>> yes. general manager kelly. >> what i would like to add or have you consider as you identify the topics maybe staff can talk about the opportunities that we can have or some of the challenges so that that it can be more of a dialogue versus just a presentation. >> right and do my colleagues agree with that? commissioner vietor? >> i'm interested in what they are going to talk about. >> they are interested in telling us what we're interested in talking about we have 2 hours commissioner torres and i think what we can t up for ourselves is what we already know we have expertise and we have a record of accomplishment and i think you know, i would like to see more regular engagement with this department and with this commission i think it makes an

awful lot of sense but i think we have to get staff. it's now what? may 13th? and so the meeting is in 14 days i think we have to really give staff an opportunity to present on key critical issues that we're dealing with. commissioner moran? >> thank you one thing that occurs to me is that we often think about the provision of hetch hetchy power as a cost benefit the fact is we also provide assistance to city departments to minimize their consumption and above and beyond the rates that we provide to the city's departments. >> thank you commissioner moran so at this point i'm going to ask that the general manager work with me and commissioner vietor to come up with some

general outline related to specific topics i don't think there would be any disagreement related to our objectives related to renewables and wastewater management we talked briefly about the chemicals i think that's in the wheel house but obviously we have an option to add just keeping in mind there's only so much time we are able to do it and we deliver that message to the environment commission and proceed from there are there any objections to that? >> i think to add to that even -- we do have a climate action plan i believe that's been adopted by the city so maybe it's the big take away is on how we're going to get to where we need to go. >> water conservation. >> how long is this meeting?

>> 13 hours? [laughter] no. >> the conversation should take place in the public we should encourage everybody to attend if there's nothing further to add at this point i'll go ahead and call for public comment. commissioners are we okay? yes vice president king. >> i just wanted to backtrack to when we initially came up with this idea there was something that prompted it and what was it? >> food waste. >> what? >> or financial -- yeah. >> okay and so this meeting was going to take place february? >> yeah. >> so it's a long time coming. it will be quick; it will be fine. >> is there any publicment comment? >> francisco, decosta please. >> thank you, sir let me state

a few things. just like the san francisco public utilities commission is an enterprise department and you know you don't get the moneys from the general fund the department of the environment was created initially when the pg and e sold the power plant and with those moneys -- it was created the department of the environment and now your commission also knows in the past your moneys moneys from the sfpuc had been used to fund the -- this is not clear in the public and we need to bring it out in the public. the department of the environment, when it had one of its directors jared broom field now the director of the epa regional 9

i believe if i'm not mistaken, he was instrumental in writing an ordinance called a precautionary principal which is not followed by this city so what is a precautionary principal state? generally it states that if our agencies or our engineers or our experts find that there's something that will adversely impact any human life any life, we must stop and investigate and we we don't do that. whether it's in the release of the methane gas, whether it's in the release of pcp's whether it's in the release of so-called treated sewage in our streams so on and so forth so i say it's very nice to get 2 departments to

sit down and chitchat but we need some substance like i belong to the public and it's very convenient to leave out the public -- because we have astute people in san francisco who can do any type of analysis and evaluation and build any type of platforms so that this government, this city government and state government and federal government can go to a better place. so the department of the environment has been known for some political appointments. so we shouldn't leave that out just like on this commission there have been some political appointments for good but sometimes not for good. so that's not going to be discussed i know but just for you to reflect upon. but i would like the precautionary principal and other such things

that the department of the environment has brought forth for our city to abide by and it be discussed thank you very much. >> thank you very much francisco i think commissioner vietor hit the nail on the head you do have a new department head and often times the members of the public and rate payers in particular get frustrated with the lack of coordination so we owe it to everybody to discuss the policy issues and common ground that we have and see if there's partnerships moving forward but to have advocates come testify and start to sway the conversation i think it's a very unique relationship that this commission has with the commission on the environment and then obviously the talent that each department has begins to work together and we kind of flushed that out. i'm looking very much forward to it and between now and then certainly

all ears. are there any other publicment comments on this item? seeing none this item is now closed. >> item 7 report to the general manager. >> good afternoon commissioners i first up wanted to give you an update on our water supply outlook so ellen will you come up? >> thank you i'm ellen levine so we will run through the slides. for the water supply conditions all right so total reservoir storage we're 67

percent of maximum and 416 ,000 acre feet of that is available directly for drinking water and the water bank is working for us and i'll go into a little bit more detail when we get to the slide on that. and we received 2.85 inches at hetch hetchy in april slightly below average for the month and with really limited run off because the conditions are really dry and the rain just just soaked right into the ground. i'll show you a plot that shows where our deliveries have been further in the presentation. >> i'm sorry where is this located. >> it's on your screen. >> i don't have a a screen. oh there it is thank you. do

you have a hard copy available at some point? >> i don't have but we can get you one. >> can you mail me one? >> sure i'd be happy to. from the overview i just gave you from the last time steve gave a presentation hetch hetchy storage is up 14 percent so quite a bit of inflow over the last month and down 12 percent that's because we've been debiting the water banks for total system storage we're down by about 1 percent that's taking in all of the inflow then all of the deliveries that we've been making in the last month if you take water bank out of the picture our storage is up 6 percent so a lot of debiting of water bank right now. this shows you where our precipitation is the blue line is 2007 and the red line this year and yellow or gold line is

1977 so you can see we're well above 1977 for precipitation for the year we had a very little bit of precipitation last week so you see just a little jagged bump up there. and really our rain season is towards the end we've got about 6 weeks left of the rainy season but snow pack conditions -- as you all know, we were significantly below the hundred percent median for april 1st we're now tracking well below 10 percent of april 1st conditions just to put that into relative terms today our snow pack is 22 percent of a typical may so we've had quite a bit of melt as demonstrated with our storages but if you look at where we're typically are in may we're at 22 percent

of that. most of the snow is above our snow censors so we don't really have a good idea of how much snow is left but we're likely to see the melt by midjune of this year so the green line is tracking this year what you see with the black line is the target for the 10 percent reduction that 10 percent reduction is based on reducing projected purchases for this year by 10 percent we asked our customers how much water they anticipated needing for the year the total with retail was 232 mgd so this line demonstrates what we envision a pattern of demand at 10 percent of the reduction of 232 which is 209 mgd for average annual and as you can see there's some weeks where we meet the target some weeks we do better than

the target and some weeks when we're over the target it's really no mystery that if you track the rainfall that's generally when you get close to the target or below and we've got our challenge ahead of us in the dry season and make sure we get the message out and customers start reducing their use. so to begin refilling water bank likely continue with these released into and through the summer our target storage level for cherry -- any of the releases we're making out of cherry are keeping that target storage in mind and hetch hetchy may fill by the end of the snow fill run off it may only be for a day but we may get there [laughter] on april

on april 25th the governor released his second proclamation for this drought and there were a lot of directives to california to avoid wasting the water and these go directly to the individual water use age by not washing drive ways washing cars at car washes that use recycled water and urging schools parks and golf courses and asking restaurants hotels and reduce water usage such as only serving water on request. and we also disclosed in the letter

that we'll continue to review customer demands weekly. so in the event we're not meeting our targets and we feel we need to take further action we suggest examining that on june 15th and we encourage customers to implement the measures recommended by the governor we sent a letter out to all of the wholesale customers with those water use reduction practices that i just showed you and our communications plan involves a campaign rolling out in june to really hit water use savings over the dry season we have our drought relief projects underway and the emergency aqueduct and the sunol valley water treatment plant and expanding our direct toilet

replacement program and accelerating the san francisco ground water project. if there's any questions i'm happy to answer. >> commissioners? >> commissioner moran just a comment thank you for the presentation the good news is we're almost up to the level of 1977 precipitation but the bad news is that 1977 was a record bad year so it's been good news and i'm glad you included the governor's drought statement he made it clear this is a statewide drought there's no agency that's untouched and most agencies now are really looking toward making sure if next year is dry it's not a really catastrophe if next year

is a dry year we can have a significant shortfall so the message is it's still a severe drought and it's a statewide problem and problem. >> okay. >> fifty bucks. thank you for being here. >> okay. so the next item is to give a sewer system improvement program update. >> water system. i'm sorry [laughter]. >> if it's the sewer system, you are in trouble. >> thank you. >> good afternoon commissioners

dan wade this quarterly report -- as you can see in the slide both the regional and local at the end of the reporting period was approximately 84.7 complete overall and this percentage is with respect to the revisions approved by this commission and as you know it's representing a a $125 million increase that would be 79 percent complete at the regional level and 95 percent complete of the local projects representing the 87.7 percent overall and the construction activities continue to to be the primary focus of the program with over 2.8 billion active construction

in the program currently. construction has been completed on 63 of 83 projects and as of the end of march -- which is the end of the reporting period we had only 3 projects remaining in preconstruction and currently only 2 projects because one project the seismic upgrades went to notice to proceed just a couple of weeks ago and as we reported in past meetings we're well past the peak of construction and however we do continue at over a hundred thousand personnel hours per month so there's still a significant amount of activity going on in the program and awarded construction contracts within the reporting period and as i just mentioned that project was actually noticed to proceed for

construction on april 28th. we also awarded another contract for the system security integration. we completed the sfpuc east bay municipal utility district project and our safety record continues to be outstanding and again, i don't like to boast about safety because we don't want to relax for a moment but it's noted that the safety record is outstanding on the program at less than half the industry average. we completed 186 out of 186 shut downs and a 10-year milestone a couple of weeks ago and that's a significant thing to celebrate.

>> now if you look at the program cost trend, back a year ago we were still operating under the old wsip approved in 2013, 4.6 billion and as you know we rebaselined as you approved a couple of weeks ago at 4.765 billion and the new budget takes into account all the major trends that existed in construction at that time and it also has appropriate contingency to account for the remaining program lists. and so if you look at the list this graph shows the confidence level versus the predicted risk cost impact and as you can see in this graph at this stage of the program we've requested enough contingency to cover approximately 65 percent of the

remaining cumulative risk in the program or about $46 million in other words about 65 percent confidence that the remaining construction risk will be able to be covered with the remaining construction contingency that's been budgeted we think it's appropriate at this stage of the program because we don't want to over estimate the contingency required to cover the additional risk. >> i just want to make sure you heard you correctly you said only covering 65 percent with our current budgeted -- >> these are things that may happen or may not happen so we run an analysis to get the probability of how much of the list budget we think might need to be used. >> so you don't think we'll have enough money? >> that's not what i'm saying. so actually we're 65 percent

confident that the remaining contingency will cover the remaining construction risk in the program. >> that's not very comforting that you are 65 percent confidence i'd like to hear that you are a hundred percent confident. >> then we'd need to request 3 or 4 times that amount of money and we don't think it's appropriate to request money that may not be needed in future years. >> at what point will you determine that we have enough money for the project. >> the risk will continue to come down and we'll be increasingly confident over time. >> that's what we thought about calaveras and then we had geologic issues. >> you are correct most of the remaining risk in in the program is on the calaveras project over half of the risk is on that project and the

contingency on that project is about half the contingency. >> so at what point will you reach 100 percent confidence? >> contingency as we're using industry standards as it relates to contingency and contingency is basically an insurance policy that allows you to have enough funding to finish a project as projects develop in planning your unknown is significantly higher your risks are higher so your contingency is significantly higher as you move a project from planning into design you know more about the project and your contingency will shrink. >> i'm confused so why do we have the bidding process if we we don't know what the cost will be. >> until we know exactly.

>> who's the engineer? >> it is the engineer of record and so in some cases a private consulting firm some cases our own engineers in-house. >> what is it here private consultant or our own. >> multiple designers on calaveras itself the engineer of record urs is the engineer of record so what typically happens multiple factors that gets into what something costs one is the scope of the work and what you typically do in generating an estimate is looking at a very recent historical cost based on your labor rates and based on your material rates the other major factor in costs is market continuation market condition so you could have a condition like 2005 and then the price of steel went through the roof in 2005 because of the high volume

of demand that china. >> i understand those economic forces but what mechanisms are in place to monitor what contract ors always do come back with an amendment all of a sudden what you thought was a cheap remodel on your garage had a turned out to the like the empire state building. >> so you get a contractor you say oh, my god it's much more expensive so most people just have enough money to afford that so you always need money, i'd suggest to everyone that does a remodel that you have money for a contingency it's not only contingency based off of unknown stuff when you open up your walls and you see all

these homeowners shows and also there's a lot of opportunity where owners request opportunities to improve and make the system better and so what emilio was talking about is when you go through this process and when you -- depends on where you are -- you look at what's the risk if something were to happen and so it could be very remote but when you look at risk you look at what the exposure would be and if you times those together will give you your risk exposure and it's a whole methodology that you put a money dollar to the risk for example if an earthquake were to happen what's the frequency or the you know the probability of that if that were to happen so that comes under the risk so i think

they are looking at here is the situation, what is the risk that if this were to happen, what would be the cost if it were to happen and how can we mitigate it so it won't happen and that's how they do the risk profile and sort of determine what's the probability so from my experience most agencies 70 percent because you don't want to fully fund something that may never happen because you are just moving money and. >> so the other side of the equation is the cost of funds because like this agency like when you do a personal remodel you don't have an infinite amount of money or you would simply put a hundred percent contingency funds cost money either in the form of advancing those funds and the cost on the market whether using commercial

or bond money and if we're going to lock up money here then we can't have projects elsewhere so we have to balance how much funds do we want to lock up on this project based on the available money and the cost of the funds against what we believe to be to to to be the risk so to to be the risk associated with a cost over run. basically tunnelling and deep excavation are your two most challenging projects because you don't know what you are going to uncover either in the tunnel or excavation so with regard to calaveras we had a worse scenario where we found a landslide so we fell

comfortable reducing the amount of contingency and given the demand to the dollars and that programming 65 percent is an appropriate level of risk by no means do we have a crystal ball but it's a professional judgment at this point what we believe to be a judicious use of funds in our overall capital program. >> and that has been the level throughout the program? >> we've had higher levels earlier because we had more projects in construction now we're 80 percent through construction the number of projects out there are smaller and the number of risky projects are smaller so the most risky part of tunnelling is done so we do believe