>> okay. good afternoon. thank you, everyone, for waiting. want to welcome you to the san francisco public utilities commission meeting for today, tuesday, april 10th, and i want to make a couple of announcements as we start first, again thank you for your patient. we're going to have a revised order on the items that we're covering today. first, there will be no closed session, and we're going to go through items 1 through 4, 1, 2, 3, and 4, then we're going to go through 9 through 13, and 14, and if we have time, we'll do items five, six, seven, and eight, okay? so also, because i want to make sure that everyone who has public comment has adequate time to speak to their items, we are going to hold strictly

to the three-minute limit, so when you hear the chime, i ask that you please abide by that timeline, otherwise we will help move you along so that everyone gets an equal chance to speak. so with that, madam secretary, roll call, please. [ roll call. ] >> clerk: we have a quorum. >> okay. on today's agenda, the commission will be considering under item 11, the proposal to adopt water rates for fiscal year ending 2019 through 2022, and under item 12, the proposal to adopt waste water rates for fiscal year ending 2019 through 2022. the commission has received protests against the proposed rate by mail and considered those protests pursuant to proposition 218. any property owner or customer who is submitting a written protest in person today should

submit his or her protest in writing to me before the commission acts on these in the meeting. >> okay. item three is the approval of the minutes from march 27, 2018. do we have any discussion, commissioner snz. >> so moved. >> so moved. >> second. >> actually, before we move nks inks -- move, i'm going to ask for public comment. all in favor? opposed? okay. item number four, this is general public comment. the members of the public may address the commission on matters that are within the commission's jurisdiction and are not on today's agenda. good afternoon. >> rossy, native san franciscan, born and raised. fifth generation, and i just wanted to bring up something very briefly that i pensionmen to the puc committee at golden gate, and i spoke to the

commission members of the puc requiring stormwater run off as it concerns my family's properties that we've owned going back to the 19th century. i understand handscape, and an account should be setup because we are using the system, but our properties and the neighbor's properties, i kind of think it would be fair that those properties that are not using the puc system be excluded from these potential accounts and fees. that's all. the other ones, i can accept. we're using city property, we're using city services. we should be charged a fee, but the other ones that are absorbing the water should be excluded. that's pretty much it. thank you for hearing my comments, and -- thank you again. >> all right. thank you, mr. rossi.

i also have peter strickmeyer. thank you. >> thank you, president kwon, commission and staff. we've had some success working with the sfpuc in the past. unfortunately we're at a standstill when it comes to the bayview delta water quality plan. there's only a month or two to go before the final environmental document on the bayview delta plan will be released, so i feel we need to switch gears. i wanted to let you know we are going to be ramping up our public awareness campaign. some background on october 29, 2016 there was an op ed by harlan kelly, and it pointed out or claimed that the bay delta plan could result in the

loss of 188,000 jobs and 49 billion, and that was based on a group report. 2.5 years earlier, we had analyzed that same report and found a number of flaws, including it treated bay area water supplies as if they would be impacted by sources on the tuolomne. and it underestimated the potential for water conservation. between 2006 and 2016, water use in the sfpuc territory was reduced by 30%. great accomplishment. and yet, there are no negative environmental or economic impacts. according to that same report, 30% rationing should have resulted in the last of 25,000 jobs and $7 billion. but in fact in san francisco alone, 125,000 jobs were added between 2010 and 2015. the narrative coming from sfpuc is that the bay delta plan could result in 50% rationing

of the first line of drought. as you know we've modelled what would have if the drought of record were to repeat, and we've found it could be modelled with a model of 10 percent percent rationing a year. your staff accepted that, but they're saying the draft amount falls between the two year highest drought on record. you've had only one meeting on the bay delta plan. that was on january 10, 2017, and we actually had to mount a campaign to get that scheduled, and that was the first time some of you ever heard about the design drought. we presented our critique, and our -- on the sfpuc brief. you asked staff to meet with us. they responded to our brief. we thought it was very unimpressive, and yet nothing happened. i can see i'm running out of time here. you know, it's too bad, because i think we could have worked well together, and i think it's going to get more contentious.

we are always open to having discussions and see if we can find some common ground, but we're in a position where we really have to be -- [ inaudible ] >> -- with our position. thank you. >> thank you. next, i have wendy lu, general public comment. welcome to group. >> hi. my name's wendy lu. i tried to comment -- i have the business located in chinatown on broadway street, and the construction takes too long, almost year and a nav. they always block no parking, but i have to loading my truck every day. ittic at thats too long from the green avenue to broadway. and they always -- they always intentionally, every day. we have meetings a we -- they have meetings all the time, and it affects my

business. it affects my business all the time. i ask the public works if they are -- we don't have money to -- for the business, only for the [ inaudible ]. well, i don't know. how can i get some help? okay. thank you. >> thank you. is there any other general public comment? okay. so we are going to move to item number nine. [agenda item read]

. >> commissioners, is there any discussion? i'm sorry. do you have a presentation on that? >> i do. >> sorry. hi, dan. sorry about that. >> good afternoon. president kwon, commissioners, dan wade, and today i'm here to present and request your approval of the march 18 revised water system improvement program. you may recall last time we requested changes to the program was march 2016, and schedules were extended for three projects in february 2017 to allow additional time for administrative closeout of the tunnel, the seismic upgrades of beta vision three and four and security system upgrades. and so to summarize what we're requesting as part of the march

2018 proposed revised wisa, we're requesting scope changes or refinements of to several project the most of which is the groundwater recovery and storage project. i'm talk more about that in just a moment. as well as the other projects listed here. we are requesting an overall revised completion date from december of 2019 to december of 2021, so a two-year extension primary due to two pronls. the alameda creek recapture project, and the groundwater recovery and storage project. and then, the revised program budget would include a $42 million increase for the regional projects for about 1% of the current program. now there is a forecast decrease to the overall program due to a revised forecast of

finances costs, and we did receive a letter requesting that, and we have no problem doing that, so we can address that at the right time. and so just getting into the scope changes, as i mentioned, the most significant change that's being proposed is on the regional groundwater storage and roor reproject. now you recall the purpose of the project is to provide up to 7.2 milli 7.2 million gal'lons perday of dry year water supply over 7.5 years, and the original projects included up to 16 groundwater wells installed on the peninsula to achieve that goal. this is based on modern end results. the project was implemented in two phases. the first phase sought to install 13 wells. we've got 12 nearly complete.

one is partially complete, and we'll complete that as part of phase two, the second phase was to install two to three wells to get up to the total service goal. we've had extreme difficulty locating viable well sites in the san bruno area where those two, three additional wells were planned, and so there's some additional considerations that have occurred since that time. number one, we've made a commitment to go forward with the daly city recycled water project, which would reese demand on the ak whiquifer in area which would likely provide more water in the groundwater basin. so give these revisions our revised scope would be to install three test wells outside of san bruno which are kind of on the margin of the basin, includes these three

sites listed here to complete that 13th well, and then, to include -- essentially complete entirely the phase one scope which has some additional changes for chemical system monitoring, sampling, and storage. so that's the most significant change that's being proposed in the program. >> and while we're on that one. >> sure. >> if i may ask a question. what -- what are the problems with the san bruno sites? >> well, the original sites were proposed within golden gate national cemetery, which is federal property, and it became very clear that it was going to be extremely difficult, if not impossible, to negotiate with the federal government to install those two -- those two wells. and so then we started looking for other sites in the san bruno area. a number of private sites, as well as potential public sites owned by the city of san bruno, and we've come up empty after -- after a couple years. >> all right. just to be clear then, it's not

engineering or ground condition kind of problems, it's basically institutional issues. >> institutional, real estate, yeah. there have been a couple sites that we followed through to the end, and the property owners decided that they depth want to sell, and a number of other stories that i could share with you about some of the sites that were pursued. >> and as far as -- so we're looking at daly city and millbrae? >> yeah. we're looking at millbrae and south san francisco. >> and are the institutional problems easier there? >> yes, well, on millbrae, it's still our right-of-way. now we still have access to get to theit sites. and the same is true, actually in south san francisco. >> yeah. thank you. >> yeah. okay. >> commissioners, anything else? >> okay. and so the other changes are less significant.

the calaveras dam replacement project. as you know, we had a very wet winter in 2016, and so we had some repairs to the land slide on calaveras road, as well as restoration in the hall pass road, the fish -- [ inaudible ]. >> -- also had some land slide stablization issues that we addressed, but it's taken additional time and costs, and so those changes are being incorporated into the proposed changes to the program. on the watershed and environmental improvement program scope, this is a program that was setup to enhance public othawareness an provide educational opportunities to water supply, water conservation and stewardship, and specifically, the opportunity that's been identified which is to fund the southern skyline boulevard

richmond trail project. and then, we have that wist close out projects in each of our regions, and some examples are listed here. i won't get into the details, but there's a number of changes proposed to fully meet the level of service goals that were set out at the beginning of program. and so this just summarizes the proposed budget revisions. there's two projects that actually have cost savings compared to the previous budget, and then, the other projects would be increases, the most significant of which is the regional groundwater storage and recovery project. and again, this summarizes the overall forecast for the program, showing the march 2016 budget chaired to the march 2018 budget. and again, the financing cost

forecast has been lowered, but the regional projects have a $42 million increase. and to summarize the schedule revisions, there are a number of individual schedule revisions, but again, the driver is the regional groundwater storage and recovery project which would take the program to the end of 2021. and so again, before i request your action, i just want to acknowledge that we did receive a letter from bsca dated april 3 that contains seven recommendations. we have no problem complying with the recommendations except that we'd like to have until june 1st, rather than may 1st to comply with recommendation number five that's in the letter. and with that, our request is to ask the commission to endorse the project level revised scopes and approve the schedule and budget of the march 2018 proposed revised

wisp and to direct staff to send a notice of change report to the state. >> okay. thank you. commissioners, any other discussion? before we go to the vote, i want to call for public comment, and i will call with nicole san kulla from bosca. welcome, nicole. >> good afternoon, commissioners, president kwon. as dan mentioned last week, i did send a letter to you about the proposed changes that the commission will be considering today, and the likely impact on bosca's water users. included were the seven recommendations to the commission based on our 11 findings or results from our close study of these issues. we've discussed these recommendations thoroughly with your staff and we urge the commission to include them in your action today. we do have two major concerns with the proposed changes. first is that the proposed change in scope or the objective for the groundwater

storage recovery project may reduce the commission's ability to meet its contractual water supply obligations to water users. second is a statement about the finance cost category that identifies the 100 million reduction in overall forecast costs. the forecasted reduction is actually an early release made possible by changed in bond repavement rules. this reduction's not related to project cost savings and could be misleading to the public. our seven recommendations are related to the graund water project, other projects scopes and changes in the financing schedule extensions. incorporating each of our recommendations into your action today will provide additional guidance from the commission that will be beneficial for your staff, helpful in reaching desired results and provide greater assurances for water users. as documented in the puc's latest report, the wis # ep is

now seven years beyond the completed schedule in 2005, and half a billion dollars more than its original estimated cost. based on the latest forecasted final cost of 4.8 billion, the water users we represent who pay costs in proportion of their water use of two thirds from the system, they will pay ruffly 3.8 billion of the proposed 4 poibt 5 billion cost of the program. when it became clear in 2008 and then in 2014 that the original deadline could not be meet, the legislation extended the oversight of bosca's request until 2022. today it's clear that that date will need to be extended again, and in 2018, we ask the le

legislature to do so for a third time. having a safe water system that will deliver reliable supply of high quality water at a fair price is essential to the health, safety and well-being of our constituents and yours, as well. thank you very much. >> thank you very much. >> you put the requested change of the delivery date for one of the recommendations? >> yes, the staff recommended change for the delivery date for the finance cost accounting is acceptable to us. >> okay. thank you. >> being on -- okay. thank you. we have another public comment on this item. adrian covert, am i pronouncing that right? >> yes, but i believe i was commenting on the proposed sue

you are rate changes. >> i have you for item nine, maybe i'm thinking of a later item? >> i believe so. >> it's ten. >> ten? yeah, i think i actually put it on the wrong one. >> okay. no worries. we'll put you up. any other public comment on item number nine? okay. seeing none, do we have a motion to approve? >> i move to approve with the addition of the recommendations as amended. >> second. >> i'm sorry. the recommendations is from the april 3, 2018 letter from bosa with the amendment to recommendation number five, y change from may 1st to june 1st. >> that's exactly what i said, yes. >> and we have a second. all in favor? opposed? it is approved. next item, please.

[agenda item read] [agenda item read]

[agenda item read] [agenda item read] . >> okay. may i have the slides, please. commissioners, i'm eric sandler, cfo and assistant general manager of the puc, and i'm here with my colleagues to present items 10 through 13, which are water and waste water rates and capacity charges, and i'll give a presentation describing that -- and that -- to a large degree, it's similar

to the presentation that i provided at the last commission meeting, updating you on the status of the rate study as well as our efforts of affordability and water shut off policy. following me, todd elmer, chief communications officer of the puc will spend some time talking to the commission about all of the public outreach that has been a part of this process to adopt rates. and then, finally, howard ash from the rate fairness board will present -- the chairman of the rate fairness board and will present his review of the staff proposal. so just to be clear, we have a number of rate and charge items over the next month or so, i wanted to be clear about what we're hearing today and what will be before the commission on may 8. so today, retail water rates, retail waste water rates, water and water capacity charges. may 8, you heard public comment from mr. rossy about rules

changes with respect to stormwater related sewer system costs. we'll also be addressing miscellaneous fees and charges on may 8. now just to provide some background on the -- that second item for may 8, we sent out letters to about 500 customers identified under the unmetered property sewer service charge. that letter said that the rules and regulations changes would be considered at today's -- at today's meeting. it was since renoticed. we received a number of comments from the public and appearances at the rate fairness board, you know, requesting a little bit more review and consideration of the item and in response to the public comment we received on it we're working on trying to develop a clear exception and appeal process. so that will be before you on may 8. and so now, i will turn to the matter at hand.

so we have a whole package of records before you which contain staff reports, a water and waste water cost service study by a consultant, as well as a number of -- you have communications related to rates and charges as well as protest letters related to rates and charges. i'm going to cover in this presentation some background and the policy framework that we used to set rates and charges, talk about the rate study and the rate study process, discuss key features of the actual water and sewer rate proposal, talk about the temporary drought surcharge that's being proposed, and then talk about capacity charges which are charges for new development requesting capacity of the system. so just some background on the rate study, or really, the rate process. the charter -- city charter requires an independent cost of service study for each utility

at least every five years, and the rate fireness board may review the proposed rates and charges. you've heard various updates over the past 1.5 years from staff about the progress of the rate study, and this is the culmination of that work. california prop 218, the state constitution sets some legal requirements in addition to the city charter, it sets some legal requirements regarding rates and charges. those requirements are both substantive and procedural, so on a substantive basis, it requires that water and sewer rates -- customers are charged based on their proportional allocation of costs to customer classes. basically, rates need to be based on cost of service. the procedural requirement are that customers will be notified no less than 45 days before a public hearing, and the -- and the notice will contain a

description of the rates and charges being proposed, and that there is a protest process for customers to submit written protests, and if more than 50% of the customer base submits a protest, that the public body can't rates and charges. again what we're talking about is a four year rate proposal starting in july 2019. this chart really outlines all of the rate relates activity over almost the past two years, and the various internal and strernl stakeholders that have been engaged in this process. the puc has a very long, involved engaged rate setting process. you can see the work streams on the left, engaging the consultant and discussing stormwater flow costal indication, financial policies, the revenue requirement, cost

of service, rate design, period of community outreach, and the rates adoption that we're undergoing right now. and you can see all of the various stakeholders who've been involved. now, in addition to the legal basis for setting rates and charges, the charter and the state constitution, there's also a policy framework of the commission that lays on top of that. and we've had a very thorough review over the past 1.5 years of critical policy development that's important in terms of setting rates and charges and also in terms of determining the revenue requirement. and all of this work that the commission worked on, which includes enhancing existing policies, the rate assurance policy as well as other policies, all of those are rolled -- have been rolled into

the rate study and the rate and charge proposal before you. so the -- when we look at setting rates and charges, we think of three real scopes of work. the first is determination of the revenue requirement, which is how much revenue is required to be generated from rates and charges to fund the enterprise. next is the cost of service analysis, which really gets at what are the appropriate allocation of costs to different customer classes. so that's really the cost of service analysis and the cost of service study is the fundamental legal under pinning of the proposal for rates and charges. ensures compliance with the charter, compliance with prop 218. rate design is the way by which you structure your rates so as to recover the appropriate revenues, the cost of service from each customer class. so these are really the three

different elements of the work. so the revenue requirement analysis is really derived out of the budget process and the ten-year financial and capital planning process that the commission undertook earlier this calendar year, which includes about, i think 12, 13 hours of public meeting, going through the proposed budget, going through the proposed ten-year capital plan and the ten year financial plan, and the revenue requirements that were at the basis of this rate study are directly out of that work. so the commission acted on february 13 adopting a ten year capital and financial plan. that's the basis of this recommendation. as you remember from that discussion, capital costs, either directly paid or

financed through the issuance of revenue bonds account for about 80% of the increase over the four-year period. so 80% of the proposed increases are going towards investment in capital and meeting service level for our customers. so another see item in input in terms of setting rates and charges are what are your water sales volumes, and i'll just point out that this is a -- was a slide that was added to the commission package, so it's titled 10(b) and what it shows it historical water use in the retail service area since 2010 through 2017. as well as the -- the retail water sales volumes assumptions that were provided to you when we developed the ten year financial plan which are in red, which are 61.1 mgd, and then what was assumed in the rate study by the consultant and is incorporated in the proposed rates and charges before you. and what you can see is there's

a slight reduction in the projected water sales for fiscal years 19-20, 21-22, versus the ten year financial plan that you adopted in february . so i thought that was important to point out. and when you're looking at water sales, this is a challenge for every water agency, particularly in this post-draught era, there are a number of driver's of behavior and ultimately did he mapped. the kinds of driver that we look at are population growth and account growth, economic activity. we look at water use changes, from fixture change -- regulatory fixture changes or behavior -- conservation related behavior change. we look at reduced usage in terms of that may be a response to increased rates and charges, although water use is very last -- it's a price change,

generally. we look at legal and regulatory changes and redevelopment activity within the service area. so there are a number of pluses and minuses that you need to consider. there's no magic number, there's no exact science in terms of forecasting water demand. what we believe was a responsible assumption that the consultant made was a half percent reduction in water sales volume over the next four years. so we talked about the revenue requirement -- >> i've got a call into sfgov tv. we've got to keep it on one of the monitors for closed captioning. i'm going to try to get it off

the second one where it's actually updated, as well. [ inaudible ] >> i know that. >> shall i continue the presentation? >> yes. >> okay. so we talked about the revenue requirement, which is a significant component of the rate and charge proposal. we talked about the water sales volume assumptions for retail water sales, and now we'll talk about the cost of service analysis. again that is the financial and engineering work that goes into saying okay, these are how certain customer classes use the system, how they cause costs, and what their share of costs should be. it goes into informing the rate design. and so some of the key updates that have occurred during this study, we've done -- this is a lot of behind the scenes work this's unglamorrous.

we've updated customer classes and peak systems, so we actually have meter level data to support our peaking factors, which is to a large degree what allows us to create the differences between our tier one and our tier two prices. so we have much better information supporting that. we have a detailed reallocation of operating expenses, a complete update of asset and capital project allocation. a very improved allocation of up sell to wholesale customer revenues. we've made some really significant enhancements in terms of the cost of service analysis underpinning these rates and charges. and so now, we've talked about the revenue requirements, sales volumes, cost of service. now we're going to talk about

rate design and what are the major features. before we talk about any changes, i just wanted to remind the commission what our current structure for water and waste water is. and we have, what i have here are outlined in the left column, the type of charge that exists, fixed charge, variable charge for residential customers, and then nonresidential variable charge. in terms of our water service, we have fixed charges for water service, fixed monthly charges based on meter size. for residential variable charges, we have two tiers, and they vary between single-family residential customers, and multifamily residential customers. the first for single-family is 4 ccf, the first for multifamily is 3 ccf. for our nonresidential

customers variable charges, we don't have tiers. the usage characteristics are so different in that customer class, and we currently have a different volumetric rates for a very small customer type. on the waste water side, we currently have no fixed charge. all our revenues are recovered on a volumetric charge. we have no tiers, and the volumetric rate for residential charges is based on a standard strength -- standard domestic strength sewage estimate. for nonresidential customers, we have separate rates for total suspended solids, chemical oxygen demand and fats, oil and grease and those are the constituents that makeup the sewer service rate and they're actually separate for nonresidential customers and based on standard industrial classification codes. so those nonresidential customers that have very strong

sewage would pay more than those that have tears. the volume metric rate is based on a stan domestic strength sewage. for now-residential customers firefighter separate rates for solids, chemical oxygen demand and fats, oil and grease. they make up the sewer service rate and are actually separate for non-residential customers and based on standard industrial classification codes. so those non-residential customers that have very strong sewage would pay more than those that have weaker sewage. so let's talk about what are the changes in rate design. so i talked about the fixed charge for water service and that covers the cost

of customer service, billing, meters and fire protection. we are also implementing a new -- well, it's a new fixed charge so it's a new part of the rate structure but it's not adding revenue to the rates and charges so it's a different way of recovering costs. it's a -- it will recover over the 4-year period about 2% -- 2.6% of the waste water revenue requirement. on the water side, not a large change to the fixed charge as the percentage of total revenues. it will recover 13.8% of total revenues recovered on a fixed charge. so essentially we are keeping the fixed charge about the same percentage of revenue for water and we are adding a fixed charge for waste water that will grow over the 4-year period. so now let's talk about rate design with

respect to the variable charge. so for residential customers. i mentioned we have two tiers in our residential rate structure. those tiers are different depending on whether you're a single family residential customers or multifamily residential customer. we looked at usage and distribution and are proposing no changes, the tier 1 for single family and 3 for multifamily. we did a significant update to the cost of service allocation with respect to the tiers. so much of the activity with respect the prop 218 and setting of water rates has revolved around tier pricing. you know, we wanted to ensure that we had a solid

administrative record and a solid financial record for setting our first and second tier prices. so the second tier includes the cost of water conservation and a portion of peaking costs by customer class including the peaking cost associated with water supply, diversification, extra capacity in the transmission, pumping, treatment, storage and distribution systems. what we are actually seeing in the proposed rates and charges is a compression of the tiers. so our tier 1 and tier 2 prices are getting more close together because the peaking characteristics of our system has changed over the past several years. we are phasing in the adjustments to that allocation over a 4-year period to mitigate the immapact on the low water volume users. so now let's talk about the water

nonresidential variable charges. essentially as i mentioned earlier, we have volume metric rates for a number of different customer types. we have a number of different customer types. these actually represent a very low volume usage. we charge some a commercial rate, interruptible rate, a special for docks and shipping. they recommended to consolidate them all into one rate. we think that makes sense. that achieves the rate assurance policy, the principal of simplicity and we needed to make sure that we had a strong financial and legal basis for having a different rate. so when you pull that altogether what does that mean? it's one thing to talk about rate design but what does it mean for the customer bill? what we have here is the average single family residential bill, which is about 5.3ccf of usage,

currently that customer pays $108 per month for water service and sewer service. it breaks down to about $49 is the water bill, $59 is the waste water bill. you can see the fixed charge and the variable charge. you can see in this table how that will change under the proposed rates and charges. essentially it's about a $10 per month increase in the monthly bill. it's a $10 increase in the monthly bill each year of the 4-year package. that translates to about an 8.4% annual increase to the typical single family residential customer. now one of the things to consider is that the commission is generally interested in is how do our bills stack up to customers in the -- other customers -- other service providers in the bay area. here we have a comparison

of the combined monthly water and waste water bills of various bay area agencies. i think one of the important things to note is that our waste water bills includes not just treatment of sanitary flow but also storm water run off and it's hard to create an apples to apples comparison when you're looking at some of these other waste water charges. not all of these include treatment for storm water run off. so currently our bill is about at the median level and will increase to about $116 per month and would -- all of the bars here for agencies are based on fiscal year '18 rates, not '19 rates so those would increase as well but we want today show the commission what the proposed rate for the fiscal year '19 looks like. so that's the discussion of the basic of the water and sewer rates and charges. in addition,

we are proposing as part of this package which is a practice that has been implemented by agencies up and down the state of the implementation of a temporary drought surcharge. this is a temperature rare surcharge that would be trigger body commission calling for water shortage that's associated with a supply shortage. so this would only be implemented in the situation where we had a supply shortage and the commission's retail water shortage allocation plan was activated. this is not just a general statewide call for conservation. the surcharge would be based on cost of service and would be relative to the mandatory water use, calls for water use restriction of the commission. it would be a surcharge on the volume metric portions of water and waste

water rates. the city would have to declare a water shortage and request customers reduce water use by 10%. this would be based on a shortage allocation plan. that's contained in the urban water management plan, not just a general call for water wise. finance staff would calculate the projected revenue and the corresponding surcharge which would not be greater in stage 1 than 10%. the stage water would be added to all volume metric water and waste water rates and removed at the removal of the declaration of the water shortage emergency. now we are moving to capacity charges. so this is item number -- so i described item 11 and 12. this is item 13. capacity

charges are charges to customers that are either newly hooking up to the system or requesting additional capacity from the water or waste water system. it's intended for them to pay a fair share of the capacity that existing customers have invested to develop. so it's really a generational equity charge. the puc adopted capacity charges in 2005 and 2007 and they have been reviewed and updated during each rate study. now we use what is called the equity buy-in calculation methodology. you look at the values of the assets, less depreciation, less any debt that was used to finance those projects, you add any cash that's been contributed by existing customers and divide t it -- it by the capacity and

come up with a charge of meter equivalent. this is actually very conservative. it's the most conservative capacity charge. you'll see that when you look at our capacity charges in comparison to other statewide -- or other regional agencies. again, they ensure that new customers pay their fair share of the cost that existing customers have already paid into the system. when you run that formula and that calculation, this is a formula calculation, there's not discretion in this methodology, the waste water charges going up by about 4% and the water capacity charges going up by 35% and the increase in the water capacity charge is really the result of the significant increase in capital assets and investments from the wisp. the items are annually authorized increases proposed

based on engineers, news, records, cost escalation for construction costs. as i mentioned, when you look at the sf puc capacity charges in comparison to pier agencies what you see is on the left -- well, we are the second and third bar from the left. it's objeabout blocked by the closed captioning. there's others that charge more for capacity. >> is that the same formula that you're using? >> it's service level characteristics. so it's a very high growth area. high new growth area. they need to procure a new capacity to meet demand. they might have a slightly different formula. so

east bay mud has a formula that's different than ours. it's an equity buy-in like we have plus an extra capacity that has to be built to service certain customers. so that's it for my formal presentation. i'm happy to answer any questions or discussion before todd elmer, my colleague, talks about the out reach that is associated with this rate package. >> commissioner kwon: any discussion? okay. >> todd. >> commissioners thank you for having me here today. i'm todd elmer. i'm excited to talk about the extensive public

education and out reach strategy that we have put in place to educate the members oh of the public via a variety of different channels and methamphetamine -- methods so they understand what their rates are being used for. so that's what i'll be describing in my next few slides. so i'd like to begin with a broad level over view of the st -- sf puc approach. whether it's a rate year like now, we are engaging our community members. we are working to educate them on the critical 24/7 services that the agency provides as well as what is necessary to maintain those 24/7 services in top shape. finally when we are out of -- i'm sorry, also we are out at

community events, meetings, using our social media channels or any other channels for communicating with the public and trying to educate them about those critical services we also want to show folks what their investments and their rates have already paid for so we provide them regular updates on on going projects such as the water system improvement program which at this point is almost 95% complete and we have a focus on engaging two-way dialogue and conversation so it's just another government agency preaching from high to the public but also getting feedback and dialogue from the community. with that broad over view in place there's three core pillars regarding our rates out reach that we have been focusing on on all the many channels we have been using. the first key message is that our water system provides essential services critical to the every day life of the bay area. the second

pillar is that our sewer system is the front line of defense to protect public health and we've identified critical upgrades to the system to insure we continue to provide public health and safety to the environment as well. finally, the third pillar is rate increases are absolutely necessary to pay for critical system upgrades and the longer we wait the more expensive they will cost over time. we started out with 150 front line staff who were engaged in talking to the public. we wanted to make sure they understand the rates messaging, why we were raising rates so everyone was speaking from the same page. some of those 150 line front line staff members who were trained on the education of out reach strategy

included everyone from the communications team, policy and government affairs team, everyone from the community benefits, our finance departments, our customer service bureau, out reach and engagement team and our water resources team. beyond just those front line employees we also offered a series of brown bag luncheons for anyone in the agency to learn more about the critical rates messaging and the need for that. moving forward, starting in january 2018 once the rates fairness board had recommendations we increased our out reach and education to the public and with targeted out reach so we started doing direct customer out reach. first of all, we mailed out almost 247,000 proposition 8 public notices with extensive information on the need for our new rates package as well as driving every person driving to

our website that included our rates page with extensive information with ways to the public to engage. in addition to those 240,000-some props we started to use our monthly bills to drive people to our rates page, to our website. we used our public currents newsletter that has 150,000 subscribers to spread the word about our critical services and what rates were going to be used for coming up. moving from some of that direct out reach to the public, we also turned to extensive out reach and personal presentations to a wide variety of community groups in every district in the city. starting in the fall we offered to make presentations to some 240 different community groups all over the city and in the district. from those about

60 have currently taken us up on that offer. so we've met with 60 different community organizations, usually after hours when most people can attend the meetings and we presented to a wide diversity of groups that reflect the wide diversity of our city and our community. we were pleased to speak to engaged citizens in every district in the city. to provide you a sample of some of the educational materials we've been using when we were out working with the public in person but also provided materials online, so every time we were driving traffic to our website through all these other channels these are some of the materials that were available. if addition, eathese are some o the materials we took with us to many presentations. we created a one-page summary of why the rates are needed and what the money will be going for. we created a comprehensive new cost saving guide that shows the rebate programs, affordable

programs and incentive programs so there was an early one-stop-shop for folks to see what all those materials are. we also provided about 20 different rates materials that were translated into chinese, spanish and filipino as well. so we've done extensive efforts to reach all our community members regardless of the language that they speak. finally, we've turned to our extensive digital reach between our website and our social media presence which we are very proud of as well. for example, as i mentioned, we developed a rates web page on our -- we started advertising that on our home website, our website between the months of january and february. home page received 292,400 unique visitors, each of which was greeted with front page banner signs about the new rates and education on how they can learn, become involved in this highly transparent public process. we used our social media channels on linkedin,

facebook and twitter to promote critical services that these rates are supporting. so the total number of impressions for those three social media channels during those three months was just over 700,000 total impressions. finally we also used -- oh, i also want to mention there was an interesting new -- brand new rate calculator that the agency developed and add toded to the rate page. so anybody would go and enter in their water usage and receive an estimated calculation of their new rates now and in the coming 4 years. we have 152,000 subscribers to our current digital and newsletters in which we've been included articles that our rates will support now and moving forward. finally, turning to media coverage, we had a two-prong approach to media coverage. for the last