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 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