PUC: Hetch Hetchy power faces a fiscal cliff as new PG&E and regulatory costs bite

The San Francisco Public Utilities Commission spent much of its Jan. 14 budget workshop examining a growing funding gap in the Hetch Hetchy Water & Power enterprise and options to close it.

General Manager Harlan Kelly and Assistant General Manager for Power Barbara Hale told the commission the PUC’s portion of the overall budget is about $185 million of an $873 million PUC budget, with roughly $149 million attributed to power operations and $36 million to water. Staff said a previously adopted 10‑year capital plan and financial plan was balanced under older assumptions, but three new, material pressures have substantially changed the outlook: higher charges from PG&E for transmission and distribution; more costly compliance with mandatory reliability standards imposed by the North American Electric Reliability Corporation (NERC) and the Western Electricity Coordinating Council (WECC); and a re‑scoped Mountain Tunnel project upcountry that could require a bypass construction rather than a multi‑year relining.

Hale described modeling that shows a range of scenarios. In a “do‑nothing” scenario the enterprise’s reserves begin to decline sharply in year three; staff estimates new PG&E‑related costs add roughly $20 million a year in operating pressure and that the Mountain Tunnel…