're satisfying that debt service so we're technical low meeting reserves but by 3 through 10 it's no longer substantial. how much is that presidential >> that's about 27 to $28 million so right now we have $20 million in reserve so we're showing that next year and in

the two years as well. >> i want to highlight although we're submitting a two year budget it's eating into our reserve so i hope to meet quarterly and if we are looking at, you know, not increasing our revenue it would be prudent to start directing our costs. so instead of waiting for year two and our reserves are down to fumes we need to do corrective actions as soon as we know that we know things we're planning on pursueing. we probably need to really, you know, pursue a lot of those things we're pursuing and get back to you

>> i'm looking the bar chart that says in the coming fiscal year year one we're down to 2.7 million. >> that's a good question. that's what we need to use in year one not what we're adopt to. this is not just to balance the budget >> this is the source of fund. >> yeah. and nicole it's saying we don't have to use as much of the reserves in that 14, 15 year but we have to use a lot of them in the subject years. so that's why we transition i'll give you the 10 year look for the balances by the year >> thank you. >> and so then moving onto the

uses slide. i think we've talked about that sufficiently. our flat budget is under our existing structure. we're going to be doing reorganization within my group for the customer development associated with getting assessing new revenues you know getting new customer commitments over the next couple of months. and then in terms of the actual position changes we're trevor some positions out of my unit and not increasing at all. so staying true to the conserve fund and limit funds megathat's appropriate under our financial circumstances. so no proposed position increases just that vauchlt for the resources to address the

development of new customer opportunity >> this is current; right? >> can you provide us with the charter our talking about. >> i'd be happy to i'll come back with that. >> and as transparent as how they relate the positions going out and the new deployment. >> sounds like it's good. that is slide 14 we're summarizing the same information just a different picture of adapting a budget and the requested changes over 14, 15 and 15, 16 with the largest change with the purchase of power and our anticipated increase of costs in invoices from pg&e on transmission and

distribution. you can see the capital costs stay pretty much the same 3 percent or so that the city budget for and then the real increases occurring in the transmission and distribution costs >> and where are you in the book. >> i'm on slide 15 under tab one hetch hetchy. >> i don't go up to 15. >> okay. >> okay. i building it's in there somewhere. >> okay

(laughter) okay continue. >> and looking through the same set of information same slides on the capital side where you see modest changes associated with street lights expertise for our capital requests. in city. again, all based on the revenue stream district on slow down 17. we're anticipating changes because of the general fund increases and anticipated increases in the charges that are enterprise customer and those customers will be paying us.

and that's all within our context of the service goals, you know, maintaining good customer service and save and reliable operations and efficient trying to achieve the financial stability and clean energy supply being the power provider as well as the cost improvements. then to summarize some of the changes we're facing again, it's the reliability standards under regulatory compliance. it's increasing continuing to see cost increases in meeting the federal and state resource adequacy requirement and implementing the risk management that our regulators put on us. and the upside of having our

kirk wood certified as rp s convalescent our portfolio standard xriens self-we're successful in that we will see some increased value to that power proud from that unit we'll able to extract from the market to sell it as a bundled aroused which is the highest value on the rail market >> barbara going back to the levels how does trld fit into that. >> we're in charge of the rate setting and the assets are not owned by us. this budget continues to fund

our operations there at treasure island providing natural gas services. within the 10 year financial plan the financial plan doesn't assume new revenue from treasure island because it's not been developed yet so the continuing operations we have it today is anticipated during this financial plan circle >> and the current level of service that we provide as caretakers is not what the route want to provide. >> that's correct. we've seen in electrical outages for a couple of months knock on would do. so i think we've been strategic in how we've made improvements and how we have implemented

repairs at the island and so we're seeing improvements in that level of service. it's still not what we regard an example of what we would time to be known for but again, they're not our assets and not something within our control to manage >> so we can't recover the costs if we went after the liability? >> since we don't control the rate he setting at the island we don't have control over the revenue part. >> that doesn't mean we can't have a dialog. >> i want to point out that as the island becomes or starts to be developed that the developer would be responsible for putting a lot of the infrastructure in place so investing in old

infrastructure right now and so we're in a place where we're operating the old infrastructure where we're working with the mayor's office to put general fund $10 million aside to address a lot of the infrastructure and working with the developer and also treasure island to look at what is the development plan and how we can roll out providing illuminate services. >> 10 million of our money is being allocated. >> yes. >> is there that any way to recovery that once the development moves forward. >> that's one of the negotiating items as far as the transfer. that's the basic level of

continued operations before a major development occurs >> yeah. . in the classic base thing you go from milled to private investment and the private developers is responsible for the infrastructure and we take it over nicole we've stepped into the middle of that and created expenses otherwise we wouldn't be liable for >> i think it's a reasonable concern. the transfer period is longer than than we each of the >> the question is are we actually putting more money into the island that we collect. >> no. >> your question assumed - >> that protects use it doesn't

do much for the customers. >> that's working with the, you know, the general fund and the mayor's office there's been so many issues there and acquit frankly it put us into a position of providing service which we had no control of. so it put us in a bad position but i think you identifying $10 million and investing in what we prioritize as major infrastructure has really proven to be fruitful because every time i say, no, we outage an outage happened the next day but there's some movement getting the developer to make a commitment and the transfer of property. we're starting to see this movement happen >> thank you. >> but it still hadn't been transferred to us correct. >> not yet.

there are a couple of things that are outstanding before that happens >> barbie have one question. the regulatory requirement are they immediately or over time or how did - >> their announced they're new requirements and about persist over time. they have different deadlines but they're in the budget kindly and they'll continue beyond this budget cycle into the balance of the financial plan >> i'd kind of had a similar question but a bigger picture. i don't have a sense of this fiscal cliff i know we're going to be approving a two year

budget but there's there's staggered there are regulatory fees come due and pg&e transition alleged costs and cool costs like when the community town hall will crumble over the next 10 year period. it's difficult to adapt even a two year budget without having a big picture of how to prioritize, you know, if we could get all the revenue and all those different pieces coming in. how do we prioritize the experiences because it's a heavy lift; right? >> yeah. as we go through today we'll have more detail on the tunnel and changes and where we might have, you know, the

timing of those requirements and what the sort of risk profile trade offices versus now or waiting. >> i hoped to get a higher level recommendation even the cost cutting piece. this is coming up next year we are going to have to generate this amount of revenue and some of those other ones that are less known will take us 5 years to negotiate and that's okay >> i would add that we it's sort of a timing issue so we're in the process of submitting our two year budget. there's a lot of unknowns right now. so what we're putting forward is a balance budget based on the information we know and as we start flushing out those details

and that's why i think a quarterly workshop will help us what actions we need to take >> then the final item i want to address was the issue of rates. as we mentioned we are increasing the general fund rates as previously adapted. we're assuming enterprise customer rate changes as those customers pay the raised comparable to what they pay pg&e and then, you know, sort of to emphasize the final point that increased rates alone will not be sufficient. that's all i have to presented to you today for our workshop and our budget power part of the budget. with that if there's no

questions we'll turn to the helpfully water portion >> thank you barbara. >> thank you. >> good afternoon steve richie assistant with the water. if we can turn to the hetch hetchy water portion of the program for power. first, here's a slide showing the length and complexity of the system that serves us from hetch hetchy. it's a wonderful system it's done a lot for us and will continue to do low for us.

but how we manage it and operate it is critical. in terms of the water enterprise budget but right now hetch hetchy is one division within the enterprise and we're joined by margaret and will be available for questions. again, the components are 3 im30u7bd reservoirs and 8 generating units and substations, one hundred of pipeline and 50 mieflz of paved roads. this is a big system and but for a water enterprise this is a big system we have the

responsibility important out there. one of the 3 powerhouses is kirk wood that produces the majority of the power in our budget. some brief summary of our brief project we've completed the water projects in the hetch hetchy area hetch hetchy is still going to, critical in integrating projects. we still have to complete the tunnel and the dam project in making sure the hetch hetchy project can deliver water. we continue to support our participation in bay delft and other procedures. when we talk about feshg it deals with the enterprises and it deals with hetch hetchy it's

the new don padding restraining order for the districts their primarily in but we're an active participate. this is ahead of the phase and it's going to take a lot of involvement for san francisco. we're also actively working on the upgrades in the system and mr. taylor the powerhouse facilities for health and safety and regulatory reasons. i didn't list the rim foyer recovery. we've made good process and there has a lot of things have been restored a we had to pay for all those things so cost recovery to insurance and other thing is an ongoing priority and todd is actively involved in

that to recover as much as possible, and, secondly, if we e in determining or merge from the the dry period for example, if we lose roads we have to take care of those. so rim fire recovery is something we have to be aware of >> will todd report to us later on those developments. >> moving forward the other big piece is regulatory compliance on two front one with rec requirements with the liability corporation and i'll talk about that in more daily in the presentation later. also for our water with the

clean water act we want to make sure we maintain compliance. those are important and part of our operation management. in terms of the thought basic budget for hetch hetchy water and power on the waterside our budget is indicated earlier really about 20 percent of the overall power budget and that's resourcefully about $040 million so for 2014 and 15 it's a decreases in the dollars and in terms of positions it's a slight increase. one of the transfers in is one of barbara transfers out shifting positions for one part of the puc to another. additionally we're proposing increases in staffing over the

two years for what can and their critical infrastructure protection i'll cover in more daily. it's about our security system about the regulations that have been adapted. >> one of the budget policies that this commission set was that position increase should be offset by increases and the idea is this commission may not be aware of but there are areas where old needs become obsolete and there will be values for making choices. i've reviewed this as a puc would i do issue but as what we precede in the budget i'll be looking for the net for the puc that it's there >> i can say going through the

hetch hetchy power and water western enterprise the word substitution has crossed everybody's lips the most. there are substitutions in the budget and if you increases >> the net should be zero so i understand. >> similar to the power side open the hetch hetchy waterside on the funds that indicate in 14, and 13 it uses some of the fund balances but it's all water sales that drive the hetch hetchy budget. and similarly the uses of fund match up to those dollars there for the different categories >> but i want to talk about the specific budget changes that are put forward here as part of the

budget. from the operating side it's flat but on the capital side there are two significant things to not on the waterside. first there are 7 candidate projects noted in the proposed capital 10 year budget. i've sitting here i've managed to save $8 million it is an incorrect finger but those are candidate projects that relate to the operation of the system. those are different power facilities and water facilities we're talking about basic, you know, maintenance and improvement and replacement of angling infrastructure. those candidate projects are new proposals come forward and they're there for discussions we can fund or not >> in the process of balancing the prior budget as i recall, it

was $100 million of improvement it fell off the planning page. >> those are still out there. >> in addition to those? >> in addition to those. yeah, that's correct >> so back to the slide we're going to talk about the mountain where we have an alternative analysis report for the bypass tunnel. we're revving those recommendations but we've got the budget in the 10 year plan that is about $518 million that's a significant increase to a bypass project. and lastly i'll talk about the change with the regulatory

convalescence in the low we're facing. given that first looets let's talk about mountain tunnel it was constructed between 1924 itless 88-year-old. it xhairz conveys the hetch hetchy supply so it takes out of kirk wood house down to another house. it's a single-barrel link to the hetch hetchy side. it's a single conduit and it's lined over the last 12 miles. we had a continue assessment conducted and it showed the lining it had to do with the age of the lynn and the technologies that were used its not as good

then as it was now. so as a result of the 2008 assessment that was the basis for the project that's been in our capital budget in the several years of about $115 million to reline the tunnel which requires us to take it out of operation for two months every year to mobilize to put in lynn and get a back out because we couldn't afford to take out the hetch hetchy i system that resulted in about a 10 or 11 year project to complete that over time. that had some concerns about that bus taking the tunnel popping up there was a concern of a risk of failure by go basically filling it