implement or rate infrastructure, but no one likes the rate increase. so the question is, what does the rate proposal look like? it's a four year span. the average annual increase is 7 to $10 a month on the average single father mily household bill and what it supports is our 7 day, 24 hour maintenance for replacement of water manes and sewer pipes each year. and also the planning and early implementation of the sewer system improvement program. the rate fairness board was very involved. that had about ten meetings on

the rate setting package. they determined the rate proposal is fair and concur with the staff recommendation. >> just regarding the sewer replacement and now that it's underway, i'm sure those of us that are here all the time -- can you tell us the rate we're doing it today, how that's going and also what we fra digsly traditionally did versus what we're doing now on our streets. >> what we were doing before -- years ago we had a rate freeze on the sewer side and now as it's ageing we're trying to catch up. the life of a sewer is about 100 years and the sewer is 100 years old. we're experiencing more sewer main brakes and water main brakes so we are in the process of -- doing asset management to

determine a replacement program. in order to bring our pipes in a state of good repair, we reupped it from 7 miles to 15 miles per year so we're trying to prioritize and hit each community to really make an impact. >> where are we kind of on pace to be doing that? >> yes. but as you know, it's very challenging with all the other work is being done in the street and it's been really a task to actually participate in coordination, but i think we're trying to do a better job of doing that. i think one of the things we need to work on is new services because, you know, can't really anticipate in advance when someone wants to do service. >> supervisor mar? >> i wanted to ask mr. kelly if you can go back to slide 16 on

the rate package. i know you've brought outreach explaining the rate increases, but it says an annual rate increase -- $7 to $10 per bill for an average single father and mily, so that's about $100 to 120 $120 per year. what's an average bill? >> so it's going up a little bit less than 10 percent. sgh >> it's about 8 percent. thank you. >> i would like to then talk about the rim fire. the rim fire began on august 17 and it was contained on august 24. the burn area is about eight times the size of san francisco

and affected both our water and power operations. the recovery effort is progressing well and i want to give a special thanks for supervisor avalos and breed who went to visit the site after the fire and i just want to let you know it meant a lot to the staff to see you guys out there to see what happened first hand. >> we get our hands dirty. >> but not burnt. >> our feet actually. >> so moving from the fire to the draught, i just want to also thank the board for supporting as we have responded to the draught, supervisor breed held a hearing that sponsored two resolutions calling for the state and federal funding for san francisco. how have we been responding. well, on january 31, 2014 we officially asked customers to

voluntarily reduce their water consumption by o 10 percent. san francisco has responded positively and stepped up and met this goal that we've asked them to achieve. the mayor released executive order on february 10 directing all city departments to reduce their consumption by 10 percent and we've been partnering with the city departments to work towards that goal. we also have identified a project in our water system, which is lower cherry aqueduct. this is a con tingency plan that will bring drinking water into our system as needed. finally over the summer we will be looking very closely at our supply and our customer's consumption to determine if more stringent water conservation steps are

necessary. let's talk about the key issues in our bud yet. budget. at the may 21 hearing we have provided you in depth presentation, but today i'd like to provide you a summary of the challenges we are facing. water and power has been a real asset to san francisco. for nearly 100 years we've been providing clean affordable water and power because the system is very efficient system. it contributes significantly to san francisco. for example, contribute $678 million in transfers to the general fund between 1998 and

2001 and also contribute $151 million in funding to street lights, both solar energy, efficiency and city owned renewables over the last ten years. they've provided low cost energy to city father mily and as you know, we are providing low cost to the general fund departments like general hospital, call street lights, mta, unified school district and community college for the last 15 years.

we had to increase the general fund customer's rate by half a penny each year for four years. we also did some severe cuts and deferral capital projects. we were able to cut $224 million, about 30 percent of our capital plan to a chieve a balanced budget. these are two things we were able to continue to provide $50 million of savings to the general departments and others. this is a slide that talks about what the cuts were and here, $224 million in cuts and deferrals looks like . so you can see we had to cut energy efficiency and also city

renewables as well to achieve a balanced budget. we figured out how to balance it two years ago, but the structural challenge remains and so we have some additional challenges these next two years, in the next two year budget. we have new capital and operation needs that have been identified. the one i talked about is mount tunnel rehab, which is $519 million increase of what we had in our prior capital plan. we also have an additional pge transmission and distribution and street lights. we have additional costs associated to regulatory compliance that comes to about $32 million increase. and on top of these we are seeing a decrease in supply power sales which represents about $13 million in lost

revenue because of the draught. we are faced with tough choices -- >> supervisor wiener has a question. >> i just have a few questions related to the power enterprise. >> yes. >> i know i've heard you refer to this before as a fiscal cliff or something like that. i just think it's important for the public to understand that this is a really -- from everything i know, and i think you're saying it in a fairly understated way today that this is a pretty dire situation for the poc's power enterprise and this is 100 percent hydroelectric clean power. is the power enterprise as currently structured, is it viable for the long run? >> well, i think it is. and i think the main thing that we are working with in the

department, the mayor's office and hopefully the board of supervisors is that this has been an asset to san francisco for over 100 years and so right now the city departments are paying a low cost of power, 65 percent below the cost that if pge provided the power, which we said is about $50 million a year. and we are supporting programs like history lights, go solar, energy efficiency and programs like that, and so we are saying -- and we have all this major infrastructure because it is over 100 years. we need to reinvest in the infrastructure. so what we've been trying to do is balance how we get there and so, you know, our goal later on to talk about some of the things that we could do to bring it into balance. >> it just seems to me that,

yes, you can charge, you know, muni more for its power, which means, you know, presumably a reduction in service because muni has a limited pot of money. we could transfer street lights into the general fund and we could put somehow maybe or probably not figure out a way to pay for it and we would continue to see a deterioration, but it seems like all the things you're suggesting are a little bit kicking the can down the road because ultimately we're all one city and it's a zero sum game in terms of one department paying for something or the general fund or not. it's all city money. to me, it seems like the actual structural way to resolve this is if for the power er enterprise to have more customers. right now your customer base is

very limited. you really struggle to add new customers because there's been a lot of political pressure not to add new customers, you know, ccs, we passed -- cca with votes at this board and that's been bottled up, but it seems to me that you should have more customers. do you have a sense of -- in terms of how -- if you were able to sell more of your power to customers, how much power you would need to sell to still bring in enough revenue to stabilize this situation. >> so we are actually working through different scenarios and you're absolutely right that if we have more customers, but it really depends on the type of customers. if we have more general fund department customers, which we're sub sidizing -- >> i mean i'm talking about non governmental customers. >> when you talk about non --

or commercial rate customers that will help us tremendously so we're talking about trying to achieve 100 megawatts so we are working with power enter vise is working on pursuing opportunities with developers and, you know, working and looking at people that are presently on our city land, our city departments that are on private property. we're just looking at nose opportunities to bring those folks and supply our power to. >> thank you. if i could ask one more thing specifically to the street lights. i know we've struggled at keeping them up. i believe they've spending about $250,000 a year to

maintain about 25,000 street lights. and i know we had a little mishap a few months ago and ultimately agreed with the mayor's office to a commitment of increasing that to $5 million next year and then $4 million the following and that is a dramatic improvement, but still in the big scheme of thing it's rather small. i know that's part of that negotiation we also agreed that the mayor's office and capital planning folks would come up with a global calculation of what all the capital needs are of our street light system so that can feed into the capital plan so we can stop ignoring our street lights. where are we in that analysis. it should be done soon, i think. >> i think the first thing

we're doing is that we are hiring a consultant that -- you know when the consultant will be on board?

>> what's the timing looking like in terms of come pleting whatever this is going to be in terms of getting our heads around the total capital needs of our street right system. you were going to finish your assessment within a few months, but what happens after that? >> i don't have that answer, but that's an item we can report back on may 21 for plans. >> and the timetable for when we're going to have that answer. >> we need to amend that into the capital plan. >> great. >> thank you. >> so working with the mayor's office to identify strategies where we can bring our finance in the balance in the next two years, we're looking at hechi in the long term and so some of the hard which choices we're making on multiple fropts,

fronts so here's some things you'll see in the mayor's budget. the first thing the mayor has made a commitment, instead of increasing the general fund rate by half a cent, he's raising it a penny. it's a penny over each year for the next two years. he also agreed to fund the natural gas and steam costs and then also we will be able to debt finance andish issue our first revenue bond which will help our cash flow. then we've also made additional $40 million of capital cuts and deferrals for the next two years, but just want to let you know that we've already put $224 million in deferral, we put in another 40 million and it just minimized, you know -- or actually it increases a risk

based on operation. so -- and then also one of the things we had to do is we had to reprogram the cca reserves for the capital needs, such as generators that we needed, exciters for our power generation, go solar, street slights and all our facilities because the fact is we would have to borrow money at 6 percent. >> can i pause you right there? you mentioned you had to do. these are the reserves the board of supervisors had set up and you should be coming back to the board of supervisors to ask for that and i'm actually kind of surprised to be hearing about it here when there's plenty of time to talk about it earlier, including our last meeting where barbara hill from your power department came and presented to us. what's your response? >> this is -- in talking with the mayor's office, this is the

proposed -- >> the board clean power sf. >> well, it is the mayor's budget that he's presenting to you that you'll have time to comment on. >> okay. we'll have plenty of time to talk about it, but i'm not likely to approve a budget for public utility commission that has swiped our reserve for a clean power, community choice aggregation program. we can talk about -- i know that the entire reserve of 19.5 million might not go towards the clean power program or cca, but there are other parts of it, but it might be good to come with us with a different scenarios for how that money can be appropriated and not talken, but to actually come here to committee and say we're going to reprogram cca dollars

when there have been eight votes on the board of supervisors, maybe more, who have set up this reserve for clean power, it's actually kind of offensive. >> first of all, i definitely apologize, but we're working with the mayor's office. we ran over 100 different scenarios of how we can bring our power enterprise into balance, so this is something in the last day or so we talked about and i would like to -- you know, i'm hear to here to give you what's in his budget that he plans to submit tomorrow. >> just based on the responses that we received in our questions about the mayor's support or lack of support for clean power sf, i don't really have a lot of faith in the answers i'm going to get. i e don't believe there was any real deep thinking or analysis. it was all just political arguments that we received and

you can tell me a lot of things and it'll be an argument that i'm going -- again, unless you can give me something really detailed about why you cannot keep a reserve for a priority that the board of supervisors had sat and worked on for over 12 years. >> we can definitely work with you and talk to you more about it. i understand what the board feels about that money that we put in reserve when considering it, one one of the considerations i'll put out that, when you have money in reserve, it is collecting interest at half a percent and we're borrowing money for 6 percent and so we should have a conversation. maybe there's a way when it goes that we make the money available, but sitting there collecting no interest when we are borrowing money at 6

percent, that was one of the bases behind it, but willing to work with you to talk about ways that if something happens, how do we execute and get that money. >> i know you said you talked about it for the first time i a couple days ago. i've been contemplating that this was going to happen for months now. i'm sure you've been con tell mating e contemplating about this for months now as well and there hasn't been that discussion. please come back with different scenarios about how much you'd like to take and what you'd do with the funds, how they'll be spread around. >> will do. so the only thick i thing i want to point out is that we actually presented fully funding or leading the cca in place. we had dlsh $5 million in street lights, $2 million in go

so solar and we had a cliff. and we're looking to work with the mayor's office to increase the general fund and so that happened in that discussion, but i hear what you are saying and we will work with you to come back with a more detailed plan. >> mr. kelly, i know you're usually really good and your staff are really good at giving us heads up on lots of issues as they come forward, but i feel totally blind sided by this one. i know as supervisor breed, avalos and i were sitting in the meeting last week, there were so many opportunities to raise what was coming down the road on this and i sure would like to look at and con consider would lead to more of a clean energy future for our communities, but this is upsetting to me as well.

i'm looking forward to hearing the alternatives. >> dually noted. beyond the two year budget, there still is a problem that we're facing with the power enterprise and so we will be working with all of you, not only on the cca as it relates to the power or go solar or energy efficiency, but there is a great need of hooking looking at bringing more customers as supervisor wean iener talked about, get more full paying customers and also we need the ability to be able to debt finance some of our projects and also we need to do more in looking at asset management so we can look and

be smart about deferring and cutting canal ting capital projects. one of the key factors is we are currently in negotiations with a new agreement with pge. we have an interconnection agreement that expires in 2015 and if we are able to continue a deal, we would minimize the impact to the power enterprise and also we are in the process of reevaluating mountain tunnel, so we are trying all the things we can do so that we will have a power enterprise that is financially in balance. that's one of our biggest challenges that we have before us. >> mr. kelly, can i ask another question about -- i think it's a slide that went back to the cuts and deferrals and it says

that -- i think it's 30 million cuts to go solar, but i'm reading a recent posting from the mayor's office that he announced full funding for go solar sf in celebrating the installation of the new solar array at davie symphony hall, but i'm wondering if you can talk more about go solar and how the full funding is going to happen. >> one of the things in the mayor's budget is that he, by looking at the increase of the general fund money, also looking at the cca and so we had to invest in our capital projects, we had to look at street lights, we had to look at solar, which he wanted at fully funded and so we use all those resources to actually fund go solar and also, the street lights and capital --

essential capital programs, but based on the conversations that we had today, i think we will work more closely with you to sew see what that hooks looks like. i want to thank you for your time today. i do apologize for the sudden shock of cca, but we've been work wg the mayor's office again and we had many scenarios we were running and so i felt i had to come today and let you know what the final plan was. >> okay. supervisor breed. >> so the -- so you don't necessarily have any alternative proposals, other than to reprogram the cca

reserves? >> well, the board has passed a resolution to look at joining marin and so -- and in order to do that we would have to fund a feasibility study, which we will need money to actually do that with some con tib tingency just in case we decide to join marin. >> we approve your budget though so if you're saying we leave money it's, like, we would leave the money. >> well, semantics, you know, so yes, you are an approval body, this is the mayor's budget, it is our department that has the money so everyone has involvement in it. and so what i was sharing with you was highlight of what the mayor's going to present in his budget tomorrow.

>> so the mayor's going to present reprogramming some of the reserves that we, as a board have put on reserve. >> that is correct as i understand it. >> so two things have happened since you received the cca appropriation. the first thing is that we will be confronted with having to issue the first power revenue bonds since we built the system. also the world changing so far as richmond, our neighbors across the bay were able to get a deal with marin clean energy because of the experience they had. that was a no money down, no reserve requirement except for a feasibility and customer assessment. so the energy markets have gotten more comfortable with ccas and so