SFPUC moves forward on inaugural Power revenue bonds and launches business-plan workshops to 'right-size' the power enterprise

The San Francisco Public Utilities Commission voted April 28 to approve the form of a preliminary official statement for the Power Enterprise—irst revenue bond issuance (not to exceed $48,000,000) and heard the first of two workshops laying out financial challenges and possible strategic options for the power business.

Deputy CFO Charles Pearl told the commission staff had revised the disclosure to incorporate the recently approved capital plan, drought disclosures and the launch of the Clean Power SF program. He said the transaction will be split into two subseries so a majority of the issuance (about $33—3 nd change) can bear a green designation to fund greenhouse-gas-free generation projects while the remaining subseries will fund transmission-related projects that may not carry a green designation.

Pearl noted disclosure additions related to an ongoing court case (Restore Hetch Hetchy), and said Fitch had just assigned a public rating (AA-minus) to the pending transaction. The Commission approved the preliminary official statement.

Separately, the commission convened Workshop 1 of a two-part business-plan review. Staff described core challenges facing the Power Enterprise: an aging Hetch Hetchy hydro system with about 380 MW of generation versus roughly 150 MW of firm obligations (creating sales of excess generation into the market), revenue volatility from hydro-dependent supply (wet/normal/dry scenarios can swing revenues by roughly +/-$15 million annually), the Water First policy that prioritizes water delivery over generation flexibility, and the water-sale settlement that assigns shared costs for joint assets (55% power / 45% water). Staff quantified a 10-year capital and operating need of approximately $3.2 billion with about $1.0 billion unfunded.

Workshop presenters framed strategic options that will be discussed in Workshop 2 (May 12), including better capturing value from high-margin full-pay customers, targeted wholesale sales, community choice aggregation as a market segment, modifying portfolio mix for higher-value products, and addressing at-risk transmission/interconnection facilities as existing replacement agreements expire. Commissioners and stakeholders flagged the interconnection agreement with PG&E and the potential that significant share of unfunded capital relates to replacement/interconnection facilities.

Next steps: the second workshop is scheduled for May 12 to present business solutions, investment requirements and recommended actions to stabilize the enterprise’s long-term finances.