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 out. so we've done that last year,

we've added a analysis that was done to look at the same thing and both jacobs and the other company have done good work. this work has concluded if there's a good risk in this slide it shows it to some stent the colored portion of the lion there and this is the alignment of mountain tunnel coming down the o to the rios reservoir. the yellow portion is the lining as of 2008 that was still in good shape. all the other colored pieces that range from red to purple as the color deepens the risk of failure is worse. we so we see many segments the

tunnel is failing at the same time we've seen the capacity of the through mountain tunnel directing over time there's additional failures going on through the tunneled and we've done further analysis to see the failures increasing over time. there is some risk there now. what's catastrophic failure it's a good word to us because if we have a cat tropic failure we'll be without the delivery off water for 6 to 9 months that means our water supply is cut off and our power ability is cut off. those are significant implementation to both of those.

so the alternatives analysis resisted some just repairing and some combination of realigning and the possibility of a bypass tunnel. the third alternative is a bypass tunnel over the loose several miles of the stretch of tunnel so we can have a new tunnel in place of the old one. we're critically looking at that and we've been looking at this to make sure we think that's the right remedies obviously this is not just financially a large project but physically a large project to complete. this is a sobering momentous moment we have to deal with the faculties old and just doing something is it better than

nothing. we can go into this individually commissioners but we have to hit the highlight we have a problem to fix >> why is this not a part of u sip program. >> it end in the san juan pipelines. that was a conscious decision years ago >> then - >> it wouldn't have changed the cost this is a joint facility so being a joint facility is costs 50 percent from one side and 50 percent over the other side. so it's a significant issue under the current circumstances >> also at the time, we knew

there were issues but it was estimated at one hundred and 55 million. that was in 2008, or 9 >> when you say catastrophic have you any projects when it fails. >> it's all a matter of probability and analysis you put together a team of engineers and look at the video inside the tunnel and all the test and collectively came to a period it's not going - well, it could fail today. that's interesting over time so over the next 20 years or so that probability will get into the, you know, 10s and 20s of failures which is significant.

so we've put that one out there 0 that's significant we have to deal with it. the recommended actions on that as far as the alternatives of the analysis report not to fill in the drain tunnel to fill it in during the rafting season we need to fulfill our obligations to the rafters but on the important side is improving tunnel assess in the event of a failure we want to improve the access and the staging areas and improving access roads. there's a place to get into the tunnel so 0 getting in and out easily is something we may want

to pursue regardless so we, deal with the problem if it occurs. again constructing the bypass tunnel and fix the tunnel above the fork after the dam is complete and filing. many mountain tunnel is an ear where there's leakage we've got a collection system to take out the river leakage and keep it out of the tunnel supply but to take care of that permanently. that's the story and we'll be looking hard at that. our next step from a project development point of view is moving to the i can't remember what c e r stands for. so we need to get the conceptual

jerry to look at it critically and look at the options that have not been clear but believe me people have loobtd the option. on the weber front. those are liability for the bulk electric system. basically folks operated under voluntary practices until 2005 there were regulatory rules button in place. after 2005 it was changed and it was enacted for the canada blackout and, in fact, they've got reports over the last year or so. i'll call it the true story i don't know if it's true or not it's the tree branch in ohio

that fell on a line and tripped on the system and there were event that tripped another system and set forth so southern canada was blacked out in 2004 hey, if one tree branch can do that what else. so congress enacted the policy to require the mandatory standards be regulated. in 2006 in the course the north american electric corporation was the electric organization at the time. in the course hearsay been previously been a coalition that voerl joined but all of a sudden they were designated a regular lowest in 2006. there was an agreement between them and the electric council

approved in 2007. so this was when the first regulatory standards were approved and put into place. it is actually that blue area on the map. it's one of 8 recreational combitsz throughout the united states and canada. it's the largest one and the toughest one. the challenges we have on the negligence side basically are in 3 bins. one is a staeld increase in the regulatory load. it's similar to osha in that it effects auto aspects of work. that basically every scripture and even hand that touches the switch needs to be be it further

resolved built into the regulatory system. we're regulated in 6 categories of entities where we're a generation owner and a generation owner and a transmission operator and a purchasing entity. there are other categories still to come we maybe regulated under each one has a set of regulations. this is a burden that is steadily ingress over time. the two specific things that come up are critical infrastructure protection and what was referenced as a in the course alert. on the critical infrastructure protection it's referred to as c i p go which is a unfortunate

acronym. they approved in november 2013 they've become effective and they include cyber and security controls and standards effecting our operations. there's one hundred and 40 requirements within the 11 standards it's a detailed oriented system. it's the minimum level of protection for the sincere by that supports the grid. the documents is critically important. i did a different versions of the slide for something that wants to develop a training program and train people and document the training people and repeat.

that's been the way the system goes her it's read and detail oriented. we're looking an audit where we are going to have 10 staff looking at this hetch hetchy operation that's the kind of regulatory system we have to deal with. in the critical infrastructure protection the efforts on that are to set up the system over the next two years. that includes purchasing of hardware and software to put in the measures to have and to demonstrate to week to week and in the course we have the critical system in place. the cost for the next two years are 4.8 multijust for this element with ongoing costs to keep is implemented over time.

this is a big deal. us in the industry. we've been talking about this for wait water but those don't touch people liquor the electric industry does this is the prime target of those protections. second thing related to transition clearance. a in the course alert you can google it, it's where in the course informs you have things in 3 categories how security threats you can't talk about but kind of the memoranda level this which is good practices to be followed by everybody and third is the information sharing. so nicole this in the course alert in 2010 was done because

in the course recognized a problem because there wasn't a sufficient line clearance which resulted in a problem. so they requested the facility owners for desperation and come up with a plan to remedial them within one year of discovery. our lines have been reported about a year wagner ago to in the course. we've used the design standard of a general specific regulation relate to the system above the ground and anything that motive be there and the national electrical safety code. we found about 3 hundred discrepancies & some of those things are built so what the system and some things are afraid and either way those are problems we need to deal with.

the projection of the discrepancies is $30 million. we're looking at that as how can we accomplish that and again 90 in our fiscal situation should we do it in 5 or 10 years. we present a plan to in the course and here's our plan for the remedication of discretion. we need to got rid of and say this is what we're doing and this is why it's reasonable. 15 years is a long time but it's the change we have to deal with on this front. so those are the highlights the operation side is flat and on the negligence and week to week front we have to deal with.

i'll turn it over to todd to wrap up. he handles solutions. >> hopefully tie you have volumes and volumes of information. >> yeah. but it simplifies to one slide. i'll recap the slide that we could switch to the morpt. so assistant general manager went through the budget so in the binder they've recapped for the tab one and two it's the budget summary and the operating budget and talked about the highlight of the capital budget. so, now we'll quickly walk to

the capital plan if the 10 years and the financial plan that is the next 10 years and that will include our solutions to consider. so behind tab 4 in our fwierndz you want to follow along the overall summary for hetch hetchy is $606 million and that is two things the increase in the mountain and tunnel and the project mentioned earlier today. the shortfall on the power side and that shaufl specifically is on the cliff we don't have enough identified solutions yet to solve all of the projected need in particular for hetch

hetchy power. the largest single item is the mountain tunnel rehab and bypass that richie talked about that were i can see further down the page where we could seem water bonds but even with the most assumptions the max out of the power bonds there's not enough capacity identified. the summary is done in a 10 year summary showing the investments in street lights and this illusion shows the entire $1.4 billion and you'll note two thirds of it is related to customer support and a 3rd of it relates to hetch hetchy water. a two year illusion is the capital budget on page 5 as well

as the total 10 year. and some highlights of that are increases in street lights been $29 million plus another one hundred and 35 approximately in new proposals for street lights which is the consolidation of pg&e owned street lights and acquiring those by the city and efficiency, however, not anywhere where the level is where we want them to be. the other key summaries for water were discussed by a.m. richie. the new projects are summarized on slide 8. you can see in relation to hetch hetchy power approximately $135 million of street light related activity eaten some

additional need at the alice grifbt and a candle stick point. so sometimes, the new customers need up front capital investment so we have to count the new expenditures and sometimes the new expenditures is up front investments in the case of candle stick point they've over $99 million so the revenues come in over time then. the 10 year capital plan is summarized on page 9 shoig the shortfall but transitioning to slide 5 how to pay for the capital needs and budget and what does that mean for rate pairs and how to keep it

forcible. the slides i've mentioned it one behind stab 5 to summarize the new expenditures they're in red at the took up of the package. there are 3 reasons for pg&e about $24 million for the yearly manual costs that are new because of the transition and distribution charges and the elimination of the power bank and also additional proposed street light increases as pg&e has fidelity within the puc their generate case that assumptions rate increases that we pay for for the benefit of all san franciscans. the weshg richie talked about. that means bh about $6 million a year and mountain tunnel the

waterside it funded through water rates if we could figure out how to balance that and that's what is one of the single contributor. you see the check marks to the right. we've assumed the green light where you've given us approval on treasure island and hunter's point and alice griffith and a upgrades for the riverbank. we're assessing hunter's point and the warriors stadium and the seawall lot and sf hope sites. that leaves us with difficult choices for the general fund paying higher rates to get to cost would be $20 million a

year. if we concluded the new pg&e rates that would be 27 $28 million a year and if pg&e paid $0.40 for the utilities that's $28 million a year and so have some of the street light consolidation just pause on that for a moment. if we opportunity $100 million for the geofunds that's the prosperity tax bill would be $120 more a year. the only other place we use geobonds is for the fire desperation system that like street lights benefit ail san franciscans. the use of refers you hear about and we're meeting the reserves.

we have to look at all the unspent money to all projects we could fro up some refers there. that leaves us with an unpleasant opportunity as well as mentioned looking at others operating cuts all costs including staff. i do want to take a moment and pause on slide 2. a year ago when you adapted the capital plan you prudently adapted the plan that mountain tunnel was a water project. it's not move forward from water quality to catastrophic center. when you adapted the financial plan we didn't have the projected case for pg&e nor the heightened additional expenses

on the transition and disbruks buttock nor what the would be so those 3 pieces of addressed information are material and basically have created that new cliff when a year ago you didn't have. in fact, the black line shows the receivers and the how it was meeting it. fast-forward that to today and you'll see based on the new expenses on slow down one the blue line that goes into the negative material which is the magnitude of the fix we have 80 do. the green part on slide one, if we turn on cost of service from the general recovery fund if we turn on cost of service for the

street lights from the general fund if we assume the consolidation those will solve the problem but still further adjustments or cutting will be noted on the capital plan. the rest of the information is the detailed sumgsdz which you know; right well, the same format was used in the past. i want to point out slide 6 which has a red circle on it. this is one where if you look at the next 10 years you'll see lark or large negative numbers. the first two years are balanced but this is a concern for you that our fund balance refers would be down to $8 million. or about 4 percent so in order

to have gotten back to the refer plan in year two we have to figure out in this two year budget to trim $19 million of costs or fro up projects of the closed amount or other operating cuts are that's in the spirit of the general manager wanted to come back and talk about how we're doing and show you how close we are for refers >> commissioner torres. >> how much do we have in refer. >> $46 million. >> that's it. >> yep. the good ole days for hetch hetchy we really noted to spend those investments >> other than cutting staff and operations how do you cigarette suggest to make up.

the shortfall >> we'll continue the negotiations for the enter connection agreement that could go a long way for serviced like street lights that benefit all san franciscans. and also to look at the category of new customers that we haven't summoned the park merry ted sedate and we'll continue to look at quite frankly every possibility. no one will solve the promise itself >> so the scenario is based on a drought situation down the road what are the variables or critically criteria that's led you to this. >> the projects here in the

plan also assume immediate hydro year. in the last 90 we've having had dry years but this 10 years assumes the modem. so to the degree we have a drought and if it's a multi year drought we're looking at 8 or $9 million a year >> so what factors reduce the $19 milli $19 milli $19 milli $19 million deficit. >> whether it's open the negotiating table or the mayor to consider the generation bond it sits with us. >> so the first option my very well be to dip into the