one. which kind of 2k3we9s us to the discussion including some of the alleged customer somewhere as well that that is how hopefully, we'll weather some of the things. not everything is going to go carotid to plan. the other things or thing is the comment this is the do-nothing approach. if we get the muni departments up to paying the costs that's a huge benefit to the city. okay even at the full cost rates. the full costs between that and pg&e rate is huge. i don't want to, you know, it's not as though everything is going to go away. the city does benefit and will continue to benefit from the hetch hetchy project

>> thank you in light of that it's not playing the devils advocate but a lot of the the programs people begin to count on it and i think it would be a mistake if we didn't at least entertain the notation of continuing the agenda item so we're continually updated and obviously, the stakeholders and public villaraigosa an opportunity to abstract to the discussion i wouldn't want to find out proposed cuts. >> i want to have dialog each meeting and if there's nothing to report then so be it but to over discuss it and over analyze it would benefit all of us

picture that's my request unless there's objections. >> i want to pout you are definitely psych we need to come quarterly and give you an update. we laid out our plan of attack and everyone i may ask for saubs in doing things and i think everyone has a stake in that and when we get to a point to reduce costs that will, you know, be, you know, give them information to let them know that programs that we've funded are in jeopardy. we need to do. you notice that even if we're successful in a lot of stuff and although it doesn't address all the potential customers which we

will probably look at the scenario but you notice there are years where the orange line is below the black line. so some years we generate excess power and have revenue. so the thing i'll caution you when we do have that we need to save it instead of spend it. so the one thing i want to point out we need to make sure we have adequate enough money for the times like this. and the last thing i want to say is also as we get new customers we have to be more prudent and be a utility that has good practices so we need to look at our reserve because our power is

dependent on water. so we are going to need to increase, you know, our compliant money to supply the power when we don't have rain >> yeah. i know that the commissioner referenced it but i want to see this on a list it's not just about the commercial customers but the energy efficiency conversation we're having residential is in the base for the revenue source what does that look like. what are the other revenue sources to be able to make end moot >> to clarify the 10 year

financial plan includes anticipated revenue from new customers. we brought to you the service agreement with transbay 1y0i7b9 power short to serve the transbay transit center. they're not an actual 0 customer yet but because a they've signed a service agreement we're anticipating their revenue from them as a customer in the 10 year financial plan. there are additional customer opportunities anticipated in that plan and other additional customers that aren't anticipated in that plan. we can show you other scenarios that anticipated that aren't currently in the mask >> i'm slightly more interested in those specifics but the bigger ticket item is it a new development play or a

residential opportunity so sort of what could be the big buckets the of revenue. >> we can talk about that in another session. >> but is it relevant to the fact we don't have any water how can we get new customers. >> he yeah, we run model in a stiffly year the budget materials you see in the workshop are assuming a normal water year. we can present that in a dry water year >> i think that's important for the transparency. i know the general manager and staff are making sure those are on the table. it's important for us and the public to know that >> and to give you a sense of

magnitude. if we're in drought we apartment another $8 million in cost >> that's what. >> net. >> thank you. with that, i'd like to visit to the budget particulars if i may come out of the workshop >> please. that will return to the one marked hetch hetchy power turning to the section with the title page for power enterprise. and our total budget slide on the screen here. it's slide number 8 once in that first packet. and here's where you see our total budget.

adapted for 2013 and 14. it is flat the only cost increase that you see represented here that brings us to the one hundred and 579 million is an increase in our contribution and dictionary costs vs. the power of 21 million. there are some additional costs associated with salaries and fringe but the only the big-ticket stem is the change and anticipated cost for transmission >> and the subsection issue. >> correct. then we have a couple of slides that shows our source of fund. first sources you can see the

primary source is the revenue from the sale of electricity and other sources listed there and our uses with our operating costs and our purchase of power being some of our larger items there. >> and how does you show 2014 and 15 the balance how does that square with the dead issuance assumption. >> this assumes that issuance and i'm not sure when. >> i'm thinking of coverage. >> so what you have is a budget balance it allows us to issue some debt over the next two years but after that it maybe

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